“Cheap” and “high tech” are not words commonly mentioned in the same sentence on Wall Street. Venu Krishna, a strategist at Barclays, said Big Tech companies currently trade at about 26 times forward earnings. While this is technically a premium compared to the S&P 500 Index, which trades at a multiple of 21, it is only at the 14th percentile in terms of relative valuation over the past 10 years. This comes as traders brace for big gains this week. Meta Platforms, Alphabet, Amazon, and Apple are all expected to release their latest results next week. So far, the reporting period has been strong. Of the more than 80 S&P 500 companies that have reported their latest quarterly results, nearly 85% of them reported earnings that beat expectations, according to FactSet data. XLK YTD MOUNTAIN TECH The combination of historically low valuations and a strong earnings backdrop for major technology stocks year-to-date could add fuel to a stock market that refuses to buck even as geopolitical uncertainty swirls around the world. “Combined with superior margins and strong resilience to energy demand shocks, this valuation backdrop reinforces our view that the U.S. continues to be well-positioned relative to its global peers,” said Barclays’ Krishna. “U.S. consumers have remained largely resilient, and U.S. stock funds have seen more than $100 billion in inflows since the beginning of the year.” Krishna said he expects the S&P 500 to end the year at 7,650, implying an 8.3% increase from Tuesday’s close. Stocks were heading for solid trading early Wednesday, boosted by the extension of the U.S.-Iran ceasefire and strong quarterly results from companies such as Boeing.
