Tech stocks ‘are way oversold,’ Wedbush’s Dan Ives says

Wedbush Securities Managing Director Dan Ives joins Yahoo Finance Live to discuss how the market and tech stocks are adjusting to Russia's invasion of Ukraine, how tech stocks are oversold, and supply chain moderation ahead of technology and semiconductor demands.

Video transcript

BRAD SMITH: Well, coming into today, the NASDAQ was less than 2% from a bear market, and if levels at the open had held, well, we would have seen the tech-heavy average close there in bear market. However, today's run from those levels is welcome news but is this enough to justify an extended rally is the question? Here with more, we've got Dan Ives, Wedbush Securities managing director.

Dan, good to speak with you this afternoon. Half a session we know does not make a trend here but perhaps the market is reading into the Fed perhaps delaying the brunt of its tightening. We don't have the firm indication that they would be doing so but do you believe that that's what tech investors here today are leaning into the ethos of perhaps?

DAN IVES: Yeah, I think look, the clear read-through, a 50 bp hike, that's off the table. And I think now much slower trajectory obviously, it's going to be positive in terms of the 10-year yield. Relative to tech stocks, in terms of the risk-off trade, look, I think fundamentally I can tell you from conversations last night, with investors this morning, just way oversold. I mean, I think it's as much oversold I've seen tech stocks since 2015 because as scary and white knuckle period as this is, if you look at the fundamental driver in cybersecurity, cloud enterprise, that's not changing because of the Ukraine conflict. And I think investors are starting to use periods like this, you go historically, geopolitical black swan events the last 25 years, there have been more opportunities in those crisis and chaos rather than the time to sell.

BRAD SMITH: So do you believe that we have hit at least in tech and some of the big tech, big-cap names, mega-cap tech names, that we've seen a bottom-placed in, or is there any inclination to believe that there is still more of a downside to come?

DAN IVES: Look, there could always be, of course, more downturn, more volatility. But I think we are getting to the point where we are way oversold in terms of tech. Relative to fundamentally, from a PEG perspective, in terms of growth relative to PE, I mean, we're going to go back to valuations six years ago, relative to growth, especially in some of these areas like cloud, cybersecurity, chips, we'd be strong buyers here.

It's obvious it's a nerve-wracking environment, it's buckle the seat belt period. When I look at areas on large-cap, names like Microsoft, Apple, Cisco, Oracle, safety blanket names, look at cybersecurity names like Zscalar, CrowdStrike Palo Alto. There's going to be many yelling fire in a crowded theater, it's scary times. But we view at least over the last 20 years, we've used these opportunities to kind of help investors pick up some of the gems.

BRAD SMITH: And so Dan, when we think about more broadly here with the international conflict, one of the things that has been on the table and has come up repeatedly in discussion is certainly with regard to semiconductors and whether there would be sanctions, chip-related or chip-directed sanctions, and even towards some of the materials that could also come into play during this particular international conflict that are necessary to make semiconductors. Does that change your reading on any of those manufacturers, whether they be fabrication, model manufacturers, or whether they just be design manufacturers?

DAN IVES: Yeah, I think most of the fabs, most of the suppliers, they've been able to diversify pretty good in terms when you think about any impact here. I do think it's pretty contained relative to any sort of either sanction or even from a supply chain perspective. Look, I think the irony is supply chain issues are moderating globally as we go into March and April. Now, granted, this is something that no one expected or in worst nightmares would have wanted to see but supply chains moderating, that's huge in terms of a tailwind for tech. Which is why, Brad, I believe we look at this period of time here six, nine months from now, and this was an opportunity to own software chips rather than a time to sell it.

BRAD SMITH: Does that supply chain moderation also impact or alter any of your price targets on some of the tech players, especially reliant on their ability to produce consumer technology products or for some of them, computers on wheels even?

DAN IVES: Well, it's bullish for Apple because that's been supply chain constrained. It's bullish from a chip perspective names like AMD and Nvidia. I think it's bullish for automotive plays like a Ford, GM, and of course, Tesla because right now I mean, that's been the biggest overhang in a lot of those EV names in automotive and tech. In terms of the supply chain. Now, obviously, things have changed dramatically the last 24 hours but in times like this, I think you just have to look at the fundamental drivers, sort of tune out the noise as hard as it is because I think that's where you find the opportunities in sort of chaos.

BRAD SMITH: If this were to permeate over into any NATO touching countries, what type of impact do you believe that that would have then on how we look at this entire situation, especially for tech companies that do have more of that globalized approach?

DAN IVES: Well, I think that's one of those scenarios. We looked at a bell curve scenario and then you start to look more the worst black swan event. I mean, that's where it gets more negative because from a consumer, from an enterprise supply chain, both from tech to automotive, I mean, that's where you can really start to see that sort of next leg in terms of a sell-off.

But that's what I think when you look at the situation right now in Ukraine, I think investors, you're starting to see more and more of that appetite for tech because I think there's a recognition when you start to do stress tests and scenarios, I think tech right here, the risk is clearly there and a lot of bad news baked in, and I think it really creates the opportunity. Especially some of these names like software chips, and cybersecurity, that's one that you really circle.

BRAD SMITH: You mentioned Tesla a moment ago, I want to get your reaction to an SEC probe that is looking into Elon Musk and brother Kimbal Musk. That coming after some of their sales of shares. Of course, noteworthy here was the time period that those sales took place in relation to the other infamous tweet of a poll nature I should say, where Elon Musk was asking his Twitter followers how much he should sell, also knowing how much he needed to sell at that point in time as well.

With regard to the SEC, this just further signals and further goes into this contentious relationship that Tesla and Elon Musk have had with the regulatory body. And so what do you expect the SEC to look into? Does it materially impact how investors look at Tesla right now?

DAN IVES: Well, I think Musk has created this himself. I mean, from the poll to Twitter and that continues to be a black cloud over the stock. And it's something, the lack of situational awareness that he has had from a social media perspective in this environment, in a risk-off is astounding in a bad way. And I think it's something where, as obviously as they look into this in terms of for Musk and Tesla, I think it just speaks to a broader issue.

You almost have-- you have two sets of things happening. First, in terms of the core business, EV demand, transformational growth, everything that's happening in Austin, and that's obviously been extremely positive, even the supply chain issues. But then you look at Musk and from a Twitter perspective and as well as everything in terms of the selling of stock and the poll, it's something that's really left a lot of investors with a bad taste in their mouth. For good reason, look what the stock's done since. So it's just been a very concerning trend that we've seen here. And I think this is just another example that Musk continues to sort of be in some ways just an overhang, especially from a social media perspective.

BRAD SMITH: Wedbush Securities managing director, Dan Ives joining us here this afternoon. Dan, always a pleasure to speak with you. Thanks for joining us.