Reuters Insider - This market sell-off is a buying opportunity -analyst
03/02/2020 05:13
Click the following link to watch video: https://share.insider.thomsonreuters.com/link?entryId=0_gk1tw98o&referenceId=tag:reuters.com,2020:newsml_OVBYIEH6Z_930&pageId=ReutersNews Source: Reuters Insider Description: Buy tech stocks during this coronavirus-induced sell-off and look for more upside from marquee tech names this year, Dan Ives, managing director of equity research at Wedbush Securities told Reuters' Conway G. Gittens. Short Link: https://tmsnrt.rs/2RLywQQ Video Transcript: Wall Street is on track to have its worst day of the year, as a matter of fact the worst day since last October. What’s going on? So many different things. Let’s turn to Dan Ives. He is the Managing Director of Equity Research at Wedbush Securities. So Coronavirus fears, we got the bond market flashing, a recession again. We got weak data, weak earnings. What do you make of this market? Look, I think right now, especially in tech you’ve had a strong earnings season, but it’s really the Coronavirus. That’s been the worry. The flights getting shut off to China. Really worries about the tech supply chain. Tech, anyone that’s exposed to Chinese consumer, I think that’s really kind of put gasoline in the fire right now and you’ll see it in a sell-off accordingly. You focus on the technology sector. I’m wondering from you, which companies are the most vulnerable if this Coronavirus then goes on for a long time in terms of being exposed by their supply chain and then on the flipside, being exposed to the Chinese consumer? From the tech perspective, it’s semis. That’s why you see semi stocks really weeding tech down today, and I think that’s one from a supply chain. You look at names like Intel, AMD, NVIDIA, Micron. Obviously those are most exposed. You look at a name like Apple in terms of not just manufacturing in terms of Foxconn, but also consumer perspective. They’re highly exposed. And then Tesla as well in terms of just Giga 3 in Shanghai. But I do think right now the bark’s worse than the bite. I think it is contained. But nonetheless right now, you’re seeing especially going into the weekend, a lot of worries and you’re definitely seeing investors at the sell signal. So when you see this kind of erosion in the market, are you seeing it as a buy signal or a signal to wait and hold. To me, and it’s been our thesis for the last few years, a bright green buy signal because anytime this macro world-ending-type event, it’s the opportunity to own these FAANG names, own tech, because in my opinion it’s a contained issue. And even if it sort of goes into March, immediately moved some of the units from March to June, it’s a timing issue. So to me right now, you’re a buyer of tech names. And I think these macros events, they create the opportunities to own tech names cheaper. So let’s talk about one stock that’s doing well despite what we’re seeing in the overall market, is Amazon. They came out with their results, blockbuster results. It looks like they’re able to manage one-day shipping without costs getting out of control. It looks like, what, we might see them close above the $1 trillion market cap for the first time ever. So what’s your view on Amazon? Yeah, that was a Mahomes-like performance in terms of what we saw from Amazon last night. Specifically, not just on the e-commerce side but on the cloud side. Right now they’re continuing to build that significant no-pun Prime membership. That move right now is really what’s differentiating them, and I think you saw numbers that handily beat expectations. The profitability on AWS, that’s the one-two punch right now. E-commerce and cloud, trillion-Dollar-plus market cap, we continue to think Amazon’s stock that goes to $2,400, $2,500. FAANG names continue to be strong. Apple and Amazon win the charge. This was a huge shot in the arm for tech bulls despite some of the new ways and some of the softness you see today and across— Alright. IBM was this week, Amazon was this week. Let’s look ahead to next week. We hear from Alphabet, the parent of Google. According to Refinitiv IBES, we’re looking for an EPS of $12.53 a share. Sales coming in somewhere between $46 billion, $47 billion. Give me your outlook for what you are looking for in terms of what you’d want to hear from Alphabet. Sure. I think it’s going to be a strong quarter. I think monetization on the Search continues to be there, and they’ll beat estimates in terms of expectations. But then the big thing would soon they are taking charge on Alphabet is cloud. If you look right now for Google, that’s the missing piece. Search, monetization they continue to own. The big piece of the valuation of the story is cloud. Amazon’s been massively successful. Microsoft is short this week. I think that’s going to be the big focus – doubling down on cloud. Strategically, they’re going to be there. There could be some acquisitions there. That’s going to be a big focus outside the numbers in terms of cloud success from GCP and Google. What about cost? When we saw Facebook’s results earlier this week, there was this concern about them having to spend more to deal with privacy issues and the whole regulatory scrutiny. Are you going to be looking closely at the cost at Alphabet for that too? That’s a balancing act. They’re going to have to continue to plow investments, especially in some of the newer initiatives as well. It’s just the regulatory environment, what you’re seeing there. But then the big thing that you saw in Facebook that I don’t think you’ll see in Google, which is really some sub growth miss and really disappointment on the top line. I think as long as Google, they continue to accelerate in terms of the monetization side, then I think you’re going to see a stock that goes higher, that continues to be in our view FAANG names go up another 25% this year. You look at the new ways. Fundamentally, I think Apple and Amazon, just tip of the iceberg in terms of what we see for the rest of the year. Alright. Great. There’s the rundown on the tech sector for 2020. Dan Ives is the Managing Director of Equity Research at Wedbush Securities. I’m Conway G. Gittens, and this is Reuters