The recent tech sell-off creates a 'massive buying opportunity' with another 30% jump for the sector possible in 2021, Wedbush says
- The recent decline in tech stocks has created a "massive buying opportunity" in the sector, according to Wedbush analyst Dan Ives.
- Ives said he believes another 30% jump in tech names is possible in 2021.
- The analyst argued that 30% to 40% of employees could eventually be permanently remote, adding fuel to the digital transformation.
The recent decline in tech stocks has created a "massive buying opportunity" as another 30% jump in the sector is possible over the next 12 to 18 months, according to analysts at Wedbush Securities.
In a note to clients late Thursday, Wedbush analyst Dan Ives said he believes the current tech stock sell-off has run too far.
"The momentum names in tech are down anywhere from 15% to 25%+ this week and in our opinion, this sell-off is way overdone given the $2 trillion of digital transformation spending on the horizon coupled by a massive M&A spree set for the next few years in the tech space," Ives said.
This past week's tech-stock weakness pushed a popular exchange-traded fund that tracks the Nasdaq 100 index below key support levels on Thursday. Popular tech names like Tesla and Microsoft led sector losses throughout the week, falling roughly 10% and 4% respectively.
Much of the decline was caused by a sell-off in government bonds that intensified over the week.
The yield on the 10-year US Treasury note, which acts as a benchmark for global borrowing rates, climbed to 1.54% on Thursday following Federal Reserve Chair Jerome Powell's comments. This led to further rotation out of the highly valued tech sector into more cyclical stocks in the energy and financial sectors.
Wedbush's Ives said he sees the tech sell-off as a "golden opportunity" and argues the "digital transformation across the enterprise and consumer world is just in its first few innings."
While some analysts and investors have said tech stocks market leadership is fading, Ives believes the post-pandemic reopening won't hurt tech companies to the extent that some might argue.
The analyst said his team spoke to CEOs around the world who told them that "30%-40% of employees could be remote in a semi-permanent structure." Ives said this will "put further pressure on CIOs to rip the band-aid off and go aggressive on a cloud/digital transformation roadmap the next few years."
Ives and company highlighted several tech names that they believe offer considerable upside in his note including Microsoft, Docusign, Salesforce, Zscaler, and Apple.
Despite recent tech weakness, Wedbush "believes tech stocks have another 30% upward move in the cards" in 2021 led by "FAANG, cloud, and cybersecurity names."