Analyst Daniel Ives is bullish about big tech’s V-shaped recovery from the pandemic.
From a note to clients that landed on my desktop Thursday morning:
Our bullish view of tech stocks during this pandemic and hand holding investors through this once in a century Category 5 storm has been predicated on a two-phase thesis. The first phase has largely played out as cloud (Microsoft/Amazon/Google), consumer services (Apple, Amazon, Netflix, Disney), cyber security (Zscaler, Palo Alto, Fortinet among others), and WFH (Zoom, Docusign, Citrix, Slack) vendors have been the foundational areas of the technology food chain to see strength and navigate consumers and companies through this turbulent period. Now we start to enter the second phase as the economic rebound slated for 2H/2021 will likely super charge the fundamentals and growth trajectories of well positioned tech stocks for the next chapter of this recovery. We view this next phase resulting in Street numbers moving higher and a further re-rating of tech stocks as the “risk on” trade and hunt for secular growth stories will be the focus for tech investors looking out as we head into the rest of 2020.
We believe the tech stalwarts that stand to benefit the most from this economic recovery will be Apple and Microsoft. For Apple, while the services business has been a Rock of Gibraltar for Cook & Co, now the drumroll shifts to a massive pent up demand for smartphone upgrades heading into its linchpin iPhone 12 5G cycle slated to kick off in the mid September time-frame. With 350 million of roughly 950 million iPhones worldwide currently in a window of an upgrade opportunity, Cupertino is roaring its engines ready to capitalize on this dynamic coupled by an AirPods franchise slated to sell 85 million this year (vs. 65 million last year). While Apple remains our top 5G play and consumer tech recovery name as the lockdown eases and consumer spending looks to spike in 2H, our favorite cloud name remains Microsoft looking out over the next 6 to 12 months.
Maintains Outperform rating and (Street-high) $425 price target.
My take: Ives is back in full-bull mode, counting on a September 5G iPhone release.
See also: Apple in a pickle