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apple (NASDAQ: AAPL), Microsoft (NASDAQ:MSFT) and Palo Alto Networks (NASDAQ:PANW) were investment firm Wedbush Securities’ top three tech stock picks at the end of the year.
Analyst Dan Ives, who has an outperform rating on everyone three companies, noted that at the end of the second quarter earnings season, the tech sector performed “much better than feared,” calling it a “major victory for the tech bulls,” citing the business spending power, cloud budgets, consumer product demand and even digital advertising.
“FAANG tech stalwarts and Redmond had solid earnings heard around the world (and on the Street) as this key barometer of consumer and enterprise spending has been a major catalyst for tech stocks in the green over the past month ,” Ives wrote in a note to clients.
However, Ives added that it will continue to be a bifurcated industry moving forward, with companies like Snap (SNAP), ServiceNow (NOW) and others seeing “incremental headwinds.” He added that smaller tech companies with less stable business models will struggle in the next few quarters, but that won’t stop what he calls the “4th industrial revolution” and companies like Microsoft (MSFT), Apple (AAPL) and Palo Alto (PANW) are poised to benefit.
For Apple (AAPL), issues related to China and the supply chain appear to have peaked and the focus is now on iPhone 14 production and demand ahead of a likely September launch.
According to a report Monday from Taiwan’s United Daily News, Apple (AAPL) told iPhone 14 suppliers to boost production to 95M units, up from 90M.
Ives added that as many as 225M customers have not upgraded their iPhone in 3.5 years, “creating a strong iPhone 14 demand story despite a gloomy global macro backdrop.”
As for Microsoft (MSFT), Ives believes the growth trajectory of its Azure cloud computing platform going into fiscal 2023 “remains strong” and that the company is “still in the middle of the innings” of changing workloads to become in the cloud.
Palo Alto Networks (PANW) is expected to see a “massive tailwind” as it continues to move to the cloud, with Ives saying it’s “in the right place at the right time” to benefit from this multi-year shift.
Some analysts wonder if advertising could be Apple’s ( AAPL ) next big growth opportunity as it looks to boost its Services revenue.