Analysts at leading investment banks say a number of tech stocks present compelling buying opportunities right now — with some more than 30% off their 52-week highs. Bank of America reports that tech stocks have been hit hard by headwinds, and investors are now asking for information about names at the bottom. In a research note dated 27 May, BofA analysts said that tech is now facing the “quadruple whammy” of increasing discount rates, peak internationalization, difficult comps, and crowding. But screen requests will be for Energy stocks rather than for low-quality growth stocks. According to the bank, investors are still 23% overweight in technology, media, and telecom stocks. “And their muscle memory of making money from dip-buying Tech must fade before Tech bottoms.” Despite this, BofA said there are some buying opportunities in the sector right now, given its “big” underperformance — tech is down 24% year-to-date versus the S & P 500 index which has fallen 17%. According to the bank, “some beaten down Tech stocks offer buying opportunities at such levels.” The bank searched “Beaten Down Tech Stocks with Strong FCF” [free cash flow]The 52-week lows are now down 30%. The list includes Alphabet, Google’s owner and Meta, Facebook’s parent company. Also on the screen are semiconductor companies Advanced Micro Devices Applied Materials and Micron Technology. IT consulting firms Accenture as Gartner are also included. These stocks all have Bank of America buy ratings. Read more Tech shakeout: Where to find the best value plays in the beaten-up sector ‘We see a clear role for alternatives’: Pros give their tips on how to trade the volatile market Here are the top stock picks from UBS for the rest of the year Cisco makes BofA’s screen — and it is also on Credit Suisse ‘s list of outperform-rated tech stocks, per a research note published May 27. Credit Suisse’s Andrew Garthwaite, a credit analyst, rated Microsoft and Salesforce outperform. Analysts at Credit Suisse stated that “most software companies have CPI linked on their service agreements.” This refers to fees tied to rising inflation. CPI stands for the consumer price index. This is a measure of how much goods and services cost. In April, it rose 8.3%. BofA estimated that the recovery of the tech industry after 2000’s dotcom crash took approximately ten years. “Investors lost track of tech” during this period. According to the analysts at BofA, it was important that you take advantage of volatility and be selective. The bank’s analysts stated that one in four 1999’s IPOs is blue-chip today, and the number of IPOs which survived has increased. [around]”400% market cap,” they stated. UBS research notes published on May 27 by strategists said that tech stock buying may be in order. According to UBS, “Global tech stocks are down since April because of growth worries.” Analysts suggested that portfolio rebalancing could be an option to make sure investors are exposed to more quality companies. UBS has not chosen stocks. However, it noted the areas that UBS enjoys such as artificial intelligence and cybersecurity.
Traders are seen working on the New York Stock Exchange’s floor in New York City (USA), May 10, 2022.
Brendan Mcdermid | Reuters
Analysts at leading investment banks say a number of tech stocks present compelling buying opportunities right now — with some more than 30% off their 52-week highs.
