Stocks to Buy, 11 Names Set to Ride Tech’s 20% Expected Gain in 2022
- The Nasdaq ended 2021 up 21.39%, but Fed tapering and expected rate hikes weigh on tech stocks.
- Wedbush's Daniel Ives tells investors to continue owning tech names, which "will be up 20%" in 2022.
- He shares 11 names amid "unparalleled" growth prospects around the cloud, cybersecurity, and 5G.
The S&P 500 and Nasdaq ended 2021 up 27% and 21%, respectively, but Wall Street analysts have warned that stocks are unlikely to repeat last year's outperformance due to a changing macro environment.
As the
Federal Reserve
winds down its bond purchases and pencils in three rate hikes this year to combat nearly four-decade-high inflation, investors are worried whether big tech can withstand the quickened rate hike calendar.
Tech stocks are sensitive to rising interest rates because they derive lofty valuations from future growth and cash flow. When rates rise, the high valuations are discounted as a result.
The potential impact is entirely recognized by Wedbush's tech analysts Daniel Ives and John Katsingris.
"We fully acknowledge that valuation sensitivity for high multiple tech stocks will be front and center in 2022 with the Fed tapering and set to raise rates throughout the year. This will clearly add to the
volatility
and some white knuckle days ahead," they said in a Monday research note.
However, "the impending 4th Industrial Revolution will result in top-line growth prospects" that are significantly above Wall Street expectations in the year ahead, the analysts said.
Specifically, Ives and Katsingris are expecting tech stocks to be up 20% in 2022 driven by "unparalleled" growth prospects around the cloud, cybersecurity, and 5G. While the fast-spreading Omicron variant has added pressure to the chip shortage, the analysts see "this dark cloud" slowly gets removed during the first half of the year, which could further strengthen the overall tech fundamental demand story.
"Our playbook is to buy the winners and themes gaining momentum over the next 12 to 18 months based on our recent checks in the field," they explained.
Among the big US tech stocks, the analysts' favorite name is Apple, which became the first US company to reach $3 trillion in market value on Monday. As a whole, the
FAANG
stocks added over $2.45 trillion in market value last year, according to Bloomberg.
With global cloud spending estimated to approach $1 trillion over the next decade, they are also bullish on Microsoft. The software giant's cloud computing service Azure is still "in its early days of playing out within the company's massive installed base and the Office 365 transition is providing growth tailwinds into 2022."
The analysts are also projecting cybersecurity budgets to expand significantly as enterprises and governments shift to the cloud and bad cyber actors continue to emerge.
"This has created a massive land grab opportunity for those well-positioned cyber security vendors in 2022 with the right products/value proposition for CISOs (chief information security officers) that hit core pain points facing today's IT departments," they noted, adding that they expect cybersecurity budgets to increase by 21% this year.
Besides well-known winning names including Apple and Microsoft, the analysts shared 9 other tech stocks in their 2022 playbook. The stocks, along with their tickers, market capitalizations, and price targets, are listed below.
Gloss