Tech stocks have soared this year as the coronavirus pandemic has rapidly shifted people into working and learning from home online.
But the group has slipped in the last couple of weeks on positive vaccine news.
Still, Morgan Stanley argues there will continue to be massive growth in the online space, and said in a note out last week that there will be a 20% increase in online advertising in 2021. And that growth will benefit names big tech names Facebook (NASDAQ: FB), Pinterest (NYSE: PINS), and Google-parent Alphabet (NASDAQ: GOOGL).
All three stocks have staged impressive runs higher this year, with Alphabet up 31% since the beginning of the year, Facebook up 33%, and Pinterest rising a whopping 254% year-to-date. But since Moderna (NASDAQ: MRNA), and Pfizer (NYSE: PFE) and BioNTech (NASDAQ: BNTX) reported 90%+ effectiveness for their COVID-19 vaccines earlier this month, two out of the three of these tech stocks have slipped lower.
Since November 9 when Pfizer and BioNTech announced their initial vaccine results, Facebook has fallen -5% and Alphabet is down -2%. This recent underperformance, though, looks like an opportunity to one expert.
Joule Financial’s Quint Tatro said of Facebook and Alphabet, “These are companies with Teflon balance sheets. Facebook has zero debt. Google only has a little bit. …We have an environment where businesses are going to have to get extremely creative to reach consumers. They’re going to want to meet them where they’re at, [and] they’re online.”
While Tatro acknowledges concerns about the two stocks’ sky-high valuations—Facebook trades at 27 times forward earnings, and Alphabet at 29 times—he believes both will outperform over the long term, even at above average price-to-earnings ratios.
“We think these are long-term staples in any portfolio,” Tatro added. “And when you get a bargain, when you get a pullback, you pick them up, and you just keep adding on dips.”
Blue Line Capital’s Bill Baruch says both stocks should have a place in any portfolio, and noted key levels that could be good buying opportunities for investors looking to get in on these two big names.
“I don’t like chasing the markets and I think there’s good levels to look at in buying,” Baruch said. “I think the buy zone for Google comes in right about $1,650 to $1,550. That aligns with the trend line as well as the previous high going back to last February, so I think you want to look into those areas, buy the pullback.”
At Thursday’s close, Alphabet shares are trading at $1,758.57 – around 6% higher than the $1,650 level Baruch has his eye on.
As for Facebook, the Blue Line Capital president is looking for a range of $250 to $275 before buying. Facebook shares are currently at $272.94.
“There’s a good trend line in there,” Baruch said, pointing to Facebook’s chart, “so I think you want to pick your sports and you want to know where you’re jumping in.”