Buy these big tech names if the economy slows more, Morgan Stanley says
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Morgan Stanley believes these stocks of technology could be a good investment option for those who are looking for opportunities to invest in the stock market. The risks of an economic slowdown are growing as inflation hovers at record levels and the Federal Reserve is considering rate increases for the first time since 2013. Morgan Stanley has increased its forecast for a 30% chance of an economic recession from its initial estimate of 5% at the beginning 2022. The bank stated Wednesday in a memo that it sees opportunities in many of the beaten up Big Tech names in an environment with slowing economic growth. Blue-chip tech names such as Alphabet, Facebook’s parent Meta Platforms, and Amazon are currently trading at a loss of 27.9%, 42.4%, and 21.5% respectively. The bank believes there is still room for growth despite the recent pullback. Based on the close of Tuesday and Morgan Stanley’s new price targets, Alphabet and Amazon could each offer 32%, 46%, and 55% respectively. These stocks trade at 10x-12x and 7x respectively the 2023 EBITDA estimates of Morgan Stanley. Brian Nowak, analyst at the bank, wrote in a Wednesday note that “this speaks to how high ‘downturn fears are priced’ in some names.” If inflation fears ease and consumer confidence improves, we expect investors to seek out blue-chip names such as these. Morgan Stanley says that Snapchat’s parent could recover, even though it has suffered some setbacks in recent weeks. Snap suffered its worst May ever after it announced that it will miss the quarterly earnings and revenue targets. Current stock prices are down 70% and 83.1% from their 52-week highs. Nowak said that there could be a 70% upside for the social media firm if it is able to win back investors by “multiple quarters consistent execution”. Also, the bank mentioned Pinterest. It has fallen by 46% over the past year and is now 76% below its 52-week peak.
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