A bearish rally or the start of another bull run?

That was the question posed by Wedbush Securities following the US tech sector’s latest earnings season and after the Nasdaq rallied 17% from its mid-June low.

Two things here: Wedbush is a closely followed US West Coast investment firm known for its technology coverage; a bearish rally is a rise of more than 10% of a stock or an index between the peak and the trough.

While Wedbush isn’t definitive in his assessment of the matter, he leans heavily toward the “bull run” thesis, although he thinks some will suffer.

Small with shallow moat

“Smaller tech players with less stable business models and unproven moats will struggle hard in the coming quarters and multiples will continue to compress for many unprofitable tech names with choppy execution,” Wedbush said in a statement. note to customers.

“However, we believe Fourth Industrial Revolution tech trends are not going to go away due to this period of slower near-term growth over the next six to nine months and we remain firmly bullish on tech stocks until the end. second half of the year.”

Microsoft Corp, Apple Inc (NASDAQ:AAPL) and Palo Alto Networks Inc (NYSE:PANW) are its “favorite” techs to own “through the end of the year.”

The investment house pointed out that the trifecta of inflation, interest rates and slowing economic growth have hurt earnings for the big and the good in Silicon Valley.

Avoided cliff edge (for now)

That said, it wasn’t the slump in profitability that many expected to accompany the Valley’s T2s.

“Fast forward to today and June’s earnings season was a major parade of wins for tech bulls as corporate spending, cloud-focused budgets, demand for consumer products/ e-commerce and even digital advertising were much better than expected given the white join context,” Wedbush said.

Going forward, analysts will be watching closely whether business spending on technology and software has held up as well as consumer demand, with results from Salesforce Inc, Palo Alto, Okta Inc and Crowdstrike Holdings Inc providing the benchmarks for performance. .

Two to watch

Looking at the numbers, Wedbush reiterated its “outperform” ratings for Salesforce and Palo Alto with price targets of $225 and $580 respectively.

On Salesforce (referred to by its CRM ticker), Wedbush said, “We think the CRM is experiencing some softness around the edges, but its core deal flow appears firm based on our checks with significant deal activity seen that more and more companies are changing cloud deployments.

“It’s a very controversial name on the street given the fragile macro; however, we believe many investors are overlooking the underlying age-old strength of the cloud for CRM through 2023.”