Despite the economic slowdown caused by the coronavirus outbreak, several long-term tech trends remain in place, along with the companies that should benefit the most from them, according to Wedbush analyst Dan Ives.
Those themes include the shift to cloud computing, the need for cyber security and a 5G super cycle of handset upgrades, Ives wrote in a note on Thursday.
After stress testing his models for each of these names, Ives argued that the companies to own for the cloud computing theme are Microsoft (MSFT) - Get Report, DocuSign (DOCU) - Get Report, NICE Systems (NICE) - Get Report, J2 Global (JCOM) - Get Report and Nuance (NUAN) - Get Report, while the cyber security names to own are Zscaler (ZS) - Get Report, Varonis (VRNS) - Get Report, SailPoint (SAIL) - Get Report, CyberArk (CYBR) - Get Report and Tenable (TENB) - Get Report.
“Does an economic slowdown impact these models and valuations? The answer is a clear YES,” Ives wrote. “However, looking past the fear and panic (and a potential short lived economic dent/softness), we believe these high priority areas of spending and business models have attractive risk/rewards looking ahead and we would be buying these tech names at current levels.”
Ives also noted that M&A could increase over the coming months as company valuations come down. He believes that Microsoft, Alphabet (GOOG) - Get Report, IBM (IBM) - Get Report, Adobe (ADBE) - Get Report and Oracle (ORCL) - Get Report could be some of the players looking to expand their cloud portfolios in particular over the next year.