Roy Rochlin/WireImage/Getty Images
- Tech stocks could rise by another 10% in the second half of 2021, Wedbush said Wednesday.
- Analyst Dan Ives sees cloud and cybersecurity stocks as benefiting from spending on products to ward off cyberthreats.
- Apple and Microsoft are among top picks in the sector.
- See more stories on Insider's business page.
Tech stocks have rebounded sharply from the losses suffered earlier this year, and should charge even higher through the rest of this year, said Wedbush on Wednesday, attributing its view on upcoming earnings and forward guidance and its expectation of robust demand for cybersecurity and cloud-based products.
The projection comes as the second-quarter earnings season gets underway this week. Wedbush analyst Dan Ives in a note said tech behemoth Apple remains its top pick among large-cap tech names and that it would be buyers of Microsoft and Zscaler, among others. Apple and Microsoft shares on Tuesday hit all-time highs.
"We believe June results and guidance around the corner over the coming weeks will be another positive catalyst for tech stocks and result in further multiple expansion as we see tech stocks up another 10%+ in [the second half of 2021] reflecting this good news," Ives wrote.
So far this year, the Nasdaq 100 index, which includes Wall Street's largest tech and non-financial stocks, has advanced by 15%, and the broader Nasdaq Composite has bulked up by nearly 14%. Tech stocks have bounced back after a sell-off in March that was largely triggered by a rapid surge in long-dated government bond yields, implying higher borrowing costs. Yields steepened on expectations of hotter inflation in the face of higher government spending and the reopening of the economy hit hard by the pandemic.
The 16 months since the pandemic slammed into the US have led to a push in demand for cloud, e-commerce, cybersecurity, and other technology products and services. "However, we believe massive growth (and further multiple expansion) is still on the horizon with tech stocks and FAANG names underestimating this surge of demand for the next 2-3 years," Ives said.
Wedbush expects spending for cloud and cybersecurity technology to surge in an effort to protect systems from cyber threats like the May ransomware attack against Colonial Pipeline, the largest fuel pipeline operator in the US. Wedbush sees a $200 billion growth opportunity in cloud security alone over the next few years. Varonis Systems and Zscaler remain among top picks in Wedbush's cybersecurity coverage.
Wedbush also said heading into the second half of the year it would own secular winners in the FAANG space, with Apple its favorite name, and cloud names including Microsoft, voice recording and data security company Nice and customer relationship management software maker Pegasystems.