Apple, Amazon, AMD And 10 More Tech Stocks Morgan Stanley Recommends Through Market Trough, Into Next Bull Run

Zinger Key Points
  • The tech subgroup as a whole is down 14% since the start of the bear market that began in 2022.
  • Morgan Stanley says tech stocks typically outperform the broader market into a recovery.

Opinions diverge regarding whether the stock market has bottomed, with some claiming the recovery seen since the start of the year is a bull trap, while others see October as the bear market’s low.

Morgan Stanley analysts delved deep into the outlook for tech stocks in 2023, given the sector typically leads the market.

Wait For Durable Trough? Tech’s bear market low typically coincides with the low of the broader market, and these stocks materially outperform after the trough, analysts led by the firm’s equity strategist Andrew Pauker said in a note. The tech subgroup as a whole has been down 14% since the bear market began at the start of 2022, the analyst said. 

See Also: Best Technology Stocks Right Now

Among subsectors, software, media and entertainment and internet retail have reported steeper losses compared to semiconductor and tech hardware stocks, he said. 

“As such, we recommend waiting for a durable trough in the broader market before adding risk more aggressively to the sector,” Pauker said. He sees the market hitting a bear market low in the first half and then advancing strongly in the second half.

The analyst listed the following as the drivers of the next bull market after the first-half lows:

  • More accommodative monetary policy as inflation ebbs.
  • More stable starting point for consumer balance sheets.
  • Pent-up fixed investment/capex demand.
  • Global growth recovery.
  • Re-emergence of positive operating leverage.
  • AI diffusion across sectors.
  • Cleantech and reshoring of related critical infrastructure.

What's Next After The Lows? Broader tech stocks outperform the overall market one, three, six and 12 months after a trough, with a 100% positive return hit over each duration, according to Morgan Stanley. About 12 months after the trough, on average, eight out of the 10 tech subgroups post positive relative returns, Pauker said.

The strongest relative returns are for the internet retail, interactive media & services, semiconductor and tech hardware subsectors, the analyst said.

“In terms of factor performance within tech, cyclicals, lower quality and value have an impressive outperformance track record 12 months post trough,” he said. 

Morgan Stanley's Recommendations For The Trough, Into Next Bull Market:

  • Endeavor Group Holdings Inc. EDR
  • Walt Disney Co. DIS
  • Warner Music Group Corp. WMG
  • Amazon.com Inc. AMZN
  • Apple Inc. AAPL
  • Palo Alto Networks Inc. PANW
  • Accenture Plc ACN
  • Global-e Online Ltd. GLBE
  • Advanced Micro Devices Inc. AMD
  • Toast Inc. TOST
  • Microsoft Corp. MSFT
  • Salesforce Inc. CRM
  • Farfetch Ltd. FTCH

Price Action: The Technology Select Sector SPDR Fund XLK was down 0.72% at $139.80 late Tuesday morning and the iShares Semiconductor ETF SOXX was down 0.66% at $411.98, according to Benzinga Pro data.

Read Next: If You Invested $1,000 In Apple When Warren Buffett Bought In, Here's How Much You'd Have Now

Benzinga illustration by Kurt Wild. 

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Posted In: Analyst ColorLong IdeasNewsTop StoriesAnalyst RatingsTechTrading IdeasAndrew PaukerExpert IdeasMorgan Stanleytech stocks
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