"We believe the tech bottom is now likely in for the year."
From a note to Wedbush clients that landed on my desktop Wednesday:
Fed Rips Band-Aid Off with Hike/Forecast; Baked Into Oversold Tech Names Here. This afternoon the much anticipated main event from the Fed finally came with a 25 bps rate hike (first one since December 2018) and indications from the statement/Powell's press conference that six more rate hikes should be expected this year at each Fed meeting. The committee also sees three more hikes in 2023 and none the following year.
So what does this mean for tech stocks in a rising rate environment?
To this point, we strongly believe this is a bright green light to own oversold tech stocks as the market was fearing the worst from Powell & Co. and now ultimately the Fed "ripped the band-aid" off for the world to see with the liftoff now under way. While there could be major volatility going forward, we believe the tech bottom is now likely in for the year...
In a nutshell, we believe the tech sector is as oversold as we have seen in the last five years and we would strongly be buying cloud, software, cyber security, chips, and stalwart tech names led by FAANG with Apple our clear favorite.
Our recent enterprise checks coupled by healthy results are showing a digital transformation that is gaining more steam into 2022 (NOT slowing) and we believe investors have run for the exits and sold the tech sector indiscriminately across the board painting all tech names with the same brush.
Herein represents why we believe tech stocks are bifurcated as the WFH/COVID pull forward names should be viewed very cautionary with valuations still moving lower, HOWEVER we view enterprise/cloud focused names as compelling table pounder buys at these levels...
Apple top tech pick. We view Apple as both a Rock of Gibraltar defensive tech name as well as the best 5G tech play in the market with a massive product cycle that is gaining more steam along with its valuable services business which is being undervalued by the Street in our opinion. We believe Apple will be a $200 stock again in 2022 as the Street better appreciates the growth story playing out globally despite supply chain issues.
Maintains Outperform rating and $200 price target.
My take: That's certainly what it looked like yesterday.
See also: Apple does the quarter-point two-step