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Why This Analyst Says It's Not Too Late To Buy Tech Stocks

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Why This Analyst Says It's Not Too Late To Buy Tech Stocks

The Nasdaq index closed Monday at a record high and is up around 20% since the start of 2020.

Despite the strong rally, investors should "absolutely" still be buyers of tech stocks, according to D.A. Davidson's Tom Forte.

What Happened: The global COVID-19 pandemic marks the beginning of a potentially multiyear long event where the digital solutions counted on today to remain productive will merely expand in usage, Forte said Tuesday on CNBC's "Squawk Box."

This creates further opportunities for stocks to run, even among those that are up 40% or more, the analyst said. 

If investors have to pick one tech stock, it should be Amazon.com Inc (NASDAQ: AMZN), as the pandemic "injected Amazon with growth hormones," he said. 

In Forte's view, the growth seen in Amazon and the broader e-commerce category will not only be sustained, but the mix of e-commerce spend will be a lot higher in the future.

Why It's Important: The majority of Amazon's COVID-19-based growth is coming from the low-margin retail business, the analyst said.

Looking at the growth in total cloud usage could be a good predictor of future sales at AWS, he said. 

The incremental growth in the high-margin cloud and growing advertising business can be used to reinvest in the lower-margin retail to help spur growth, Forte said. 

What's Next: Amazon's stock has crossed the $3,000 per share mark, so Forte's price target of $2,625 implies downside from current levels. The analyst said he will review the price target for that reason.

The stock ended Tuesday's session down 1.86% at $3,000.12. 

Related Links:

Amazon Includes Cannabis Company In AWS Data Marketplace For First Time

Amazon CEO Jeff Bezos's Net Worth Tops Pre-Divorce Height: Bloomberg Index

Photo courtesy of Amazon. 

Latest Ratings for AMZN

DateFirmActionFromTo
Jul 2020Canaccord GenuityMaintainsBuy
Jul 2020Credit SuisseMaintainsOutperform
Jul 2020Morgan StanleyMaintainsOverweight

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