According to Wedbush Securities’ Dan Ives, the tech sell-off isn’t a second dot-com bubble — it’s a “buying opportunity” for the right stocks. “We see this historic sell-off as more of a generational buying opportunity for the right tech names/winners in 2023 and 2024 than a time to throw in the tech sector.” with the cumulative impact we’re seeing. Streets today,” Ives wrote in a Friday note. “Even our conversations with our customers and IT this week continue to enforce our positive stance on cybersecurity and cloud spending during this tense macro.” For some investors, tech stocks’ massive underperformance this year casts doubt on the sector’s potential from here. The Nasdaq Composite is down about 25% so far, as rising interest rates and supply-chain challenges have kept investors away from growth stocks. Many names that have been successful in the past have fallen between 70% and 80%, says Ives. However, the analyst cautions that investors should not value all technology stocks the same way. While weaker tech outfits have disappeared in the past due to economic downturns, other names have emerged as clear winners. Picking winners and losers Investors should start picking winners and losers in the next tech cycle, Ives said. The analyst believes that valuations of high-quality growth stocks are “very attractive” to investors with a 2 to 3 year horizon or longer – especially as early investors Venture capital, private equity, and family offices are poised to commit more than $1 trillion to the technology sector. Ives said companies in the macro cloud, cybersecurity, electric vehicles and 5G smartphone sectors will benefit from the next iteration of the technology growth cycle. Wedbush Securities has highlighted several picks from its books that will benefit from these trends. Cloud computing names include Amazon, Google, Oracle, and Adobe. Cybersecurity outfits set to thrive include Palo Alto Networks, Check Point, and Zscaler. Top electric vehicle names include Tesla, Li-Cycle and XOS Trucks. The research firm’s top large-cap picks are Apple, Microsoft, and Tesla. To be sure, both Apple and Tesla will have to deal with Covid-related shutdowns in China in the near-term, but both companies’ valuations look attractive based on the 2024 outlook, Ives said. . Meanwhile, investors should steer clear of tech companies that focus on e-commerce or real estate, or those that have benefited greatly from the work-from-home trend, the analyst said. Investors should also steer clear of companies with bad management. “This has been a painful reset for tech stocks and valuations with opportunities (and wrecks) abound for the right names in the final market,” Ives wrote.
Traders on the NYSE, May 11, 2022.
Source: NYSE
According to Wedbush Securities’ Dan Ives, the tech sell-off isn’t a second dot-com bubble — it’s a “buying opportunity” for the right stocks.
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