Seven tech stock winners amid the pandemic
Investors are anticipating a return to normalcy in the economy and the stock market following the 2020 health crisis. However, Bank of America (ticker: BAC) analyst Haim Israel says the pandemic will have a lasting effect on the world and the companies changing it. Companies and consumers are generating more data than ever; big governments are taking a more proactive approach in global economies; and a younger generation of investors are now focused on social distancing, the digital economy and environmental sustainability, Israel says. Here are seven of Bank of America’s top tech stock picks amid the health crisis and for the post-pandemic world:
Amazon shares are up more than 65% through early August despite the crisis, a reflection of how perfectly positioned its major businesses were for a shelter-in-place economy. In the second quarter, Amazon reported blowout earnings and revenue numbers while much of the rest of the retail sector struggled. Online grocery sales tripled, Amazon Web Services revenue increased 29%, and net income roughly doubled from a year ago. Analyst Justin Post says the pandemic accelerated long-term shifts to online retail and cloud computing, two markets where Amazon dominates. Bank of America has a “buy” rating and $3,560 price target for AMZN stock.
Microsoft Corp. (MSFT)
Microsoft is Amazon’s top competition in the cloud services space and has been gaining market share from Amazon in recent years. Azure revenue was up 47% in the second quarter. Microsoft’s gaming business is also thriving as millions of bored Americans are stuck at home. Xbox content and services revenue increased 65% in the second quarter, up from just 2% year-over-year growth in the first quarter. Analyst Kash Rangan says Microsoft is a secular growth story with attractive margins and a reasonable valuation. Bank of America has a “buy” rating and $250 price target for MSFT stock.
Alphabet (GOOG, GOOGL)
Shares of Google parent company Alphabet are up about 9% so far in 2020, but the stock has lagged most of its mega-cap tech peers because of concerns about online advertising revenue. Alphabet even reported a 2% drop in overall revenue in the second quarter, the company’s first-ever quarter of negative sales growth. However, Alphabet reported that both search and YouTube advertising revenue growth accelerated in July. Post says Google Cloud and YouTube subscription growth should help support the stock while the advertising business recovers. Bank of America has a “buy” rating and $1,730 price target for GOOGL stock.