Tech stocks are poised for big gains this year despite the rotation out of the sector seen recently.
Q1 Earnings An Imminent Catalyst: The first-quarter earnings reports released over the next month are likely to be a major positive catalyst for tech stocks, according to Wedbush analyst Daniel Ives. The following stocks, according to the analyst, have a 25-30% move in the cards for the rest of the year.
The analyst named Apple Inc (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT) and Nuance Communications, Inc. (NASDAQ:NUAN) as his favorite tech names heading into earnings, as these continue to stand out with compelling risk/rewards.
Supercycle Playing Out For Apple In March and June Quarters: Based on the current trajectory and in a bull-case scenario, Apple has the potential to sell an "eyepopping" 240 million-plus iPhones in 2021, Ives said. This could eclipse the previous record of 231 million units sold in 2015.
The analyst highlighted an unprecedented upgrade cycle and strong demand in China as key to the bull thesis for Apple.
Microsoft Gains In Cloud Race: The tide is shifting in the cloud competition, given Microsoft Azure's 50% growth is helping it gain market share versus Amazon.com, Inc. (NASDAQ:AMZN), Ives said. The analyst sees transformational cloud opportunity on the horizon.
"While we have seen the momentum of this backdrop in the last few quarters, we believe deal flow looks strong heading into the rest of FY21 for Nadella & Co," the analyst wrote in the note.
Nuance - A Health Care Cloud Story: Nuance continues to be laser-focused on building a global cloud health care and AI-driven business with growing annual recurring revenue and a sustainable revenue/earnings stream going forward, Ives said.
Larger deals will materialize in the field, as more hospital-wide deployments shift to the cloud.
For the March quarter, the analyst sees a robust cloud healthcare pipeline and deal flow conversion, as more hospitals look to deploy these solutions.
The Tech Stock Ratings: Ives has Outperform ratings on Apple, Microsoft and Nuance. The analyst has a $175 price target for Apple, $300 for Microsoft and $65 for Nuance.