Though a recent tech rout has led to widespread pessimism about the sector, long-term investors should still be considering Big Tech names like Amazon (AMZN), according to Jefferies Senior Research Analyst Brent Thill (video above).
“Look, tech is at a discount right now,” he told Yahoo Finance. “It’s not the space where people want to be; they want to be in other sectors… I do think ultimately the opportunity is to tuck this away for three years, and you’re going to be pretty happy three years from now.”
Thill’s especially optimistic about Amazon at the moment. Amazon Web Services, the company’s cloud business, has thrived and, while the company’s retail business is currently being overshadowed, he’s expecting that business to bounce back.
“Right now, Amazon isn’t where the consumer is,” Thill said. “We’re all traveling. We’re not spending money online. We’re [instead] out spending money in restaurants, shopping live, traveling, airlines, and hotels. So, I think investors for the long-term have an opportunity to buy the stock now and, over time, we think the retail business will come back into fashion. It’s out of fashion now.”
However, he’s not expecting that bounce-back to be immediate.
“I do think it’s going to take until into 2023 before the [e-commerce] business really finds its footing again,” Thill told Yahoo Finance. “I think the consumer spend is away from where Amazon’s core is, but I think it’s going to come back over time and they’ll return to growth and better margins.”
Additionally, Thill thinks that still-new CEO Andy Jassy will be prioritizing “areas where [Amazon] can make money” and is looking for “predictability and recurring revenue,” which he counts as positives in Amazon’s story.
Amazon is set to report earnings on Thursday.
Not all optimism
Thill’s enthusiasm doesn’t necessarily translate to other names in Big Tech, including Twitter (TWTR).
“I think Twitter’s business is fundamentally a disaster right now,” he said. “You see reports of employees leaving, employees working eight-hour weeks. It sounds like sentiment’s awful on the inside and you see executives fleeing like flies out of that place. So, I think in the short-term, they’ve got to settle the ship.”
So much of Twitter’s future is tied up in how the company’s court battle with billionaire Tesla CEO Elon Musk plays out. For Thill, he’s operating on the idea that it’s likely the standoff resolves at least somewhat in Twitter’s favor. In April, Musk originally offered to buy Twitter at $44 billion, or $54.20 per share — the company’s stock has now fallen to $39.08 per share, as of open this morning.
“I think we’re all under the assumption that, hopefully, something gets done and it just may not be at the original $54.20 price,” he said.
Allie Garfinkle is a senior tech reporter at Yahoo Finance. Find her on twitter @agarfinks.
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