Wedbush: Split government a 'Goldilocks moment' for Apple et al.

The rotation out of the FAANG will be "short-lived," says analyst Daniel Ives. He expects tech to climb another 20% over the next year.

From a note to clients that landed on my desktop Friday morning:

Political Backdrop + Regulatory Swirls in China = Positives for US Tech Stocks. Our conversations with tech investors this week have centered around the political backdrop post elections and what this means for US tech stocks moving forward. Adding into the complex Rubik's Cube climate for tech stocks has been the heightened regulatory focus/crackdown of Chinese tech giants such as Alibaba, Baidu, and Tencent from Beijing coming out of left field. Putting all these pieces together:  First off we continue to believe the Biden Presidency and very likely Red Senate (January Georgia runoff remains a long shot variable) is a goldilocks scenario for tech stocks moving into 2021. The gridlock situation is bullish for the tech sector as now it appears any potential antitrust legislative changes/fixes against Big Tech have essentially hit a brick wall. The chances of major business model changes for tech stalwarts Amazon, Apple, Google, and Facebook look slim at the moment which removes a dark cloud lingering over the tech sector for the past year.  That said, the ongoing DOJ suit against Google and likely others down the road remains a clear risk worth watching for the Street as more scrutiny is ahead for FAANG names both in the Beltway as well as the EU into 2021 and beyond.

US/China decoupling path could be altered with a Biden win now in the cards. The second major issue remains the US/China Cold Tech war which under a Biden White House win would likely take a much softer tone going forward in the eyes of the Street and potentially change the course of the decoupling path going on between the two powerhouse countries into 2021 and beyond. This would be a major bullish sign for the likes of Apple, Cisco, and semi names which are caught in the crossfire on this ongoing US/China battle with 5G front and center... Based on policy platforms, the Street's view appears to be that a Biden Presidency will take a much more friendly tone on China technology and policy issues which could significantly ratchet down tensions and rhetoric between the US/China across the enterprise and consumer technology ecosystem, however the long standing issues around piracy and IP theft are not going away.

Maintains Outperform rating and Street-high $150 price target. 

My take: Ives tends to see tech through rose-colored glasses.

16 Comments

  1. Bart Yee said:
    Agree, reducing trade tensions between China and US and jumpstarting bilateral trade would do wonders for both economies trying to recover – China gets back big US agricultural and meat supplier, US gets exports rolling again, stabilizing the farm sectors of the economy and extending an olive branch to a particular sector.

    Meanwhile, softening the tech war rhetoric would give cover to Chinese consumers to again increase Apple purchases. Yes, the IP issues still must be worked out but world economy stabilization would go a long way to pulling all out of the Covid depression while the fight continues to slow the pandemic.

    So many fronts for the new administration to tackle.

    4
    November 13, 2020
  2. David Emery said:
    There is a slim chance, though that Republicans and Democrats see value in producing a “compromise” Big Tech regulation bill that addresses -both- of their concerns. Now that could be a big hit on tech, with increased anti-trust, increased content regulation scrutiny, etc.

    1
    November 13, 2020
    • Gregg Thurman said:
      Neither Democrats nor Republican, can get elected without the financial support of WS and tech. Any bill that stymies tech growth on the basis that they are getting to big will fail. I personally thin the Sherman anti-Trust Act is just fine as written. The problems arise in the judiciary (especially the DOJ) in its enforcement. Enforcement is inconsistent when applied which hasn’t been very often.

      3
      November 13, 2020
      • Fred Stein said:
        Well said, I agree and add. It goes beyond WS.

        Everyday people love the tech and services provided by big tech, even if the same people throw rocks at big tech. This cuts across all political persuasions.

        0
        November 13, 2020
  3. Gregg Thurman said:
    IP theft was the core issue in the trade war. It was the only thing in a trade deal that China would not agree to.

    Just by virtue of China’s population its economy will eventually become the world’s largest. I’m not comfortable with a totalitarian government (with military expansionist goals) having that much economic power, especially when that power was built on the back of stolen Western IP.

    We can’t afford to give China the same power that OPEC (another totalitarian region) had over energy. If we do you can say good-bye to Taiwan, Quemoy, Matsu, and Hong Kong, not to mention US leverage in future negotiations.

    7
    November 13, 2020
  4. Peter Kropf said:
    Anyone else concerned about Trump’s apparent willingness to charge his followers with overthrowing electoral norms?

    What happens if he successfully installs himself as Leader for Life?

    Sorry about sharing my nightmare scenario.

    1
    November 13, 2020
    • Gregg Thurman said:
      No.. I don’t think their loyalty runs that deep. Those with the funds will take a pragmatic stance and say it’s a waste of monies. Those without will give nickels and dimes, if they give at all.

      Trump for like? He’d like that, but nobody, except the very most ardent, would support it.

      1
      November 13, 2020
  5. Jerry Doyle said:
    “…. The chances of major business model changes for tech stalwarts Amazon, Apple, Google, and Facebook look slim at the moment which removes a dark cloud lingering over the tech sector for the past year.”

    The above statement perplexes me. When one viewed the Oversight Hearings of the tech giants during the past administration then one viewed a “bipartisan” appetency desire to effectuate business model changes for some tech giants. Gridlock poses no issue in such a political environment. Apple was less hideous in the Oversight Hearings’ scrutiny of the tech behemoths. My worse nightmare, though, is if Senator Elizabeth Warren gets her desired appointment as Secretary of Justice, then will she proceed with her already stated intent of separating the App Store from Apple?

    0
    November 13, 2020

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