Brian Partridge of 451 Research discussed the technology and applications of 5G. 5G allows for three networks in one physical deployment thanks to virtualization like SDN and NFV, massive MIMO, and network slicing. We’re in early innings with new radio deployment of an existing 4G core. Covid-19 should boost long-term demand; the pain of sustained social distancing could be eased by AR/VR, distance learning will be more popular, and telemedicine should explode.
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We discuss recent investor and buyer survey results, consider how last week’s rally may indicate what to own on the other side, and highlight stocks of interest and to be avoided now.
Tech’s relative performance is good, but it’s absolute is not. Our index has outperformed the last few weeks after a year of in-line with the market. However, the average stock chart looks bad following the recent bounce.
Our Wolfe Tech Universe rose 13% the past week, outperforming S&P 500’s 10% gain. Every sector beat the market, led by Services (+15%) and Semis (+14%) while Hardware lagged (+11%) in Exhibit 2. We are encouraged by better breadth as our equal-weighted index’s relative performance has improved. Top performers in a snap-back week included Sabre (+84%), Wayfair (+70%), Softbank (45%), Trend Micro (+41%), and Square (40%). Laggards were Ocado (-8%), Logitech (-8%), Micro Focus (-7%), Keysight (-6%), and Autodesk (-4%).
Every three months we perform a survey of investors regarding their views on tech trends and stocks. Results were accumulated over March 8-24. The majority believe that Covid-19 will be a problem for a few months then stocks will recover. Almost one-quarter are more pessimistic and think challenges will continue through the summer. Few take the virus lightly or think it will be much worse than the market thinks. Some 43% are trading less while 36% are trading more around core positions and 21% are making significant portfolio changes.
451 Research performed a Voice of the Enterprise: Digital Pulse, Coronavirus Flash Survey, a quick survey designed to measure the impact of the Covid-19 coronavirus outbreak on businesses. It was conducted between March 10 and March 19 with 820 IT decision-makers.
Covid-19 certainly wasn’t expected, but tech was ripe for a pullback given stretched valuations that did not retreat along with earnings growth in 2H/19. Three signs that the virus effect is passing will be (1) broad testing that helps understand its distribution; (2) antivirals and eventually a vaccine that works; and (3) evidence that large numbers are immune so economic activity can resume. These are unlikely near term.
The Wolfe Tech Universe fell 11% the past week, besting the S&P 500’s 15% decline as growth continues to beat value. Our equal-weighted universe has performed in line with the market YTD and last twelve months, unlike better results from cap-weighted indices heavy in Apple and Microsoft (Exhibits 2 and 11). Software (-6%) and Internet (-10%) continue to do well with Semis and Services lagging. Top performers this week included Logitech (+29%), Zscaler (+28%), CrowdStrike (+24%), Zoom (+21%), and Coupa (+17%). Laggards were Sabre (-94%), Alliance Data (-44%), Insperity (-40%), WEX (-37%), and Etsy (-35%).
Please watch our video, in which we:Update tech performance measurements Show how P/Es finally are contracting Discuss sector positioning for now and coming out of the downturn
Paul Teich is Principal Analyst at Liftr Insights and a leading data center industry analyst. Every month Liftr Insights uses software developer interfaces to pull in data from the top four clouds: Alibaba, AWS, Azure, and Google Cloud. They can track which processor memory, and accelerators are being deployed.
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