- The Nasdaq's year-to-date gain of 28% is likely to spill over into next year, according to Wedbush's Dan Ives.
- An easing chip shortage should extend the bull market and quell valuations concerns, Ives said.
- Ives said the tech-heavy Nasdaq will hit 19,000 in 2022, representing 19% upside potential.
2022 should be a favorable year for the tech-heavy Nasdaq as it looks to extend its year-to-date gains of nearly 30%, Wedbush's Daniel Ives said in a Thursday note.
Ives thinks an easing of the semiconductor shortage in the first half of next year should help improve the fundamental demand story behind tech companies and quell investor concerns about high valuations. Emerging growth from the cloud, cyber security, 5G, and the metaverse should also sustain bullish investor sentiment towards the tech space.
"The tech bull cycle will continue in our opinion its upward move into 2022 given the scarcity of growth names and winners in this market on the heels of the 4th industrial revolution playing out among enterprises and consumers," Ives said.
Ives set a 2022 price target of 19,000 for the Nasdaq, representing potential upside of 19% from current levels and an increase from its 2021 target of 16,000. Ives 2022 return target is just below the Nasdaq's 10-year compound annual growth rate of about 23%.
Driving the upside next year will include the three largest companies in the world, Microsoft, Apple, and Alphabet, Ives said. Microsoft and Google should continue to benefit from an ongoing shift to the cloud, an industry that is still in its early days.
"We believe ~90% of these cloud deployments have already been green-lighted by CIOs and healthy cloud budgets [are] already in place for 2022, with Redmond [Microsoft] firmly positioned to gain more market share vs. Amazon Web Services," Ives said.
Meanwhile, Apple will likely surpass a $3 trillion valuation on continued growth from an iPhone upgrade supercycle, according to the note.
Finally, Ives highlighted the cyber security space as a sector investors should own, as the ongoing growth in cloud solutions leads companies to understand the need for cyber security protection. "As more data moves to the cloud, a golden age of cyber security will continue," Ives said.
Internal checks lead Ives to believe the cyber security industry will see strong deal flow next year, and points to Zscaler, Palo Alto Networks, and Cyber-Ark as stocks to own in the sector, among others.