Saturday, August 8, 2020

What tech stocks are still worthwhile

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Frankfurt Jeff Bezos may have only shrugged briefly. In the middle of the stock market crash in the corona crisis in March, the founder of the Internet department store Amazon also became significantly poorer due to the price losses. At times, his fortune on paper fell by about seven billion dollars in one day – which should hurt even the richest man in the world. But in the meantime, the descent of the Amazon papers has long been history and for Bezos maybe just an anecdote in this wild year on the stock exchange.

Corona crisis? What corona crisis? The Internet giant’s shares have regained their former strength on the US stock exchange. The papers rush from one stock exchange record to the next. The Seattle company is not an isolated case. US technology stocks have become the surprising winners of the stock market crisis. Even in the violent market turmoil in the spring, paper did not lose as much as many other companies. And the success-spoiled companies on the stock exchange have caught up faster than many value stocks. The index of the American technology exchange, the Nasdaq 100, recently reached new highs.

What does that mean for investors? Is it still worth getting started – or is there already a new bubble threatening memories of the dotcom collapse around the turn of the millennium? Christian Kahler, chief investment strategist at DZ Bank, takes a clear stance on this question. “This time, the hangover that follows is not pre-programmed,” explains Kahler, who has undertaken the industry in a current study. From March 2000 to 2003, the technology barometer lost 84 percent of its value and destroyed around $ 16 trillion in value. But above all the American technology stocks have now changed to the new “widow and orphan papers”, that is to say comparatively safe papers.

“Weak balance sheets and high losses, which were comparatively common in 2000, are now rarely found,” writes the investment strategist. With a few exceptions, the technology corporations today achieved above-average returns compared to their cost of capital. Reasons for this include competitive advantages such as customer loyalty, network effects and sophisticated distribution channels.

However, investors now have to pay this at the stock exchange with handsome prices. With a price-earnings ratio (P / E ratio) of 29, the paper is highly valued in comparison to the broad S&P 500 and its value of 22, writes the expert.

“The success story of the technology stocks and thus their further price increase should only come to an end if the growth in the sector also weakens,” Kahler predicts, however. Although the assessment of the leading US technology and internet companies appears to be ambitious again, the prospects for profit and growth remain promising.

“Investments in new technologies and software should gain in importance compared to the ‘old economy’ in the coming years,” it says. Rising dividends and increased share buybacks also indicated for these companies that the business models would mature. “The potential growth of companies is losing momentum,” analyzes the expert. His forecast: The rally in technology stocks would continue, albeit at a slower pace than last.

The Handelsblatt takes a look at several important titles from the technology sector below:

Amazon:

Nobody seems to be as optimally positioned in the virus world as the giant from Seattle. After all, many stationary retailers have come under pressure in the past few weeks, some have had to close due to the corona crisis – some permanently. Amazon is also the global market leader in cloud computing. But much of it is already priced in the US company’s stock price.

Most analysts who regularly cover Amazon are still optimistic for the online retailer. 51 experts recommend the share to buy, four to hold – and only one to sell. However, they see the target price at $ 2734 on average as very close to the current level.

Microsoft:

The software provider Microsoft still runs on most computers in the world with its Windows computer program. Because of its strength in business software and cloud number two behind Amazon, Microsoft, as well as its wide range of products, Microsoft is also considered to be crisis-proof and a possible beneficiary of the corona crisis. Marc Hellingrath, fund manager at UniGlobal, is convinced that “large companies with strong balance sheets and low indebtedness as well as companies with high recurring sales such as Microsoft” are likely to cope with the crisis.

DZ Bank also emphasizes that Microsoft has a lot of imagination for the future. The group is valued on the stock exchange with a higher market capitalization than the 30 DAX companies combined. Most analysts who regularly cover the stock, according to the Bloomberg financial information service, advise buying. At the price target, they still see room for improvement on average at $ 206.

Netflix:

Netflix has recently proven to be a strong bet on the stock exchange. The market leader in video streaming worldwide has recently replaced competitor Disney as the world’s most valuable media group on the stock market. The US company reached a new all-time high and catapulted its value to over $ 186 billion. As the market leader, Netflix has more films than almost any other provider, although Disney is also growing strongly with its Marvel films and its Stars Wars series.

An important question for all companies in the streaming industry will be where new content comes from. Many Hollywood studios have stopped production and finished films are being held back. But for the time being it works. The number of paid subscriptions skyrocketed worldwide by 15.8 million in the three months to the end of March.

The analysts can no longer get out of the rave either. The research company Jefferies left the rating for Netflix “Buy” with a target price of $ 520, according to a survey of almost 1,500 subscribers in the United States, Great Britain and India. A total of 30 experts advise buying, eight holding and six selling.

Zoom Video Communications:

A new word is spreading among employees who are currently working from their home office: Zoom. Behind this is an American video conferencing provider that is currently experiencing strong demand. Whether virtual yoga classes with the sports group, daily office meetings with the team or a short chat in the evening with friends on a laptop: the video conference provider increased the number of users to 200 million in March – every day. Before Corona, a maximum of ten million had used the service, said Zoom founder Eric Yuan.

Zoom Video Communications’ share price has doubled since the beginning of the year – even data protection problems could not stop the paper permanently. Some banks and the space company SpaceX from Elon Musk banned the app internally because of the shortcomings. The company still expects sales of up to $ 1.8 billion in the fiscal year ending in January. But the stock is valued enormously – the price-earnings ratio is in the three-digit range.

Of the analysts that Bloomberg regularly covers, twelve recommend buying the paper, 13 just holding, and five selling. You see the price target on average well below the current price.

Apple:

The US iPhone manufacturer quickly recovered on the stock exchange. The stock is already targeting new highs. When the corona virus spread at the beginning of the year, the technology giant Apple was not without consequences. Like many other companies, the smartphone manufacturer had to close shops. Supply chains were disrupted, and demand in the Chinese market in particular fell.

All in all, Apple has come through the corona crisis quite well so far. Total sales in the past quarter were below original expectations, but still grew compared to the previous year. Apple CEO Tim Cook also expects to do better business with iPads and Macs in the current quarter thanks to home office. He believes that more people will work outside the office after the crisis.

Apple is currently facing headwinds from the EU Commission. After complaints from competitors, their competition authorities check whether the group is carrying out unfair competition in its app store and with the Apple Pay payment system. However, this cannot tarnish the optimism of the analysts in the long term. Analysis firm RBC recently raised the price target for the Silicon Valley tech company from $ 345 to $ 390.

Despite the high of the stock in recent weeks, the potential is far from being exhausted. For example, more than half of the experts who regularly cover the stock recommend buying the paper.

More: New milestone on Nasdaq – despite Corona

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