Why This Wedbush Analyst Expects A Year-End Tech Rally

The tech rally may have hit a speed bump amid brewing uncertainties, but tech stocks are positioned for another move higher, according to a Wedbush analyst. 

Why Techs Tower Over Uncertainties: After an eye-popping rally over the last six months, stocks in the sector are now facing several uncertainties, including the presidential election, antitrust momentum and worries around more stimulus bills, analyst Daniel Ives said in a Tuesday note.

Even against this uncertain backdrop, transformational growth drivers across the tech sector and a further re-rating of tech stocks keep Wedbush bullish heading into the year end, the analyst said. 

Tech stocks are in for another 15%-plus rally into the year-end, led by FAANGs, cloud software and cybersecurity companies, he said. 

Among FAANGs, Apple Inc. AAPL is Ives' favorite name, while Microsoft Corporation MSFT and Zscaler Inc ZS take the honors in the cloud software and cybersecurity spaces, respectively, the analyst said. 

Related Link: Wedbush Says Tech Sell-Off A Buying Opportunity, With Bullish Forecast For Apple, Microsoft

The Election's Impact On Tech: Irrespective of the election outcome, tech stocks are likely to continue to grind higher given their underlying fundamental drivers, Ives said.

These strong fundamental drivers will be in focus during the third-quarter earnings season over the coming weeks, the analyst said. 

Wedbush sees no signs of a slowdown heading into 2021, he said. 

As the economy starts to rebound in 2021, it will likely supercharge the fundamentals and growth trajectories of well-positioned tech stocks, Ives said. 

Antitrust Issues A Contained Risk? The lack of consensus on both sides — regulators and big tech — on antitrust issues makes it tough to move things forward in the 16-month investigation into the powerful grips of Apple, Amazon.com, Inc. AMZN, Facebook, Inc. Common Stock FB and Alphabet Inc Class A GOOGL GOOG, the analyst said. 

Without changes in core law, the antitrust momentum will hit a brick wall, he said. 

That said, a potential "blue wave" in November would be a game-changer on this front and represent a formidable force for changes in antitrust law, with breakups possibly on the radar, Ives said. 

"For now this is a contained risk, but ultimately this could morph into a threat for Big Tech."

The Technology Select Sector SPDR Fund XLK was trading 1.49% higher at $117.36 at the time of publication Wednesday and has gained about 28% year-to-date. 

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