Tech Stocks Go Nowhere — What Now?

Another up-and-down week for tech stocks is in the books.

Unfortunately, for most of the week we were caught up in a flurry of analyst downgrades that weighed heavily on software stocks and the tech sector in general.

Where Did Things Go Wrong?

It all began as investors digested early-morning comments from Workday Inc. (NASDAQ: WDAY) management that suggested slower-than-anticipated growth in the company’s core human resources software business.

WDAY shares tanked double digits, setting off a chain reaction that dragged down other top names in the space.

NOW

Considering how the market mercilessly punished almost every big name in the cloud software space yesterday due to these new growth concerns, we’ll have to keep a close eye on WDAY’s next move.

Is “Soft” Tech’s Run Over?

IPOs of the last two years that have offered substantial value to investors are true technology stocks in the most fundamental sense.

Often, they’re software-driven and business-to-business (B2B), meaning businesses are the target market rather than individual consumers.

The advantage? Businesses have deeper pockets… and actually need smarter, faster technology to operate and grow.

Five top companies that come to mind are:

  • Zscaler (NASDAQ: ZS)
  • Anaplan (NYSE: PLAN)
  • Smartsheet (NYSE: SMAR)
  • Docusign (NASDAQ: DOCU)
  • Zoom (NASDAQ: ZM).

On the other hand, you’ll notice the recent IPOs that are in negative-return territory — the great hyped hopes of 2019.

Among them high-profile companies Uber, Lyft and Airbnb.

For the most part, these companies offer business-to-consumer (B2C) services… with a side order of technology.

Not to mention — as is the case for Uber, Lyft and a few others on the chart — these companies rely on third-party subcontractors that further complicate business models.

Perhaps the run-up in software stocks is finally ending. If this proves true, we’ll soon look to hardware stocks like Nvidia and AMD as money rotates back into these previous market leaders.

For Technology Profits Daily,

Ray Blanco

Greg Guenthner
Chief Trading Expert

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

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