MW Investors may have a 'buy' signal, as these big tech stocks have dropped up to 32% in only three weeks
By Philip van Doorn
Now might be "a golden opportunity" to own the "secular tech winners" for the next 12 to 18 months, according to Wedbush analyst Daniel Ives.
The stock market is in the middle of a big pullback for technology stocks, which had been flying high for almost a year until the Nasdaq-100 Index rose to a record Feb. 16.
But this "risk-off" period may turn out to be a short one. It may set up "a golden opportunity to own the secular tech winners for the next 12 to 18 months at compelling valuations," according to Wedbush analyst Daniel Ives, who specializes in technology stocks.
The setup
On Thursday, Bespoke Investment Group posted the following on Twitter:
In fact, the Nasdaq-100 Index had also moved below its 100-day moving average, through the close March 4:
The recent drop may not look so dramatic when you take into account the entire movement for the tech-loaded Nasdaq-100 Index, and the Invesco QQQ Trust $(QQQ)$ that tracks it, over the past year. But you can see below that significant portions of those gains have been given back for certain stocks over the past few weeks.
The pandemic led to obvious (in hindsight) boosts for companies that provide remote services, including Peloton Interactive Inc. $(PTON)$ and Zoom Video Communications Inc. (ZM). You can see below that those companies achieved remarkable increases in sales during 2020 and that their sales-growth rates are expected to cool in 2021 and 2022. But those growth rates are expected to remain relatively strong, and the stocks have fallen quite a bit from their highs.
In a note to clients March 3, Ives made the case that the transformation of workplace culture brought about by the pandemic will continue:
"[W]e are hearing a clear message from many CEOs we speak to around the world that 30%-40% of employees could be remote in a semi-permanent structure, whichwill put further pressure on [chief information officers] to rip the band-aid off and go aggressive on [the] cloud/digital transformation roadmap the next few years."
Biggest Nasdaq-100 losers
Here are the 20 stocks in the Nasdaq-100 that declined the most from the close on Feb. 12 (the last trading session before the index hit its all-time intraday high Feb. 16) through the close March 4.
Scroll the table to see all the data, including sales-growth projections for this year and next year, which are on the right.
For the sales and growth projections, all figures are for calendar years and are marked "estimated" because of the vagaries among companies' fiscal years. If a company's fiscal year ended December 2020 and it has already reported its results, the estimated sales figure used for the calculations in the table will match the actual figure. For a company like Zoom, whose fiscal 2021 ended Jan. 31, 2021, the 2020 sales figure is the consensus estimate for that calendar year among analysts working for brokerage firms, as adjusted to reflect the most recently available information.
Here's a summary of opinion about the stocks among Wall Street analysts polled by FactSet:
Wedbush's tech list
Wedbush's Ives suggested investors act on the recent share-price declines to own Apple Inc. $(AAPL)$, DocuSign Inc. $(DOCU)$, Microsoft Corp. $(MSFT)$, Zscaler Inc. (ZS), Palo Alto Networks Inc. (PANW), Sailpoint Technologies Holdings Inc. (SAIL) and Nuance Communications Inc. $(NUAN)$, "among other names."
He called Uber Technologies Inc. $(UBER)$ and Lyft Inc. $(LYFT)$ his "favorite 'reopening plays' given a recovery in rides, profitability on the horizon, and food delivery seeing a surge of growth for Uber with an elevated level of activity here to stay. "
DocuSign is included in the above screen of Nasdaq-100 decliners from Feb. 12 through March 4. Zscaler, Palo Alto, Sailpoint, Nuance, Uber and Lyft are not components of the Nasdaq-100 index.
Here's the same data for all the stocks recommended by Ives:
And here's a summary of analysts' opinions of the stocks favored by Ives:
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-Philip van Doorn; 415-439-6400; AskNewswires@dowjones.com
$(END)$ Dow Jones Newswires
March 05, 2021 09:16 ET (14:16 GMT)
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