This month’s significant decline in technology stocks is a great buying opportunity for some stocks, according to Baird.
The firm’s internet and videogame analyst Colin Sebastian looked at what happened to companies in his coverage universe after large market corrections and found the best stocks that historically have bounced back.
“While talk of the ‘R word’ (as in #Recession) is now rampant, we think it is reasonable to consider a more optimistic outcome, such as #Rebound,” he wrote Wednesday.
Sebastian’s call comes after both the S&P 500 and the Nasdaq Composite have fallen about 15% so far this month.
In the past four market corrections (a decline of 10% from a previous peak), large-cap internet stocks rose by 11% on average over the following six months, he noted,
The analyst gave his three favorite Outperform-rated stock ideas to invest for a market turnaround.
“In short, Activision Blizzard (ATVI), Alphabet (GOOG) and Amazon.com(AMZN) appear to be ‘best bets’ in a rebound,” he wrote.
Sebastian has a $2,100 price target for Amazon (ticker: AMZN) stock, representing a 54% upside to current levels, citing the company’s emerging growth businesses.
The stock also has the best historical performance with an average 30% gain in the six months after market corrections.
Sebastian has a $85 price forecast for Activision Blizzard stock, representing a roughly 93% increase from current levels.
The analyst said Activision should trade at a higher valuation because rising profit margins in its shift to more digital distribution of its videogames.
Sebastian has a $1380 price target for Alphabet stock, some 38% higher than current levels.
He is bullish on the internet giant’s long-term growth rate and its dominant competitive position.