Tech stocks have suffered a massive sell-off this year, but Bank of America believes there’s still opportunity in some untested names. CNBC Pro highlights four of the bank’s top picks. The tech sector has had to bear the brunt of the market’s shift away from growth and become valuable names, as the potential for a steep rate hike cycle – making future earnings less attractive growth stocks – went home. Disappointing first-quarter earnings from Netflix, Google’s parent company Alphabet and others added to the industry’s anxiety. While investors may focus on these well-known names, Bank of America believes a number of small- and mid-cap technology stocks present opportunities for investors. To be sure, the outlook is not all rosy for these companies. The Bank believes that the context of rising exchange rate, inflation and growth concerns may persist in the near term. But analysts, led by Jill Carey Hall, said on June 3 that the sector had “limited” positioning risks and enjoyed inflows. Hall added that the sector is also seeing more upgrades than downgrades by the bank. She notes that while small-cap technology is still “expensive,” it’s still cheaper and of higher quality than it was during the tech bubble of the late 1990s. Plus, there’s a lot more now. Small-cap tech stocks are profitable compared to the tech bubble. More than 70% of the sector is profitable, compared with less than 50% during the tech bubble, she added. Stock Options Bank of America’s top pick in the enterprise software space is open source software company GitLab, which the bank describes as a “category leader”. “We believe the company has the potential to drive growth at [more than] 50% rate over the medium term,” said Hall. The bank has set a $65 price target for the stock, representing a potential gain of about 58.5% from its closing price of around $41 in June. 3. In the semiconductor space, Bank of America’s top pick is On Semiconductor, which enjoys the company’s strong turnaround potential and exposure to “super growth trends” in the vehicle sector. electricity represents a potential increase of 27%.In the internet space, the bank’s top choice is an online dating service Fit in a Recession scenario, the bank added, streaming pricing free money is many times more attractive than its industry peers.Growner-sharing like DoorDash would perform better in a risky scenario, Hall said, given macro risks like inflation and rising interest Yields have been a key driver of DoorDash’s valuation over the past nine months.The bank has a $105 price target for the stock, implying a 54.4% upside potential for the stock’s closing price. u is $68 on June 3.
A woman is reflected in a puddle as she walks past the Bank of America branch in New York’s Times Square.
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Tech stocks have suffered a massive sell-off this year, but Bank of America believes there are opportunities in some names under control. CNBC Pro highlights four of the bank’s top picks.