The demise of Silicon Valley Bank might pose an existential disaster for a lot of startups this yr, however for Big Tech, it’s a boon as traders rush to established names, one analyst maintained Friday.
While it might be complicated to bearish traders, Wedbush analyst Dan Ives mentioned the dynamics of the previous week — the collapse of SVB Financial Corp.
SIVB
and Silicon Valley Bank, and Signature Bank, the uncertainty within the regional banking sector, and a reasonably good earnings season for tech names — has arrange a “compelling risk/reward heading into the rest of the year for high quality tech names.”
“While it sounds like Twilight Zone comment to many investors; tech stocks have become the new safety trade with Big Tech names a major beneficiary of this dynamic,” mentioned Wedbush analyst Dan Ives in a Friday be aware.
One inventory supporting Ives was Microsoft Corp.
MSFT,
which on Friday turned out its finest week in almost eight years throughout the banking turmoil and rising reputation of OpenAI’s ChatGPT artificial-intelligence app, which Microsoft is utilizing in its Bing search engine and Office 365 merchandise.
Read: Microsoft inventory rallies for finest week in almost 8 years
“Large cap tech and sub-sectors such as cloud and cyber security are seeing much more resilient growth than the Street had anticipated,” Ives mentioned. “While budgets are under pressure across the board, enterprises have green lighted projects and deployments in 2023 with many budgets now in place. Numbers for 2023 have been derisked by management teams and these tech stocks have been under owned and still remain in that camp in our opinion.”
Also, Ives mentioned that with the potential for one other Fed charge hike subsequent week “is now baking in a handcuffed Fed for the rest of the year on its rate hike path that needs to pause and likely cut heading into year-end given the cracks (SVB, Signature, etc.) seen in the financial system over the past few weeks.”
Given that, Ives mentioned he nonetheless expects tech shares to rise 20% or extra in 2023 “and still have a nice upside this year.” The tech-heavy Nasdaq Composite Index
COMP
is already up 11.1% on the yr, in contrast with a 2% acquire on the S&P 500 index
SPX.
In cybersecurity, Ives mentioned he prefers names comparable to Palo Alto Networks Inc.
PANW,
Check Point Software Technologies Ltd.
CHKP,
CyberArk Software Ltd.
CYBR,
Tenable Holdings Ltd.
TENB,
Zscaler Inc.
ZS,
and CrowdStrike Holdings Inc.
CRWD.
Read: ‘High proportion’ of startups might fold by yr’s finish following Silicon Valley Bank failure, Morgan Stanley says
In addition to Microsoft, Ives mentioned his high cloud picks for 2023 had been Datadog
DDOG,
MongoDB
MDB
and Salesforce Inc.
CRM,
whereas Apple Inc.
AAPL
“firmly remains” his high tech decide for 2023 and Tesla Inc.
TSLA
stays his “favorite disruptive tech name.”
Established names have a particular edge over late-stage startups proper now seeing many must rethink their funding plans and timelines for going public as evidenced within the announcement from privately held fintech firm Stripe of a $6.5 billion funding spherical to offer liquidity to present and former workers, chopping the corporate’s valuation to $50 billion, almost half its $95 billion two years in the past.
Year-to-date, the ETFMG Prime Cyber Security ETF
HACK
is up 2.4%, the First Trust Cloud Computing ETF
SKYY
is up 9.2%, the iShares Expanded Tech-Software ETF
IGV
is up 11.8%.
Source web site: www.marketwatch.com
