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Tech stocks, with the exception of one, are 'frustrating a lot of investors': analyst

Brian Sozzi
·Editor-at-Large
·3 min read
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The once can't-miss big-cap tech trade has been anything but hot in 2021 amid a shift to value stocks ahead of a strong economic recovery from the worst of the COVID-19 pandemic.

Such ongoing weakness in tech has put most names in the space in the penalty box for veteran Wall Street tech analyst Brent Thill of Jefferies.

"I think that tech is off limits right now. You are seeing money go to travel stocks. You are seeing money go to airlines. You are seeing the broadening out of money," Thill said on Yahoo Finance Live. "I think money will come back, it's just right now valuation combined with the names aren't working I think it's frustrating a lot of investors. A lot of the hedge funds have gotten turned upside down and they have to rethink their positioning. So right now, I call it more of a time out [on tech]."

While cautious on most of the underperforming tech sector, Thill does have his eye on one social media giant: Facebook.

"Facebook is a cheap name," Thill says. "$15 of earnings power and a mid 20 [P/E] multiple on it, and you are at $350 to $375 on the stock. So you got a lot of upside still on Facebook. We like that."

Facebook shares finished Wednesday's session at $282, up 3% on the year — and a laggard relative to the S&P 500 and Dow.

BRAZIL - 2021/03/24: In this photo illustration a Facebook logo seen displayed on a smartphone. (Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images)
BRAZIL - 2021/03/24: In this photo illustration a Facebook logo seen displayed on a smartphone. (Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images)

Meanwhile, a recent example of a likely frustrating tech trade is cloud play Adobe.

Adobe smashed quarterly earnings estimates on Tuesday evening by 36 cents. Demand was strong across the board, led by a 32% increase in sales at the company's Digital Media business. The company issued full-year earnings guidance about 60 cents above Wall Street projections.

Yet, Adobe shares fell nearly 2% in heavy trading on Wednesday.

Serious traders probably aren't too shocked by the ho-hum response to Adobe's blowout earnings.

The Nasdaq Composite is up marginally on the year versus a 4% gain for the S&P 500 and a 6% bump on the Dow Jones Industrial Average. As for the closely watched NYSE FAANG+ Index (which tracks top tech names such as Facebook, Apple, Amazon, Netflix and Google) it's up slightly year-to-date.

Cloud stocks have been hammered this year — Salesforce is down 6% year-to-date and DocuSign has shed 11% (despite a strong recent earnings report of its own, as explained by DocuSign CEO Dan Springer on Yahoo Finance Live).

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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