20% Stock Rally, Rising M&A Activity, Apple's AR Glasses, Incremental Job Cuts And More: Analyst Shares Christmas Wish List For Tech Sector

Tech stocks have been among the worst performers in the current market downturn and investors are hoping that the new year will bring a reversal in sentiment. Against this backdrop, Wedbush analyst Daniel Ives outlined his Christmas wish list for the sector.

1. Abounding M&A News Flow: Ives said the tech sector is ripe for a massive consolidation phase, both on the enterprise and consumer side. A surge in M&A is likely, given depressed valuations for tech names and a strong appetite for strategic and financial buyers, he added.

A foretaste of what is to come on the front was seen when Coupa Software Inc. COUP recently announced an $8 billion deal to be bought by tech-focused private-equity firm Thoma Bravo.

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2. Musk Handing Over Twitter Rein: With the kind of damage Elon Musk’s Twitter buy is inflicting on Tesla Inc. TSLA stock, Ives called upon the billionaire to name a permanent CEO for the social media platform.

3. Microsoft Pocketing Activision: Microsoft Corp.’s MSF proposed acquisition of Activision Blizzard Inc. ATVI is facing opposition from the Federal Trade Commission. Ives wants the deal to go through, as he sees Activision becoming a key asset in Microsoft’s consumer gaming war chest. The fructification of the deal could be a precedence for larger deals in the big tech space, he added.

4. Conservative 2023 Guidance: Ives wishes tech executives to issue conservative guidance for 2023 when they report fourth-quarter results in January so that it would likely be viewed by the Street as achievable.

5. Apple Shifting Base Out Of China: Following the iPhone production disruptions, Ives hopes for Apple Inc. AAPL to diversify the production of the gadget out of China. He called for building a bigger manufacturing presence in India or Vietnam in 2023 or beyond.

6. Reversal In Tech Stocks: Wedbush hopes for a 20% rally in the overall tech sector in 2023, with big tech, software and semiconductor stocks leading the charge.

7. Strong Cybersecurity Spending: Cybersecurity spending will likely be a pillar of strength despite the softer macro situation in 2023, Ives said. The analyst estimates 15%+ growth for the industry. He reiterated that Palo Alto Networks Inc. PANW, CyberArk Software Ltd. CYBX, Zscaler Inc. ZS, Check Point Software Technologies Ltd. (CHKP) and Tenable Holdings Inc. (TENB) as his favorite names.

8. Increased Activism: 2023 will bring more activism into the tech sector, with Salesforce.com Inc. CRM likely a major target, Ives said.

9. Apple’s AR Glasses: Apple’s augmented reality glasses are also on Ives’s Christmas wish list for materializing in 2023.

10. More Flab Cuts: Ives calls for another 8-10% workforce reduction at big techs to manage the downturn forecast for 2023 and adjust to lower growth profiles.

Price Action: Technology Select Sector SPDR Fund XLK ended Friday’s session down 1.32% at $127.48, according to Benzinga Pro data. The exchange-traded fund has shed about 26% year-to-date.

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