Market Outlook: Tech Stocks

Technology stock valuations are painting overly rosy scenarios, but Morningstar equity analysts still see pockets of value in areas such as enterprise software and IT services

Brian Colello, CPA 12 April, 2017 | 2:40PM
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Overall, we view the tech sector as modestly overvalued today at a market-cap-weighted price/fair value of 1.06, versus a ratio of 0.98 last quarter. Large-market-cap contributors like Apple (AAPL) reported strong fourth-quarter results that contributed to a rise in valuation toward our fair value.

Meanwhile, several key semiconductor firms still see bright business conditions, while software vendors are bouncing back nicely as well. In general, we still believe that valuations across tech are painting overly rosy scenarios in new and emerging technologies around artificial intelligence, for example.

Some growth prospects, like rising demand from the automotive sector, are properly being considered by the market, in our view. We still see some pockets of value in tech, such as enterprise software and IT services.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Adobe Inc618.28 USD-0.41Rating
Advanced Micro Devices Inc91.03 USD-0.86Rating
Alphabet Inc Class C2,735.93 USD-2.04Rating Inc3,626.39 USD-1.98Rating
Apple Inc146.77 USD-1.49Rating
Microsoft Corp286.54 USD-0.87Rating
Oracle Corp87.80 USD-0.07Rating
ServiceNow Inc582.29 USD-0.33Rating

About Author

Brian Colello, CPA  is a senior stock analyst with Morningstar.

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