Banking giant Goldman Sachs is now bullish on the sector which has recently underperformed the broader market.
A team of analysts led by Peter Oppenheimer, chief global equity strategist at Goldman Sachs Research, expects a massive rally for technology stocks. Reports Market monitoring.
Goldman analysts say,
“Globally, the IT sector now has a P/E (price-to-earnings) below consumer estimates, consumer staples and industrials. Unlike most sectors, the year-to-date valuation premium has also fallen sharply.”
Goldman analysts also say the tech space’s price-earnings-to-growth (PEG) ratio — a comparison of a stock’s price against how quickly analysts expect a company’s earnings to grow over the coming years — is lower than that of the global overall market, creating “valuation opportunities,” meaning technology stocks are undervalued at current market prices.
The bank’s analysts highlight that technology earnings reviews are more positive than other sectors and that there is a significant gap between stock performance and underlying earnings growth. They also argue that technology companies’ increased capital expenditures should pay off in the future.
“While a severe shock to credit availability or excessive revenues could put this spending at risk, analyst estimates of the size of the favorable earnings created by those investments have only increased over the past few weeks.”
Finally, the bank’s analysts say they’re not worried about a market bubble, noting that technology valuations are still lower than they were before the 2000 technology bubble.
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