Recent moves within the market have beaten up the tech sector, and now investors are seeing these stocks trade at low multiples on both earnings and EBITDA. As a result, some investors are shopping around and bottom-fishing for tech stocks. One analyst believes it has found a couple that offer huge upside potential.
Morgan Stanley issued a couple calls recently with a focus on big tech stocks. Each call is incredibly positive, forecasting upside of at least 60%.
While market headwinds have put a damper on the markets in general over the past few weeks, Morgan Stanley believes that a couple of these stocks could provide solid upside for the time being.
Salesforce
Morgan Stanley reiterated Salesforce Inc. (NYSE: CRM) as Overweight and cut the $360 price target cut to $291. That now implies upside of 77% from the most recent closing price. The analyst, Keith Weiss, revised down his total revenue estimates for 2023 by about 3% and operating margin assumption by 70 basis points to reflect incremental foreign exchange headwinds since the company gave its full-year guidance in April.
Weiss further noted that his conversations with channel partners suggest business momentum sustained well in 2022 and that the 2023 pipeline “continues to remain solid.” Shares are trading at multiples not seen since 2009, and Salesforce comes into the first quarter report facing “a steep wall of worry,” which “frames an attractive set-up” if the company can show continued durability of demand behind their strategic solution portfolio and illustrate a shareholder friendly operating philosophy.
Salesforce stock last closed at $164.12, in a 52-week range of $154.64 to $311.75. The consensus analyst price target is $289.83. Shares are down over 35% year to date.
Meta Platforms
Morgan Stanley’s Brian Nowak reiterated Meta Platforms Inc. (NASDAQ: FB) at Overweight. The $330 price target implies upside of 65% from the most recent closing price. Nowak noted that multiple press reports indicated that Meta was taking a more conservative approach to expense and headcount growth and plans to reduce or freeze hiring for engineers and mid-to-senior level positions. Nowak views this as a confirmation of management’s comments on the first-quarter earnings call around expense discipline and prioritization.
Nowak said in the call that he is “even more encouraged by these changes” as he sees the combination of a revenue acceleration in the second half and cost discipline leading to significant free cash flow. The extent to which Meta has significantly lowered hiring and/or operating expenses per head could add, as a “bull case,” 4% to 16% to 2022 free cash flow per share.
Meta shares closed Monday at $200.04, in a 52-week range of $169.00 to $384.33. The consensus price target is $301.33. The stock is down over 40% year to date.
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