Wall Street Anticipates Strong Earnings in Tech Sector or The Impact of Generational AI Growth on Tech Stocks
Exploring Daniel Ives’ Top Tech Stock Picks
Daniel Ives, a 5-star analyst rated in the top 2% of the Street’s stock pros at Wedbush, sees this as setting the stage for a soft landing for the economy, especially with minimal wage inflation. He believes this is excellent news for the tech sector, as it gears up for the upcoming earnings season.
Ives predicts that the upcoming third-quarter earnings will be a revelation for Wall Street, driven by transformative AI growth and a stabilizing IT spending environment. He expects a substantial tech rally heading into year-end, with tech stocks potentially rising by another 12%-15% in the fourth quarter.
While there may be bearish sentiments attempting to temper bullish enthusiasm, Ives advises investors to focus on the potential of this generational AI growth, with an anticipated $1 trillion in tech spending over the next decade.
Ives has identified specific companies well-positioned to benefit from this trend. Let’s take a closer look at two of his top picks, both of which are rated as ‘Strong Buys’ by the analyst consensus.
Progress Software (PRGS): Poised for Growth in the Digital Landscape
Progress Software, a leading American infrastructure software company, specializes in providing a wide range of software tools and solutions to enhance business operational efficiency and accelerate digital transformation. With a strong product portfolio, including platforms like Progress OpenEdge and Progress Telerik, the company serves prominent clients such as Meta, Microsoft, IBM, Barclays, and S&P Global.
In its recent fiscal Q3 report, Progress Software delivered impressive results, with revenue climbing by 15.7% year-over-year to $175 million and adjusted EPS exceeding expectations. The company also achieved a net retention rate above 100% and is actively seeking potential M&A opportunities.
Daniel Ives is optimistic about Progress Software’s future, particularly its M&A strategy, which he believes will capitalize on undervalued assets in the market. He maintains an ‘Outperform’ rating on PRGS, with a $65 price target, suggesting a potential 23% return.
The consensus among analysts supports Ives’ sentiment, with a ‘Strong Buy’ consensus rating and an average price target of $63.75, indicating approximately 21% upside potential.
Microsoft (MSFT): Leading the Charge in AI Revolution
Microsoft, a tech giant with a significant global presence, stands out as a prominent player in the AI revolution. The company’s Windows operating system and a wide range of software applications and services, including Microsoft Office, Azure cloud computing, and Xbox gaming consoles, have established its dominance.
Microsoft is heavily invested in AI, with its AI assistant feature, Microsoft CoPilot, set to become widely available for enterprise customers. Despite some concerns about growth in its fiscal fourth quarter of 2023, the company continues to innovate in the AI space.
Daniel Ives believes that Microsoft’s AI monetization opportunity is progressing faster than expected, and Azure’s growth is exceeding guidance. He rates MSFT shares as ‘Outperform’ with a $400 price target, indicating a 21% potential return.
The overall consensus for Microsoft is ‘Strong Buy,’ with 30 Buy ratings against 4 Holds. The average target of $397.19 aligns closely with Ives’ objective and offers a potential 20% gain.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended for informational purposes only. It is essential to conduct your analysis before making any investment decisions.