- Tech stocks have taken a huge hit in 2022 as the Federal Reserve hikes interest rates.
- But Dan Ives of Wedbush Securities believes that now may be the time to buy the dip.
- Here are six tech stocks that Ives says are worth buying now — plus nine other picks.
A long-awaited turnaround for technology stocks may be right around the corner, according to long-time bull Dan Ives, a technology and software analyst at Wedbush Securities.
That backdrop has led to an upswing in volatility that’s exemplified by how stocks traded before, during, and after Fed chair Jerome Powell’s confirmation that the US central bank was raising interest rates by 0.5 percentage points. The tech-focused Nasdaq Composite had its worst month since 2008 in April as investors priced in that 50-basis point hike. Once the rumor of a larger-than-expected hike turned into reality, stocks took off — only to give up those gains and more in trading on Thursday.
But such price action is “just the nature of a Fed liftoff backdrop,” Ives wrote in a text message to Insider on Thursday morning. He’s still confident that the tech selloff has gone too far and that it’s time to buy the dip in high-quality technology companies that have been unfairly punished, in his view.
“A somewhat clearer path from Powell should start this bottoming process for the tech sector,” Ives wrote in a May 5 note. “We continue to believe the path for tech stocks are higher from here.”
Where to invest in the beaten-down tech sector
Not all tech sector dips are the same, Ives warned. The Wedbush tech analyst wrote that investors should avoid e-commerce companies and work-from-home beneficiaries that dominated early in the pandemic but have since crashed back to earth. Examples of stay-aways, in Ives’ view, are NFLX), Video (ZM), and DocuSign (DOCU).(
“Frothy, low-quality tech names continue to see dark days ahead as pull forward growth and a normalizing economy plays out in the summer timeframe and beyond, thus leaving these names on the wrong side of consumer/enterprise growth trends,” Ives wrote.
Conversely, Ives believes that software and cybersecurity stocks in particular are poised for a rebound. Those two tech subsectors, as well as enterprise tech and semiconductors, have already held up “extremely well” given the circumstances and benefit from having healthy demand drivers and positive corporate guidance, Ives wrote.
“Software names stick out,” Ives wrote. “We believe large-cap tech will outperform small caps and a rotation to the tech stalwarts with defensive business models and high FCF.”
Supply-chain backlogs and China’s stringent “COVID-zero” policy are a continued headwind for semiconductor firms and the rest of the tech sector, the analyst wrote, but he’s encouraged by what he sees as still-robust global demand.
6 top tech stocks to buy
In note, Ives listed six tech stocks that he said he would be buying at current levels. Four of the six names are in the software or cybersecurity subsectors.
But Ives also expressed interest in nine other tech stocks in his note: three software standouts, two cloud winners, and four cybersecurity picks.
Ives listed Oracle (ORCL), Adobe (ADBE), and Salesforce (CRM) as “top software names to own at these levels,” while he noted that Amazon (AMZN) and Google (GOOGL) are companies that should disproportionately benefit from the ongoing shift to cloud computing.
Four cybersecurity stocks that didn’t make Ives’ final cut were Crowdstrike (CRWD), Fortinet (FTNT), CyberArk (CYBR), and Palantir (PLTR). Ives recommended three of those four — with the exception of Palantir — in a late February note.
Below are the remaining six stocks that Ives said he thinks are top picks, along with the ticker, market capitalization, and year-to-date performance for each.
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