Where is the technology sector going from here? Should you hold your tech stocks?
The tech selloff continues into the last stretch of September, marking a month that has so far seen the market take a bite out of those impressive gains over the spring and summer by names like Apple (Apple Stock Quote, Chart, News NASDAQ:AAPL), Amazon (Amazon Stock Quote, Chart, News NASDAQ:AMZN) and Microsoft (Microsoft Stock Quote, Chart, News NASDAQ:MSFT).
As the S&P 500 registers a plus-five per cent loss for September so far, Apple is down more than 20 per cent, Amazon is down over 16 per cent and Microsoft is down 12 per cent.
But tech is still the place to be, argues Jeff Kilburg, CEO of KKM Financial, who says the longer picture is still looking good.
“It’s still a sector we embrace,” said Kilburg, who spoke on CNBC on Monday . “The chart for the month of September, that’s a little bit of a myopic view. If you look at the year-to-date chart, which I prefer to look at, you look at Amazon, Apple, Facebook and even Google and Microsoft — they’re all outperforming the S&P 500. So it depends on what chart you want.”
Plunging stocks on Monday are being chalked up to continuing worries of a prolonged economic slowdown as a result of the COVID-19 pandemic, which is causing some countries to warn that reverting to a lockdown once again may be up ahead if rising infection numbers persist. Markets in the United Kingdom fell by more than three per cent on concerns that the government is considering another nationwide lockdown.
The drop in share prices across the board on Monday comes after three straight weeks of losses, led by the FAANG tech giants which together make up over 25 per cent of the S&P 500 Index’s value.
But Kilburg said investors should still be thinking about tech as we get close to the fourth quarter of the year.
“Tech is still our number one sector despite [September’s losses],” Kilburg said. “You’re going to see a lot of volatility, no matter what the headline you want to plug in. We’re five, six weeks away from an election so we’re anticipating this volatility: embrace this volatility and stick with software, stick with tech.”
“In Q4 and the end of the year, that’s the sector where you’re going to see acceleration,” Kilburg said.
Tech companies wowed investors over the spring and summer with their resilience in the face of the pandemic, with many names showing strong revenue growth despite the economic slowdown, as people and businesses ramp up their tech use and spend within the work-from-home environment.
Amazon’s e-commerce dominance was on display in its latest quarterly report in July, where the company handily beat estimates for earnings and revenue, generating a whopping $10.30 per share in earnings and $88.91 billion in revenue compared to analyst expectations at $1.46 per share and $81.56 billion, respectively.
For its part, Apple delivered better-than-expected second quarter numbers as well, even as the company had to close retail stores over the Q2. Apple posted double-digit year- over-year growth in products and services, while Microsoft’s Q2 revenue was also better than expected at a 13-per-cent annualized growth rate.