Ahead Of Tech Earnings, Analyst Says Sector Is 'Under-Owned' — Repeats Calls For 20% Rally

Tech earnings news flow will hit Wall Street in earnest in two weeks and an analyst at Wedbush painted a positive picture concerning the prospects for the sector.

Guidance The Key: As the focus shifts to fourth-quarter earnings, the wildcard would be the 2023 guidance and overall demand environment for the tech sector, analyst Dan Ives said.

Investor worry about a deteriorating enterprise/consumer demand backdrop will continue to haunt tech stocks in 2023, the analyst said. As many are doubling down and negatively betting on a repeat for 2023, tech stocks are under-owned since the 2009 timeframe, Ives added.

Rebound On The Cards: The near-term macro climate uncertainty will lead to the next growth cycle over the coming years, beginning now, Ives said. The analyst noted that tech names are cutting costs to preserve margins and are getting leaner in this macro environment.

Ives expects tech companies to issue more hittable/beatable guidance. He also noted that valuation multiples have dropped below their five-year mean.

The headcount reduction, according to the analyst, is the first major step toward stabilizing tech stocks, setting the stage for a rebound. Ives noted that after Meta Platforms Inc.’s META massive layoffs and reining in of metaverse spending, the stock has taken off.

Over the past week, Amazon Inc. AMZN and Salesforce Inc. CRM have announced significant headcount reductions, Ives said. He reiterated his call that tech stocks are way oversold at current levels and will rally 20% this year.

Tech Stock Picks: Apple Inc. AAPL remained Wedbush’s top tech pick for 2023, as demand story holds up and the risk/reward is favorable at the current levels.

The firm said Microsoft Corp. MSFT and Salesforce are its top cloud picks.

It said cybersecurity names such as Palo Alto Networks Inc. PANW, Check Point Software Technologies Ltd. CHKP, CyberArk Software Ltd. CYBR, Tenable Holdings Inc. TENB and CrowdStrike Holdings Inc. CRWD were its favorite tech stocks.

Price Action: The Technology Select Sector SPDR Fund XLK ended Friday’s session at $124.73, up 2.93%, according to Benzinga Pro data.

Read Next: Apple Down 25%, Meta 65%, Amazon 49% As Tech Stocks Hit Rough Patch In 2022: 4 Factors That Could Work In Sector's Favor In 2023