As technology revenues decline, Wedbush analyst Daniel Ives offered his opinion on how the reporting period for the sector developed.
Better than the dreaded Profit: The June quarter earnings season was a big success for tech bulls, Ives said. Business spending, cloud-driven budgets, consumer product/e-commerce demand, and even digital advertising are “better than feared,” the analyst said.
FAANGs and Microsoft Corporation MSFT reported solid earnings, the analyst said. This key barometer of consumer and enterprise spending, the analyst said, was a key catalyst for tech stocks’ gains over the past month.
Earnings and technology guidance are relatively healthy, with some signs of caution, allowing for the expectations of economists, “tech perma-bears” and market experts, the analyst said.
Clearly, this is not the “guideline Armageddon” that technology skeptics are hoping for, he added.
Read Benzinga’s preview of the upcoming week’s earnings
What awaits: Ives sees a “bifurcated tech tape” ahead. Companies like Snap, Inc. SNAP and ServiceNow, Inc. NOWaccording to the analyst, is likely to see incremental headwinds during a “recession-like” macro period.
The analyst was also negative about smaller tech companies with “less robust business models and unproven moats.” These companies will “struggle mightily” in the coming quarters and multiples will continue to compress for many unprofitable tech names with choppy execution, he added.
Ives, however, said the fourth industrial revolution tech trend is unlikely to be affected by the slower near-term growth period in the next six to nine months. Wedbush remains bullish on tech stocks in the second half of the year, he added.
Wedbush’s Top 3 Tech Stock Picks By Year End:
- Microsoft Corporation MSFT: Redmond is a beneficiary of the strong Azure growth trajectory.
- Apple Inc. AAPL: While China and supply issues are resolved, the company remains laser-focused on the upcoming iPhone 14 model.
- Palo Alto Networks, Inc. PANW: The company stands to capitalize on the multi-year tidal wave of cybersecurity enterprise spending.
Tech Stock Rating/Price Targets:
- Microsoft: Outperform/$320
- Apple: Outperform/$200
- Palo Alto: Outperform/$580
The Tech Stock Price Action: The Technology Select Sector SPDR Fund XLK Friday’s session closed down 0.23% at $147.02, according to Benzinga Pro data.