Banking giant Goldman Sachs is now bullish on a sector that has underperformed the broader market of late.
A team of analysts led by Peter Oppenheimer, chief global equity strategist at Goldman Sachs Research, is predicting a huge rally for technology stocks. reports MarketWatch.
Tell Goldman’s analysts:
“Globally, the IT sector now has a price-to-earnings ratio (P/E) lower than consumer discretionary, consumer staples and industrial goods. Unlike most sectors, the valuation premium over history has also fallen sharply.”
Goldman’s analysts also say that technology’s price-to-earnings-growth ratio (PEG) — a comparison of a stock’s price to the rate at which analysts expect the company’s profits to grow in coming years — is below that of the global market, creating “valuation opportunities,” meaning technology stocks are undervalued at current market prices.
The bank’s analysts emphasize that technology earnings revisions are more positive than those of other sectors and that there is a large gap between stock performance and underlying earnings growth. They also argue that technology companies’ increasing capital expenditures should pay off over time.
“While a severe shock to credit availability or hyperscaler revenues could jeopardize this spending, analyst estimates of the size of the earnings tailwinds created by these investments have only increased in recent weeks.”
Finally, the bank’s analysts say they are not concerned about a market bubble, noting that technology valuations remain lower than before the 2000 tech bubble.
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