- US stocks have fallen nearly 19% from the all-time high on February 19 through Monday’s close amid the coronavirus outbreak and an escalating oil price war.
- The market rout represents a “golden buying opportunity” for key tech stocks poised to be long-term winners, according to Daniel Ives of Wedbush.
- Here are the top 10 tech stocks Ives recommends owning in the coronavirus-driven stock sell-off.
- Read more on Business Insider.
As markets fall amid coronavirus outbreak panic and an unexpected oil-price war, it could be a good time to buy a list of key technology stocks, according to Wedbush.
The coronavirus outbreak, while tragic for those impacted, represents “golden buying opportunities to own the tech themes and stocks that we believe will be long term winners,” Wedbush analyst Daniel Ives wrote in a note March 1.
Stocks rebounded slightly on Tuesday after President Trump said he’s discussing stimulus including a potential US payroll-tax cut designed to boost US economic activity. Markets have shed nearly 19% from the all-time high on February 19 through Monday’s close, amid the coronavirus outbreak and an unexpected oil-price war between OPEC and its allies.
But the broader picture aside, Ives’ longstanding view is that we are in the midst of an unprecedented tech bull market, driven by themes such as cloud computing, the “transformational” 5G super cycle, electric vehicle demand, streaming cord cutting, and cyber security.
Against this backdrop, Wedbush’s strategy is “not to hide under the covers in markets like this, watch the red screens with frozen fear, and let the uncertainty of the coronavirus outbreak cloud our bullish longer term view of these transformational tech names and themes for the coming years.”
The coronavirus outbreak has disrupted supply chains of major tech companies such as Apple, and others including Microsoft and Mastercard have lowered or rescinded future earnings outlooks due to the impact of the outbreak, weighing on stock prices.
Still, in the long term, Ives thinks that coronavirus is a “shock event” that will prove short-lived, according to a Monday note. Once the disruptions from the outbreak have passed, he expects companies such as Apple to normalize quickly.
Here are the top 10 technology stocks Wedbush says to own in the coronavirus sell-off, in no particular order.
“Microsoft firmly remains our favourite cloud play for 2020 and beyond; despite the bad news from the PC/supply chain (which we view as temporary) this does not change our bullish thesis around Azure’s growth and the longer-term prospects for Redmond over the coming years,” Ives wrote.
“Our thesis since this coronavirus outbreak began is that it is primarily a timing issue for iPhone demand and ultimately once the supply chain gets back towards full capacity the Apple renaissance of iPhone growth story will resume,” according to Ives.
“The current situation with the coronavirus outbreak will temporarily push out China supply and demand of Model 3s, but not alter the longer-term bullish trajectory coming out of the region,” Ives said.
“We believe the potential to hit 150k units/demand out of this region over the next year still remains intact although could be delayed by a few months, with the stage set for a massive growth catalyst.”
“Adobe represents a company leading the digital transformation among both consumers and enterprises over the coming years,” Ives wrote.
He continued: “We continue to see relatively healthy demand trends for the company’s creative and marketing solutions with ADBE driving increased customer lifetime value and TAM expansion opportunity with subscriptions over the next 12 to 18 months a key lever that may drive further upside over time.”
“ZS is the best pure play in the cloud security arena, which we believe is still in the very early innings of taking off with overall hybrid cloud workloads poised to meaningfully accelerate over the coming years,” Ives said in a March 1 note.
“While the company has seen some speed bumps in the field over the past year from an execution perspective, we believe SAIL is still in the early innings of capitalising on a high priority identity $US10 billion+ security TAM which is being driven by the move to the cloud and a recently minted new CRO successfully leading the strategic vision in the field,” wrote Ives.
“We view NUAN as a core healthcare cloud play for the coming years and ultimately coronavirus should have negligible impact on its business in our opinion, however this crisis/outbreak speaks to the next generation technology needs in healthcare in which Nuance plays into with its ACI and AI powered strategic initiatives looking ahead,” Ives wrote.
“As more organisations make the move to digital platforms and are looking to significantly cut down on the high redundant costs and time involved in the traditional laborious contracting process, DOCU is solving a major pain point across the board for organisations looking for a streamlined software based cloud platform that solves these growing needs,” Ives wrote.
While coronavirus could lead to cancellation of some conferences and partner summits, which could impact the company’s deal flow, “we do not see this moving the needle on broader demand trends which remain robust from our vantage point with DOCU a core name to own for 2020 and beyond,” he said.
“We continue to believe NICE has a major runway for growth heading into FY20 and beyond and plays into a core cloud theme as more enterprises focus on analytics and cloud driven contact centres with NICE a significant beneficiary from this trend,” Ives wrote.
“We see a negligible impact from the coronavirus outbreak given the company’s core customer base and healthy end markets,” he said.
“While Uber is clearly impacted by less travel globally due to the coronavirus that could negatively affect growth and take rates in the near-term, we are taking a forest through the trees approach on owning Uber here,” Ives wrote.
He continued: “The ridesharing industry has become one of the most transformational growth sectors of the consumer market over the past 5 years with Uber establishing itself as the clear #1 player and in our opinion is paving a similar road to what Amazon did to transform retail/ e-commerce. “
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