Why This Analyst Sees Further Upside To FAANG Stocks — With Apple As A 'Favorite' Pick

Tech stocks still have upside left in them, Wedbush analyst Daniel Ives said in a note Sunday, while acknowledging the supply chain issues plaguing underlying businesses in the short term.

What Happened: Ives said that the “tech rally has legs well into 2022 given stellar growth prospects.”

The analyst attributed this to the “scarcity of growth names/winners” in the market ahead of the so-called 4th Industrial Revolution playing out among both enterprises and consumers.

“We would own the secular winners in FAANG (Apple remains our favorite), cloud (MSFT, DOCU, NICE, PEGA favorites), cyber security (ZS, PANW, CYBR, TENB favorites), and 5G looking ahead," Ives said. "Our favorite metaverse play continues to be MTTR.”

FAANG is made up of tech names Facebook Inc (NASDAQ: FB), Apple Inc (NASDAQ: AAPL), Amazon.com, Inc (NASDAQ: AMZN), Netfix Inc (NASDAQ: NFLX), and Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG) subsidiary Google.

See Also: How To Buy Apple (AAPL) Shares

Why It Matters: Taking stock of the supply chain issues affecting tech stocks going into the holiday season, Ives termed these as “transitory.”

The analyst said the Street has a “goldfish mentality” as it looks through this near-term headwind instead of focussing on the “underlying demand picture for 2022 which remains fertile.”

As per Ives, Apple would be driven higher by demand despite supply chain shortages.

“We view this issue purely as a victim of the supply chain for Apple and NOT a demand issue for iPhones which remains the foundation of our bullish thesis into FY22 and view of Cupertino reaching a $3 trillion market cap over the next year.”

Ives said the shift to Cloud is a “major benefit” to Microsoft Inc (NASDAQ: MSFT) and other stalwarts.

“For MSFT, we believe Azure's cloud momentum is still in its early days of playing out within the company’s massive installed base and the Office 365 transition for both consumer/enterprise is providing growth tailwinds over the next few years.”

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