JPMorgan) analyst Samik Chatterjee has removed Apple (NASDAQ:AAPL) and Qualcomm (NASDAQ:QCOM) from the firm's Analyst Focus List (AFL) and instead added Arista Networks (NYSE:ANET) Ciena (NYSE:CIEN).
The analyst is seeing early signs of a reversal of the Value over Growth momentum amid mounting recession concerns. In this environment, investors are likely to seek growth exposure even if it comes at a rich valuation, Chatterjee said in a client note.
"Over the course of the last month, there has been understandably a lot of noise around demand weakness across global tech, but we believe the macro weakness seeping through the sector will impact the Consumer end-markets more materially followed by a moderation in Business/Commercial spending if macro headwinds were to persist longer than can be dismissed as simply temporary. In this regard, we believe it's apt to moderate our near-term bullishness for shares of AAPL and QCOM," Chatterjee wrote.
On the other hand, CIEN and NET have been added to the AFL as JPM expects to see strong resiliency in spending from both Telecom customers towards their networks, as well as from cloud companies towards building infrastructure to support workload migration to the cloud.
Businesses with great exposure to the consumer sector are likely to suffer more in the first half of this year, with the rest of the coverage to follow the same path later this year.
"We expect to see Telecom and Cloud spending to be the most resilient to the macro situation on a near- to medium-term basis, with Enterprise customer spending more susceptible to the macro," Chatterjee concluded.
By Senad Karaahmetovic