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
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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 Salesforce.com (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).

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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
Rating
Alphabet Inc A2,786.17 USD1.35Rating
Amazon.com 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
Salesforce.com Inc295.11 USD0.40Rating
Workday Inc Class A282.76 USD0.22Rating

About Author

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