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Large-cap tech stocks are only prepared to resist their current slowdown; they will most likely continue to outperform the broader market in the coming years, Goldman Sachs analysts wrote in an email Sunday.
While the sector’s top seven stocks have fallen 20% from their July peak, they are now trading 1. 3 times higher than their price, earnings consistent with a consistent percentage and long-term expansion (PEG), below the average ratio of 1. 9x. for action S
“As recently as January, the organization achieved an 18% PEG premium over average inventory (2. 2 times versus 1. 9 times). If consensus expansion estimates remain unchanged and mega-cap technology inventories return to their average PEG of the last decade. (0. 84x), the organization would appreciate by 20%,” Goldman said.
It’s possible that will happen soon, as the upcoming earnings season is likely to be an imaginable catalyst for more gains in the sector. For two-thirds of the earnings seasons since 2016, primary technology stocks have outpaced gains by 3 percentage points.
And today’s biggest tech names — Apple, Microsoft, Amazon, Google, Nvidia, Tesla and Meta, also known as the “Magnificent Seven” — are expected to see their sales increase 11% in upcoming third-quarter results, with an estimate of 1% for aggregate S.
Not only may this push the tech industry to 2023 highs, but the sector may also continue to outperform average S inventory.
In fact, impressive sales expansion has been a long-standing trend for large-cap technologies, even before the hype over synthetic intelligence sparked a big spike in their inventory prices. For example, from 2013 to 2019, the sector grew at a compound annual expansion. rate of 15%, to 2% for the rest of the S.
By 2025, the seven largest stocks are expected to grow nine numbers faster than the rest of the index.
In addition to high hopes for a strong earnings season, large-cap technology stocks are also expected to rally amid a moderation in the U. S. Treasury bond market. The sector fell sharply as 10-year yields rose above 4. 6%, but Goldman estimates they will fall back to 4. 3% in the fourth quarter.
“The divergence between downward valuations and core stocks represents an opportunity for investors,” the note said.
Wedbush Securities’ Dan Ives is positive about the tech sector. In a recent note, he called the upcoming earnings a “taste” of the technology’s long-term growth. Still, not everyone believes the recovery is sustainable, and some commentators have warned that persistent inflation and waning enthusiasm for AI would disrupt the sector’s long-term earnings.