Here’s JPMorgan’s New Technology Outlook
“Within tech, we think that prospects of a potential bottoming in consensus estimates are improving…[and] relative safe haven stocks could be used as a source of funds,” wrote JPMorgan Chase analyst Mark Moskowitz in a research note seen by Forbes.
As the publication reported, Moskowitz updated his ratings on several key technology stocks on Monday based on that reasoning, and despite the “muted growth outlook” in technology, he urged investors to back away from safer havens in favor of riskier companies.
EMC (NYSE:EMC): Current Price $24.22
Moskowitz downgraded the stock from Overweight to Neutral and decreased his price target on the company’s shares from $29 to $26. His reasoning for the lower rating was based on his fear that EMC’s midrange market share momentum was easing and the possibility that increased competition from Oracle (NASDAQ:ORCL) in the high-end storage arena could prevent the company from having “above-peer growth potential.”
Shares of EMC were also downgraded last Friday to Equal-weight from Overweight by Morgan Stanley analyst Katy Hubert. In a research note seen by Barron’s, she wrote that while the fourth quarter “turned out to be challenging for hardware in general, our channel checks suggest storage experienced the largest negative change on the margin.”
IBM (NYSE:IBM): Current Price $192.55
Shares of IBM were also hit with a downgrade by the JPMorgan analyst, who dropped his rating from Overweight to Neutral, based on concerns that “investors could become less interested in the stock, given the company’s limited upside potential and muted revenue growth profile at a time when broader tech end markets could be bottoming.”
While the company has weathered every significant technological change in the past century and has more patents than any U.S. technology company, it has a much slower growth rate than many other technology companies like Amazon (NASDAQ:AMZN) or Google (NASDAQ:GOOG) because of its size. While the company has positioned itself to take advantage of the cloud computing trend, it is a much more competitive segment than its traditional in-house data center model and IBM will have challenges. With his downgrade, Moskowitz is not denying that IBM is a safe bet, rather he is arguing that its growth will be limited because of changes in the technology sector.
Hewlett-Packard (NYSE:HPQ): Current Price $16.77
With the amount of bad press H-P had last year, it may seem surprising that Moskowitz raised his rating on the company to Neutral from Underweight, but as he wrote, “the headline news just cannot get much worse.” His analysis is in line with an assessment made by Bloomberg last week. The publication noted that the company’s problems may not be with its business; H-P has a full array of operations, including PCs, servers, and printers, and many of those businesses remain high revenue generators.
“I see them looking more like a junior IBM situation,” Global Financial Private Capital’s chief investment officer Chris Bertelsen told the publication. He believes that chief executive Meg Whitman may be able to turnaround the company because, in his opinion, H-P’s biggest problem is not its core businesses, but its leadership.
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