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Tech stocks have been among the worst performers in the current market downturn and investors are hoping that the new year will bring a reversal in sentiment. Against this backdrop, Wedbush analyst Daniel Ives outlined his Christmas wish list for the sector.
1. Abounding M&A News Flow: Ives said the tech sector is ripe for a massive consolidation phase, both on the enterprise and consumer side. A surge in M&A is likely, given depressed valuations for tech names and a strong appetite for strategic and financial buyers, he added.
A foretaste of what is to come on the front was seen when Coupa Software Inc. (NASDAQ:COUP) recently announced an $8 billion deal to be bought by tech-focused private-equity firm Thoma Bravo.
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2. Musk Handing Over Twitter Rein: With the kind of damage Elon Musk’s Twitter buy is inflicting on Tesla Inc. (NASDAQ:TSLA) stock, Ives called upon the billionaire to name a permanent CEO for the social media platform.
3. Microsoft Pocketing Activision: Microsoft Corp.’s (NASDAQ:MSF) proposed acquisition of Activision Blizzard Inc. (NASDAQ:ATVI) is facing opposition from the Federal Trade Commission. Ives wants the deal to go through, as he sees Activision becoming a key asset in Microsoft’s consumer gaming war chest. The fructification of the deal could be a precedence for larger deals in the big tech space, he added.
4. Conservative 2023 Guidance: Ives wishes tech executives to issue conservative guidance for 2023 when they report fourth-quarter results in January so that it would likely be viewed by the Street as achievable.
5. Apple Shifting Base Out Of China: Following the iPhone production disruptions, Ives hopes for Apple Inc. (NASDAQ:AAPL) to diversify the production of the gadget out of China. He called for building a bigger manufacturing presence in India or Vietnam in 2023 or beyond.
6. Reversal In Tech Stocks: Wedbush hopes for a 20% rally in the overall tech sector in 2023, with big tech, software and semiconductor stocks leading the charge.
7. Strong Cybersecurity Spending: Cybersecurity spending will likely be a pillar of strength despite the softer macro situation in 2023, Ives said. The analyst estimates 15%+ growth for the industry. He reiterated that Palo Alto Networks Inc. (NASDAQ:PANW), CyberArk Software Ltd. (NASDAQ:CYBX), Zscaler Inc. (NASDAQ:ZS), Check Point Software Technologies Ltd. (CHKP) and Tenable Holdings Inc. (TENB) as his favorite names.
8. Increased Activism: 2023 will bring more activism into the tech sector, with Salesforce.com Inc. (NYSE:CRM) likely a major target, Ives said.
9. Apple’s AR Glasses: Apple’s augmented reality glasses are also on Ives’s Christmas wish list for materializing in 2023.
10. More Flab Cuts: Ives calls for another 8-10% workforce reduction at big techs to manage the downturn forecast for 2023 and adjust to lower growth profiles.
Price Action: Technology Select Sector SPDR Fund (NYSE:XLK) ended Friday’s session down 1.32% at $127.48, according to Benzinga Pro data. The exchange-traded fund has shed about 26% year-to-date.
