To say it’s been a tough year for tech stocks is an understatement, with tech heavy
Nasdaq Composite Landing in a bear market area and a stalwart like
Amazon Extension of loss periods for long weeks.
But the sale could be a “generational buying opportunity” for the right names in technology that could make a lot of money in just a few years, according to Wedbush analyst Daniel Ives.
“This is not Dot-com Bubble 2.0 in our opinion, it is a massive patch in a higher rate environment that will cause a forked tech strip of haves and have-nots,” he wrote in a research note.
Tech bears certainly have a very strong case to warn against investing in this sector. Technology stocks continued to fall sharply as the Federal Reserve raised interest rates and scaled back its bond-buying program, causing bond yields to soar. Increases in bond yields reduce the current discounted value of future earnings – the main criteria by which many tech companies are evaluated.
Bearish investors fear that complications will continue to pressure more as they have done over the past few weeks – the Nasdaq is down 27% year-to-date. Moreover, there are concerns that supply chain problems arising from the Covid shutdowns in China could become more permanent, hurting profits and margins in the long run. There are also widespread concerns that Fed policy could push the US economy into recession.
Ives retracted those assumptions on Friday, saying the warnings were exaggerated. He said tech stocks are already factoring in a mild recession. In addition, the economic downturn could be what ultimately stimulates the next innovators in the technology cycle.
Investors should look to own a mix of profitable and valuable tech names, while analyzing the best names in the high growth category, or else they may miss out on the best high growth names after the storm is over.
In his view, stocks to own include companies that bet heavily on big cloud computing, cybersecurity, 5G smartphones, and electric vehicles. Think: Apple (stock ticker:
TSLA), which are the big-hat Ives picks. It also prefers names that appear on the cloud such as
the alphabet (
ADBE). Includes its own cyber security basket
Palo Alto Networks (
Check Point برنامج (CHKP),
CyberArk suvware (
While Tesla is the biggest name in the EV class, it has also stood out
my cycle (
Hezon Motors (
charge point (
CHPT). Value technology with strong end markets included
Progress Programs (
Ziv Davis (
Cloud Compatibility (
He added that the have-nots may turn into home-run theaters, e-commerce stocks, huge real estate offerings, and poorly managed businesses.
Ives’ optimism is not shared across the industry. Cole Smead, president and portfolio management at Smead Capital Management, said the company is leaning toward energy and commodities in the short term, where the sector has outperformed technology. He thinks the tech sector is “nowhere near” to the bottom.
Citi’s Robert Buckland was also more circumspect, explaining in a research note Thursday that the company’s global equity strategy currently favors financial stocks and cheap commodities over more expensive technology-related trades.
Whatever the case may be, tech investors have to put up with a few more months of pain. But those who weather the storm may be lucky enough to find a pot of gold at the end of the rainbow.
Write to Sabrina Escobar at firstname.lastname@example.org