Big tech stocks have witnessed a fair amount of selling over the past month. Valuation concerns and uncertainty regarding the COVID-19 pandemic led to a selloff in tech stocks. The chart below shows that big tech companies are trading in the red, while Apple (NASDAQ:AAPL) and Meta Platform (NASDAQ:FB) barely managed to stay in the green over the past month.
With tech stocks currently under pressure, let’s look at each of these tech giants to ascertain what the future holds for them in 2022.
AppleDespite supply-chain concerns, Apple delivered a solid financial performance in FY21. Strong sales across all product categories and strength across all of its geographies drove Apple’s financials, and in turn, its stock, which outperformed the benchmark index in 2021.
Looking ahead, demand for Apple products is likely to outpace supply, as noted by Wedbush analyst Daniel Ives. The analyst is bullish on Apple stock. He sees higher demand and the easing of supply-chain issues in the first half of 2022 as a tailwind for Apple stock. Moreover, Ives noted that higher average selling prices provide a multi-year growth opportunity.
Besides robust demand and higher selling prices, Ives expects Apple to gain from its growing market share in China.
Overall, the majority of analysts are bullish on Apple stock. Its Strong Buy consensus rating is based on 21 Buys, 3 Holds, and 1 Sell. However, hedge funds have been selling Apple stock. TipRanks’ Hedge Fund Trading Activity tool shows that hedge funds have sold 4 million Apple shares over the past three months.
AmazonTough comparisons, cost inflation, and supply-chain disruptions weighed on Amazon’s (NASDAQ:AMZN) financial performance in 2021, and in turn, its stock price. Amazon stock underperformed the Nasdaq 100 Index by a wide margin in 2021.
Given the near-term challenges, investors and hedge funds have a negative outlook on Amazon stock. TipRanks’ Stock Investors tool shows that about 1.3% of investors holding portfolios on TipRanks have sold AMZN stock in the last 30 days. Meanwhile, hedge funds have lowered their holdings by 576.2K shares in three months.
Nevertheless, Monness analyst Brian White is bullish on Amazon for 2022. He expects Amazon’s growth to accelerate in the 2H22. Further, White noted that AWS’ (Amazon Web Services) revenue growth has accelerated over the past three quarters, while Amazon is well-positioned to benefit from an “accelerated digital transformation.”
Along with White, most Wall Street analysts maintain a bullish outlook on Amazon stock. AMZN has received 30 positive analyst reviews for a unanimous Strong Buy consensus rating.
AlphabetAlphabet (NASDAQ:GOOGL) stock delivered strong returns in 2021 and outperformed its peers, thanks to the stellar recovery in ad sales and the strength of its cloud business.
Looking ahead, Alphabet could benefit from higher advertising revenues and growth in the cloud segment. Further, its balance sheet and cash flows remain strong.
Taking note of its strong cash flows, Ivan Feinseth of Tigress Financial stated that Alphabet would continue to boost shareholders’ returns through share buybacks and fund its growth initiatives on the back of its robust cash flows.
Feinseth sees Alphabet benefiting from secular tech trends, including video sharing, cloud computing, growing mobile engagement, and the ongoing shift to digital advertising, among others.
On TipRanks, Alphabet stock sports a Strong Buy consensus rating based on 26 Buy and 2 Hold recommendations. Furthermore, 1.9% of the investors holding portfolios on TipRanks have increased their exposure to GOOGL stock over the last 30 days.
MicrosoftThanks to the strength in its cloud business, Microsoft (NASDAQ:MSFT) stock increased over 49% in one year and outperformed the benchmark index. Despite the appreciation in its share price, Jefferies analyst Brent Thill is upbeat about Microsoft’s prospects and maintains a bullish outlook on the stock. Thill increased his price target on Microsoft to $400 from $375.
Thill sees Microsoft as the “safest largecap investment option” with multiple growth vectors. The analyst expects Microsoft to continue to enhance shareholder value on the back of its strong profitability and free cash flows. However, he expects Microsoft’s top-line growth to moderate a bit in the coming quarters.
Overall, on TipRanks, Microsoft stock has received 24 Buys and 1 Hold for a Strong Buy consensus rating. Furthermore, it scores a 9 out of 10 on TipRanks’ Smart Score system, indicating that MSFT stock could outperform the market averages.
Meta PlatformsFacebook changed its name to Meta Platforms to better reflect a metaverse company. However, investors and hedge funds continue to dump their stock.
TipRanks’ Stock Investors tool shows that about 0.7% of investors holding portfolios on TipRanks have sold FB stock in the last 30 days. Meanwhile, TipRanks’ Hedge Fund Trading Activity tool shows that hedge funds have sold 1.7 million Meta Platforms shares over the past three months.
Monness analyst Brian White noted, “The longer-term journey for Facebook became more intriguing in the later part of 2021 with the company introducing its vision for the metaverse, followed by a name change to Meta Platforms.”
However, he expects Apple’s app tracking transparency to continue to hurt Meta Platforms in the future.
Nevertheless, he maintains a Buy rating on Meta Platforms and expects it to benefit from favorable digital ad trends and digital transformation opportunities. Meanwhile, on TipRanks, FB stock has a Strong Buy consensus rating based on 28 Buys and 5 Holds.
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Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates Read full disclaimer >
Shares of American technology giants Microsoft Corporation (MSFT) and Alphabet Inc. Class A (GOOGL) has fallen the most in the past week, since the start of the pandemic.
One of the top metaverse stocks, MSFT declined 6.4% and GOOGL lost more than 5% in the first week of trading for the new year 2022. This has been the largest weekly slump for both companies since March 2020.
Rising Treasury Bond YieldsThe yield on the U.S. 10-year Treasury bonds increased to 1.77% on Friday, its highest level since January 2020. The upward spike caused high growth stocks, especially technology stocks, to fall.
An increasing yield indicates an inflationary environment, which means companies will face higher borrowing costs to fund development. From the investor's perspective, a rising yield means they expect more returns on their investments. Both factors add pressure to the performance of high-growth companies.
Another factor that led to the overall downfall was the latest jobs report, which showed a slump in the unemployment rate as well as an increase in wages.
On Friday, MSFT sank by as much as 1.2% and GOOGL fell 1.4%. The iShares Expanded Tech-Software Sector ETF also slipped as much as 1.7% on Friday, and for the past week it was down 8.7%.
2021 was a favorable year for the tech sectors as the pandemic-driven shifts led to major spending on tech services. Microsoft gained 45.6% over the past year and Alphabet gained 56%. Meanwhile, the tech-laden NASDAQ 100 gained about 25% last year.
Analysts’ Weigh InRecently, Wedbush analyst Daniel Ives issued a report about the upcoming earnings season for the disruptive technology stocks. The analyst says the Street is laser-focused on the stocks’ 2022 guidance.
Ives said, “In this vacuum of Fed news and watching every tick of the 10-year yield move on an hourly basis, tech investors wish 4Q earnings season was already here today. The absence of fundamental news for the tech space in this risk-off environment has catalyzed a brutal surge of selling tech names to kick the year off in 2022 as valuation scrutiny remains front and center for investors.”
Microsoft remains his favorite large-cap stock. Ives has a Buy rating on the stock and a price target of $375, which implies 19.4% upside potential to current levels.
Overall, the MSFT stock commands a Strong Buy consensus rating based on 24 Buys and 1 Hold. The average Microsoft price target of $371.36 implies 18.3% upside potential to current levels.
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