Despite record highs in the market, the consensus forecast is for an earnings recession with the aggregate S&P 500 expected to fall 2.6% in the fourth quarter. This will mark the fourth consecutive quarter of year-over-year net income declines. When taking into consideration buybacks, which help to reduce companies’ shares, the S&P 500 could post 0.6% EPS growth in all of 2019 compared to 2018’s 23% increase in EPS.
Although sentiment is bordering on euphoria in the market, there are pitfalls to watch out for and winning tech verticals to lean into.
As the analyst who early-on called the top-performing stock last year (Roku) following its IPO, plus many other accurate calls such as Uber’s IPO flop, Zoom’s successful IPO, and Microsoft’s Pentagon win, here are my top 8 predictions for successful tech investing in 2020:
1. 5G is a business to business growth story; the consumer story is overblown
Investors who believe 5G will drive a “ supercycle” for Apple are not taking into consideration that 5G is a replacement cycle for 4G. The consumer opportunity will not be as significant as previous generations, such as when 4G delivered mobile broadband with smartphones being the primary beneficiary.
Apple’s revenue declined 2% year-over-year and is nearly stagnant in forward estimates at 4% growth from fiscal 2018 for fiscal 2020. To put it simply, investors are paying 105% more for each dollar of Apple’s earnings as the fundamentals are flat with a decline of 7% in net income. Some of this hype is being driven by the highly speculative 5G release in September of 2020.
Verizon Communications Inc. 5G wireless signage is displayed at the company’s booth during the Mobile World Congress Americas event in Los Angeles, California, U.S., on Tuesday, Oct. 22, 2019. The conference features prominent executives representing mobile operators, device manufacturers, technology providers, vendors and content owners from across the world. Photographer: Patrick T. Fallon/Bloomberg © 2019 Bloomberg Finance LP
To determine the 5G story of the year, the following has to be taken into consideration:
- China is ahead of the United States; the 5G story of the…