The tech sector continues to capture attention with its vast potential for growth, leading analysts to identify key stocks that are positioned to deliver promising returns as they approach their earnings announcements. According to Morgan Stanley, several overweight-rated tech stocks stand out as opportunities for investors. In this article, we’ll delve into four prominent names: Microsoft, Apple, Atlassian, and Fortinet, discussing their current market dynamics and the reasons behind their favorable outlooks.
Microsoft consistently ranks as one of the most formidable entities in the tech landscape. Despite a strong upward trajectory in 2024—boasting nearly a 14% increase in its share value—analyst Keith Weiss from Morgan Stanley believes there remains significant room for growth. Investors have grown cautious due to increasing anxieties surrounding gross margin projections, capital expenditure demands, and the evolving monetization strategies of generative AI—as emphasized by Weiss.
However, the heart of Weiss’s optimism lies in Azure, Microsoft’s cloud computing service, which he asserts has an impressive growth trajectory. He anticipates that while Q1 performance might reflect some modest gains, the real game-changer will be cementing investor confidence in the anticipated acceleration of Azure’s performance in the latter half of the fiscal year. With Microsoft’s earnings set to be released on October 30, the spotlight will be on how the company navigates these complexities amid a fluctuating market sentiment.
Apple, another tech titan, faces a mixed bag of sentiments as it heads into its quarterly earnings announcement on October 31. Analyst Erik Woodring notes that, despite reports of inconsistent iPhone 16 demand, the firm remains steadfast in its belief that Apple represents a solid investment choice. His analysis suggests that while there are indications of conservative forecasts for the December quarter, the company is still likely to surpass expectations in its September quarter earnings.
Woodring emphasizes that short-term fluctuations in intrigue regarding iPhone demand will not sway the investor community in a dramatic fashion, suggesting that the existing sentiment surrounded Apple stock will stabilize post-earnings announcement. Rising 20% in share price throughout 2024 thus far only adds to the anticipation of potential gains in the upcoming reports.
Among software developers, Atlassian has experienced a particularly challenging year with share prices down over 20%. Nevertheless, Morgan Stanley considers it a prime candidate for investment as Weiss posits that the company should be on a trajectory back to growth rates exceeding 20%. Concerns regarding growth have clouded investor views, but Weiss remains optimistic that Atlassian’s expanding product offerings and renewed marketing focus will pave the way for an advantageous position.
In addition, Weiss supports his positive outlook with data indicating a sustainable demand environment for Atlassian’s offerings, where partnerships have largely exceeded expectations. The software company is set to report earnings just one day after Apple, and investors are likely to watch attentively to gauge the impact of Weiss’s recommendations on future performance.
Fortinet, a leader in cybersecurity solutions, rounds out the selection of key tech stocks worth monitoring. Morgan Stanley described it as a top pick due to its potential for growth driven by a tech refresh cycle alongside upselling capabilities within its large installed customer base. Although current demand remains stable, anticipations of enhanced quarterly performance come from the expected budget flush that typically occurs at the year’s end, coupled with easing year-over-year comparisons.
As Fortinet gears up for its quarterly results, the indications of robust underlying demand and the propensity for increased investments in cybersecurity present an attractive landscape for potential investors. With its earnings report on the horizon, Fortinet’s ability to capitalize on these factors will be critical as it positions itself for upcoming opportunities.
The tech sector, with its inherent complexities and volatility, remains a crucial focal point for investors looking to optimize their portfolios. The insights from Morgan Stanley regarding Microsoft, Apple, Atlassian, and Fortinet serve as a reminder that, despite market fluctuations, a clear strategy grounded in analysis can yield positive outcomes. As these companies prepare to share their quarterly results, savvy investors would be prudent to consider these stock dynamics as they pave the path for their next financial moves.