US Tech Sector Still Overvalued, say Analysts

Ahead of earnings season for US tech stocks like Facebook, Amazon and Apple, Morningstar analysts look at the opportunities in the sector

Brian Colello, CPA 12 July, 2018 | 3:32PM
Facebook Twitter LinkedIn

Facebook Data Scandal

Tech stocks have had an impressive run over recent years and Morningstar equity analysts view the tech sector as slightly overvalued today, but less so than in the fourth quarter of 2017 and first quarter of 2018 as global markets have eased.

The single most important trend in technology remains the ongoing shift toward cloud computing, which we think is having ramifications on dozens of stocks across our coverage. We continue to see several undervalued names with healthy cloud computing exposure, such as four-star rated Microsoft (MSFT) and four-star rated (CRM). In short, both startups and enterprises, in efforts to reduce the high fixed costs associated with running on-premises IT hardware and software, are shifting more and more workloads to infrastructure-as-a-service, or IaaS, vendors, such as Amazon's (AMZN) Web Services, Microsoft Azure and Google (GOOGL).

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

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.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Alphabet Inc A2,786.17 USD1.35Rating Inc3,376.07 USD1.68Rating
Apple Inc149.32 USD0.46Rating
Cisco Systems Inc55.81 USD1.22Rating
Facebook Inc A315.81 USD-3.92Rating
Microsoft Corp310.11 USD0.64Rating
Oracle Corp96.98 USD-0.93Rating Inc295.11 USD0.40Rating
Workday Inc Class A282.76 USD0.22Rating

About Author

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