Tech stocks are on the rebound.
The tech-heavy Nasdaq broke out of a losing streak on Tuesday, staging its best day since early November. Then Thursday, the index surged just under 3% as the new $1.9 trillion stimulus bill was signed into law by President Joe Biden.
Still, the index is down down nearly 5% since hitting a new all-time high just a month ago, and one trader says there are three big tech names that are buys on the dip.
“I absolutely love Amazon (NASDAQ: AMZN), Adobe (NASDAQ: ADBE), and Zoom (NASDAQ: ZM) for one very simple reason,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management. “That’s because all these companies are essentially subscription-based companies with very, very loyal customer followings and an absolutely market-dominant position.”
While Amazon shares are up 1.75% over the last week, the stock—which Schlossberg says is a “blue chip of a lifetime”—is down 7.5% over the last month, giving investors a buying opportunity.
Adobe is also down over the last month, shedding 12%, and Schlossberg says its a buy given its “fortress-like” software business.
As for Zoom, which is down 22% over the last month, Schlossberg says the stock could see more downside ahead but is still a winner over the long run.
“Zoom, I think, has established a major beachhead,” Schlossberg said. “That having been said, it’s the biggest stock risk at this point. It easily could come in 100 more points to the downside, and still be relatively highly valued.”
While Schlossberg loves all three names, Piper Sandler’s Craig Johnson warns that such stocks may have further to fall.
Johnson noted that many high-growth, high-momentum stocks have been consolidating since late last summer, and the technician argues it’s not surprising to see weakness in this group now.
“Take Amazon as an example here,” Johnson, the firm’s chief market technician, said. “It moved sideways in this consolidation range roughly about a 500-point consolidation range, but it has been an underperformed. Now, you could say that the stock is resting or maybe we need to see a deeper correction.”
“I think it’s probably going to be challenging over the next couple months until we finally get a deeper washout in these tech stocks and, frankly, I think it’s a bit overdue,” Johnson concluded.