After a solid 2019 for the broad markets in general, and the tech sector specifically, 2020 poses an interesting question on what’s next for this sector. Wedbush believes that there is clear momentum for the tech stocks as a number of transformational trends such as 5G, cloud, autonomous and the streaming content wars will be front and center for Wall Street.
In covering tech stocks the past two decades, Wedbush’s annual predictions provide a framework for investors and key themes heading into the year that have helped define who this firm believes will be the potential winners/losers going into the next year.
As for companies, Wedbush predicts that the top name in 5G will be Apple Inc. (NASDAQ: AAPL), and top cloud names being Microsoft Corp. (NASDAQ: MSFT) and VMware, Inc. (NYSE: VMW). Wedbush’s top cybersecurity names to play in the cloud trend are CyberArk Software Ltd. (NASDAQ: CYBR), Zscaler Inc. (NASDAQ: ZS) and Palo Alto Networks Inc. (NYSE: PANW).
The boutique brokerage firm believes that “Winter Is Coming” for Slack Technologies Inc. (NYSE: WORK). Specifically, Wedbush thinks that it will be more difficult for Slack to compete with Microsoft and its Teams initiative, given Redmond’s cloud shift/Office 365 upgrades starting to inflect.
Wedbush offered its top 10 tech predictions for 2020:
- 2020 will be the year of the “5G Super Cycle” and Apple will be the clear winner.
- FAANG regulatory headwinds result in fines, but NO business model changes.
- Tesla will find success in China with Giga 3 and potentially hit the key 100k delivery number quicker than the US/Europe trajectory and be a demand tailwind.
- Microsoft/Nadella will win the next stage of the cloud war vs. Bezos/Amazon.
- The streaming wars will result in clear winners/losers with Disney and Iger the juggernaut that will help disrupt 10%+ of Netflix’s installed base.
- 2020 will be the year of consolidation in cyber security as we believe both financial and strategic buyers will be aggressively looking at acquiring public/private vendors.
- Uber will need to significantly curtail/possibly shut down Uber Eats given the lack of profitability and competitive headwinds in this business segment.
- FAANG tech stalwarts such as Google, Amazon, and Apple further expand into healthcare and banking verticals through both organic as well as acquisitions to broaden their monetization engines and consumer product footprint.
- AB5 California legislation will be a major “gut punch” to the Gig Economy and throw a major wrench in the business models of Uber, Lyft, DoorDash, Postmates, and other players once passed (with all eyes on the impending court battle).
- Google and its major cloud initiative, GCP, will potentially make a major strategic acquisition of a public cloud vendor to catalyze Kurian’s efforts chasing after the likes of Microsoft and AWS in the $1 trillion cloud race.