Three analysts share their outlook for technology, with one saying it’s poised for a tough rally and another naming some “very interesting” stocks in the sector. Longview Economics chief executive Chris Watling said the stock market as a whole is “ready for a rally.” “We just need a whiff of good news from anywhere to start this rally,” he told CNBC’s Street Signs Europe on Wednesday. His comments come after a wild week for stocks, which saw the S&P 500 briefly enter a bear market on Friday. The tech-heavy Nasdaq Composite — down 3.8% over the past week — is already deep in bear market territory, 30% off its highs. “When [Warren] Buffett said you want to be greedy when people are fearful and fearful when they are greedy, so I think from a tactical trading perspective it’s time to be greedy,” Watling added. When asked how to invest in the current environment, Watling said technology is likely to bring out the best in all sectors over the next few months [tech] is badly hit and should bounce back and outperform quite strongly,” he said. The Nasdaq was down about 27% year-to-date on Friday. Super-high growth stocks vs. big tech Michael Purves, founder and CEO of Tallbacken Capital Advisors, said that looking ahead, it’s important to distinguish between the tech giants — like Apple, Microsoft, and Alphabet — and the type of stocks in the ARKK ETF — the “very high growth story stocks” – to distinguish. “A lot of them have corrected 70% or 80% or even 90% from their peak a little over a year ago,” Purves told CNBC on Friday. Cathie Wood’s ARK Innovation ETF is down over 50% year-to-date, he said these stocks mirror reflecting the ‘2000, 2001 phase’ when the dot-com bubble burst [year] 2000 arguments are really relegated to this super high growth part of the market.” “Microsoft and Google’s and whatnot, they’re being upgraded with high interest rates, but let’s not forget that [they] arguably the modern day form of an electric utility – but with amazing financials, with amazing cash on hand to support earnings growth through future share buybacks,” Purves added. Tech stock picks Neil Campling, head of technology, media and telecom research at Mirabaud Securities, said there are some “very interesting opportunities” in the industry right now. In particular, he noted a shift in how tech companies operate as Netflix made layoffs , Meta paused hiring and Amazon said its warehouses were overstaffed.”These different things are happening now as I think the tech sector is refocusing on that – not so much on chasing revenue at all costs – but on cost management.” and finding ways to improve margins,” he told CNBC’s Street Signs Europe on Wednesday. One option tech companies looking to save money should look to companies that help with cost management, like software vendors, Campling added. “Stocks like ServiceNow, Workday, and Qualys, there are types of companies hme that can help manage this process by looking for fat that can be removed and can really help increase efficiency,” he said. ServiceNow sells cloud-based software, while Workday makes HR technology and Qualys provides cloud security. “At the corporate level, especially in inflationary environments…the deflationary economics of technology can really stand out for the companies that can provide these types of services,” he said of the stocks he named. In an interview with CNBC last month, Bill McDermott, CEO of ServiceNow, described enterprise software as “the most deflationary force on the planet” as he claimed it helps companies cope with problems like rising prices and interest rates and supply chain disruptions. – CNBC’s Lauren Feiner, Sarah Min and Hannah Miao contributed to this report.
A woman walks in the rain in front of the New York Stock Exchange (NYSE) in Lower Manhattan’s financial district during the outbreak of the coronavirus disease (COVID-19) in New York, April 13, 2020.
Andrew Kelly | Reuters
Three analysts share their outlook for technology, with one saying it’s poised for a tough rally and another naming some “very interesting” stocks in the sector.