It’s been a bad week for technology stocks. The Nasdaq tumbled 2.7% on Wednesday, and looks set to continue on Thursday.
So buy the decline before tech stocks will be at least 25% higher this year, says veteran tech analyst Daniel Ives of investment firm Wedbush in our call of the day.
“The risk-off trade for technology has been a painful trade-off for technology investors this week, as concerns about high valuations, bubble fears, rotation trading, rising returns and a focus on reopening plays are central,” Ives said.
But according to Ives, the digital transformation is just underway and will take a number of years among businesses in cloud, cyber security, e-commerce and 5G. These analysts are the lifeblood of the tech party, with consumer and business demand facing a “perennial growth spurt,” the analyst said.
Although collaboration software companies such as Zoom ZM,
Tension, Slack WORK,
and Citrix CTXS,
will “moderate” growth in 2022, many CEOs told Wedbush that 30% to 40% of employees in some form can continue to work remotely. This will encourage companies to ‘rip off band-aid and become aggressive’ with cloud transformations, Ives said.
See: Analysts say Zoom can continue to thrive in a vaccinated world
Investors should take advantage of the current market weakness to ensure that Apple AAPL,
Microsoft MSFT,
DocuSign DOCU,
Zscaler ZS,
Palo Alto PANW,
SailPoint SAIL,
and Nuance NUAN,
are included in their portfolios, Ives said.
In the broader sector, Wedbush predicts that technology stocks will move up at least 25% in the next year. It is powered by big names Facebook FB,
Amazon AMZN,
Apple, Netflix NFLX,
and Google Parent Alphabet GOOG,
GOOGL,
as well as cloud and cybersecurity stocks, despite the recent sell-off, Ives said.
More generally, Ives said that Uber UBER,
and Lift LIFT,
– “disruptive names for technical recovery” – remains Wedbush’s favorite “reopening play”, with profitability on the horizon and a huge increase in food delivery.
Do not miss: Lift stock rises to highest prices since 2019 after best week for pandemic
And while technology regulation is a long-term risk, according to the Biden administration, it still remains a Goldilocks environment for technology stocks, according to Wedbush. Ives probably considers President Joe Biden the tension in the “Cold Tech war” between the US and China, as well as cyber security initiatives.
Market bears will come out of hibernation to warn investors that the technological boom and bullfight is over, Ives said. Wedbush believes it is a ‘golden opportunity to own the secular technology winners for the next 12 to 18 months at compelling valuations given some of these sales.’
The buzz
The House of Representatives closed the week after police discovered a QAnon-linked military conspiracy to attack the Capitol, but that did not stop important legislation late Wednesday. House Democrats have submitted the biggest overhaul of the U.S. election law to the Senate in at least a generation, along with a bill to revamp policing, named after George Floyd, who was assassinated during an arrest in May 2020.
On the economic front are initial claims that are unemployed, released at 8:30 am Eastern. 750,000 Americans are expected to have applied for unemployment last week, a slight increase from 730,000 the previous week. Continued demands for jobless claims and factory orders for January were also addressed this morning before Jerome Powell, chairman of the Federal Reserve, at the Wall Street Journal Jobs Summit this afternoon.
SpaceX’s Starship – a prototype for a future Mars mission – looked like it had reached a landing to make founder Elon Musk proud. But a few minutes after the touch was declared a success, it exploded with so much force that it went to heaven again. And there’s a video.
The CEO of Texas’ power network has been fired. The network fatally broke in an icy February, leaving millions of days without heat or electricity in one of the worst suspects in American history.
The European Medicines Agency, the European Union’s drug regulator, has launched an investigation into the Sputnik V COVID-19 vaccine developed in Russia.
The Competition and Markets Authority, the UK competition regulator, is investigating Apple’s terms and conditions governing the development of access to the App Store.
The online Indian retailer Flipkart, mostly owned by Walmart WMT,
is considering a U.S. listing by merging with a specialty procurement firm, or SPAC, according to a Bloomberg report that says the company could achieve a valuation of at least $ 35 billion.
The markets
Dow futures YM00,
rejects approximately 120 points, in line with other ES00 futures futures contracts,
NQ00,
set to continue yesterday’s slide. The Dow DJIA,
on Wednesday, along with other indices, dropped more than 120 points. European shares UKX,
DAX,
PX1,
is lower after three consecutive days of profit, while the major Asian index NIK,
HSI,
SHCOMP,
all fell by more than 2%.
The graph
If you think that effects were more unpredictable than usual … you would be right. Our chart of the day, from Marshall Gittler at BDSwiss, shows how volatile the Treasury market is at present. Gittler charts the MOVE index, which looks like the stock market version of the VIX stock index. The volatility in equities is almost normal, while foreign exchange is a little calmer than usual.
Random reading
Tahltan woman from Northern Canada bakes elk head that looks angry, has phenomenal taste and feeds a family.
A passenger flight overturned in Sudan when a hideout cat attacked the pilot.
Need to Know starts early and is updated to the opening clock, but sign up here to have it delivered to your inbox once. The version by e-mail is sent in the Eastern direction at about 07:30.
Want more for the day ahead? Subscribe to The Barron’s Daily, an investor briefing, including exclusive comments from Barron’s and MarketWatch authors.