Technology Stocks Rebound in First Quarter

Technology snapped back nicely in early 2019 with some optimism that the US and China can reach trade agreements 

Brian Colello, CPA 5 April, 2019 | 9:03AM

Semiconductor technology

The Morningstar Global Technology Index is up 16% year to date in 2019 and outperformed the global equity market, which rose 11% over the same period. Technology snapped back nicely in early 2019 with some optimism that the US and China can reach trade agreements and avoid a full-blown trade war, an issue that caused the markets and the tech sector to fall in the fourth quarter. We continue to believe that tariffs and/or the lack of a trade deal may weigh on the health of the Chinese consumer and disrupt a highly interwoven tech supply chain that would be quite difficult for the US and China to unwind.

The median technology stock is roughly 2% below our fair value estimate today compared with a 15% discount toward the end of the fourth quarter. Despite the recent rally in tech and in semiconductors specifically, we still think semis are the most undervalued subsector in technology, as about 30% of our coverage is 4-star-rated or higher and the median chip stock is about 4% below our fair value estimate. Online media is also an attractive segment, as the median online media stock within our global coverage is about 12% undervalued.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Alphabet Inc A1,526.94 USD0.49
Baidu Inc ADR134.60 USD0.31
Facebook Inc A217.14 USD-0.30

About Author

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

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