Going against Morgan Stanley! UBS pessimistic about performance and downgrades ratings of six giants including NVIDIA to "Neutral"
UBS downgraded the ratings of six major tech giants including Apple, Amazon, Google, Meta, Microsoft, and Nvidia to "Neutral" due to a reversal in profit momentum. The stock prices of these companies have already dropped by 8%, and the expected earnings per share growth rate for next year will decrease from 42% to 16%. Analysts believe this reflects the challenging competition and cyclical pressures these stocks are facing. Morgan Stanley believes that the performance of large tech giants will become a drag on the US stock market
According to the Zhitong Finance APP, UBS has downgraded the ratings of the six tech giants' stocks, including Apple (AAPL.US), Amazon (AMZN.US), Alphabet (GOOGL.US), Meta Platforms (META.US), Microsoft (MSFT.US), and Nvidia (NVDA.US), from "Buy" to "Neutral" due to a reversal in profit momentum.
From the low point in January 2023 to the peak in April 2024, the stocks of these six tech giants have risen by 117%. A group of strategists led by Jonathan Golub stated that since that peak, the stock prices of these companies have fallen by 8%.
These stocks, along with Tesla (TSLA.US), have all retreated from recent highs. The electric car manufacturer has dropped by about 50% (compared to the peak on July 18, 2023), while Nvidia has fallen by around 20% (compared to the peak on March 25).
According to analysts, TECH+ includes all technology sectors, freely disposable internet retail, interactive media and services, interactive home entertainment, as well as movies and entertainment like Netflix (NFLX.US).
Analysts pointed out that due to the reversal in profit momentum, they have downgraded the ratings of the six tech companies.
Golub and his team stated, "Investors attribute the rise of large-cap stocks to positive sentiment and the impact of artificial intelligence; however, our research shows that profit momentum surge (changes in forward growth estimates) is driving this upward trend."
However, according to UBS analysts, this momentum is collapsing, and it is expected that the earnings growth rate per share of the six major companies will decrease from 42% to 16% next year, while other tech+ and non-tech+ stocks will accelerate growth.
Analysts noted that their downgrade of the six giants' ratings is not based on extended valuations or doubts about artificial intelligence. However, it is an acknowledgment of the tough competition and cyclical pressures these stocks are facing. These forces do not apply to other TECH+ companies or other parts of the market.
Morgan Stanley believes that large tech giants' performance will be the "savior" of the US stock market
There is a huge difference of opinion among stock strategists at major Wall Street commercial banks on whether US companies can achieve strong profit growth this year.
Michael Wilson, the chief stock strategist at Morgan Stanley, a well-known bear on Wall Street, expects that the overall earnings growth trend of US companies - that is, the overall earnings per share of S&P 500 index component companies will improve. In terms of market expectations, the performance growth rate of the "five tech giants" is expected to reach up to 60%, which may be the core driving force leading the US stock market out of the recent quagmire.
The stock strategy team led by Michael Wilson at Morgan Stanley stated that with the strengthening of the US economy, it is expected that the profit growth of US companies in 2024 and 2025 will significantly improve. This is also a rare optimistic outlook on earnings per share by the "big bear" Michael Wilson since 2023 Regarding the latest outlook on US stock earnings expectations, Wilson emphasized that the rebound in the US business activity survey, supported by new order data, "confirms the sustained growth trend in future earnings."