Although a recent tech rout has led to widespread pessimism towards the sector, long-term investors should still consider Big Tech names like Amazon (AMZN), according to Jefferies Senior Research Analyst Brent Thill (video below). above).
“Look, technology is on the cheap right now,” he told Yahoo Finance. “It’s not the space where people want to be; they want to be in other sectors…I think ultimately the opportunity is to put that aside for three years, and you’ll be kind of happy in three years.”
Thill is particularly optimistic about Amazon at the moment. Amazon Web Services, the company’s cloud business, has flourished, and while the company’s retail business is currently overshadowed, it expects that business to rebound.
“At the moment, Amazon is not where the consumer is,” Thill said. “We all travel. We don’t spend money online. We are [instead] spending money on restaurants, online shopping, travel, airlines and hotels. So I think long-term investors have the option to buy the stocks now, and over time we think retail will come back into fashion. It’s out of fashion now.”
However, he does not expect this rebound to be immediate.
“I think it will take until 2023 before the [e-commerce] the company is really getting back on track,” Thill told Yahoo Finance. “I think consumer spending is way out of the core of Amazon, but I think that’s going to come back over time and they’ll come back to growth and better margins.”
Additionally, Thill believes new CEO Andy Jassy will prioritize “areas where [Amazon] can make money” and seeks “predictability and recurring revenue”, which he considers positive in Amazon’s history.
Amazon is expected to release its results on Thursday.
Not all optimism
Thill’s enthusiasm doesn’t necessarily translate to other Big Tech names, including Twitter (TWTR).
“I think Twitter’s business is basically a disaster right now,” he said. “You see reports of employees leaving, employees working eight hours a week. It sounds like an awful feeling inside and you see executives fleeing like flies out of this place. So I think at short term, they have to settle the ship.”
Much of Twitter’s future has to do with how the company’s legal battle with billionaire Tesla CEO Elon Musk unfolds. For Thill, he assumes that the impasse is likely to resolve itself at least somewhat in favor of Twitter. In April, Musk originally offered to buy Twitter for $44 billion, or $54.20 per share – the company’s shares have now fallen to $39.08 per share, at the open this morning.
“I think we’re all assuming that hopefully something will get done and maybe it won’t be at the original price of $54.20,” he said.
Allie Garfinkle is a senior technical reporter at Yahoo Finance. Find her on twitter @agarfinks.
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