Analysts at Barclays said in a note Tuesday that the recent sell-off in several tech stocks has been excessive, presenting a buying opportunity for selective investors.
The current market environment, characterized by numerous potential catalysts such as central bank decisions and major earnings reports, has created significant volatility. However, Barclays believes that certain tech stocks remain strong.
"Fundamentally, we remain positive Tech on account of potentially strong EPS growth," wrote the bank.
According to Barclays, the market is bracing for a "catalyst-bonanza" this week, with key economic data, decisions from the Federal Reserve, Bank of England, and Bank of Japan, and earnings reports from around 40% of the S&P 500's market cap.
They state that this has caused short-dated volatility to trade at a premium. Despite this, "owning optionality does not appear particularly onerous" given the alignment with historical volatility patterns.
Barclays is optimistic about the tech sector's potential for strong earnings per share (EPS) growth, despite the recent downturn driven primarily by positioning and technical factors.
The analysts state, "Selectively buy the dip: The recent Nasdaq sell-off was, in our view, mostly driven by positioning/technicals. However, fundamentally we remain positive Tech on account of potentially strong EPS growth."
Barclays has identified three tech stocks that stand out based on their screening criteria, which include the severity of the selloff over the past month and muted earnings-related implied moves.
The stocks are Meta Platforms (NASDAQ:META), Advanced Micro Devices (NASDAQ:AMD), and Lam Research (NASDAQ:LRCX). These stocks, according to Barclays, offer potential upside powered by upcoming earnings.
While the broader market remains volatile, Barclays' analysis indicates that the selloff in these specific tech stocks may have been overdone, presenting a timely opportunity for investors to potentially benefit from a rebound.
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