Broker JPMorgan says the sector is vulnerable to earnings downgrades in 2023. But other forecasters are more bullish, urging a flight to quality.
Australia’s technology stocks may have rebounded off their October lows, fuelled by expectations of a dovish pivot from the Federal Reserve, but JPMorgan analyst Bob Chen warns the interest-rate sensitive sector is in for a bumpy ride.
Market concern about the impact of stubbornly high inflation on company earnings is the next major headwind facing tech companies, he said, with an eye on downgrades leading into February reporting season. “With a US recession likely in 2023 and the delayed impact of global monetary tightening, we expect earnings downgrades for FY23 and FY24.”P/ASX All Technology Index has witnessed a turning point of sorts over the past two months, gaining 3.1 per cent in November to build on October’s 7 per cent rally. Investors believe they have sighted peak interest rates following the most aggressive pace of tightening in decades.P/ASX 200 returns of around negative 2.
The broker is "underweight" Appen with a price target of $2.60, noting suboptimal margins and muted revenue growth expectations.
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