Goldman Sachs’ top tech stock picks to weather market volatility
Goldman Sachs has named four “compelling” buying opportunities in tech after a mixed bag of first-quarter earnings. The stocks offer solid topline growth and are more likely to prevail amid the current market volatility, the bank said. After years of market-beating returns, tech stocks have endured a massive sell-off this year. The sector has borne the brunt of a market rotation out of growth and into value names, as the likelihood of a steep rate hiking cycle — which makes growth stocks’ future earnings less attractive — hit home. A string of first-quarter earnings misses from Netflix , Google parent Alphabet and Amazon , coupled with warnings of further headwinds ahead have further compounded market nervousness. The tech-heavy Nasdaq Composite notched its seventh straight week of declines last week— the longest losing streak for the index in 21 years. But there remain pockets of opportunities in the sector, according to Goldman Sachs. “We see the most compelling buying opportunities in our largest cap coverage as these companies provide a mixture of solid topline growth in the current environment, are more likely to be able to weather any resulting global economic downturn (given their proven scaled status) and, in many cases, have talked about managing a mixture of investments and potential for capital returns to better align with current investor focus,” Goldman’s analysts, led by Eric Sheridan, said on May. 20. Read more Tech investor Jim Breyer says he’s adding Microsoft on weakness and will hold it for years These are the cheapest tech stocks today following the severe drawdown in the sector Stock picks Goldman named its “top picks focused on large caps that can weather [the] volatile environment.” The analysts’ “top pick for 2022” is Amazon , which they said is exposed to a “multitude” of broader growth trends including advertising, cloud computing and media consumption. Amazon’s demand remains strong, according to the bank, while the majority of the e-commerce sector has seen weakening demand. The bank has a price target of $3,700 on the stock, which closed at $2,221.55 on May 26 — a potential upside of 66.6%. Goldman also likes ride hailing firm Uber . While the company’s better-than-expected results have not led to a meaningful follow through in its share price, Goldman believes the company has the potential to achieve topline growth of more than 20% over the next 3-5 years from its platform exposure to transport and local commerce, Sheridan said. The bank has a price target of $55 on the stock, which closed at around $23 on May 26, representing a potential upside of 139%. Facebook parent Meta also made Goldman’s list. “We see a much better landscape for growth and margin stabilization in [the second half of 2022] as management’s comments on the Q1 earnings call struck a positive tone on growth, investments & capital returns,” Sheridan said. Goldman’s price target of $300 on Meta implies a potential upside of 57% to the stock’s closing price of around $191 on May 26. Rounding off Goldman’s list is Alphabet . The bank sees the company’s digital advertising platform as a “strong performer,” and believes the company’s other units, such as Google Cloud and “Other Bets,” could scale and achieve sustained profit growth in the coming years. Goldman has ascribed a price target of $3,000 on the stock. Shares of Alphabet closed at around $2,155 on May 26, suggesting that the stock could still rise a further 39.2%, according to Goldman’s estimates.
A Goldman Sachs Group Inc. logo hangs on the floor of the New York Stock Exchange in New York, U.S., on Wednesday, May 19, 2010.
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Goldman Sachs has named four “compelling” buying opportunities in tech after a mixed bag of first-quarter earnings. The stocks offer solid topline growth and are more likely to prevail amid the current market volatility, the bank said.