UBS downgrades what it calls the Big Six to neutral
UBS cut its rating on what it calls the Big Six – that’s the Magnificent Seven minus struggling Tesla – to neutral from overweight.
Strategists led by Jonathan Golub noted the grouping of Alphabet (GOOGL), Amazon (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT) and Nvidia (NVDA) has already dropped 8% from its April peak, having soared 117% from its Jan. 2023 lows. Nvidia on Friday skidded 10% as AI stocks retreated.
What’s of note is that the UBS call is not about animal spirits or AI. It’s just that earnings per share growth for this group is expected to slow to 16% from 42%
The COVID-19 pandemic set off what it calls an asynchronous earnings cycle. Other tech stocks didn’t benefit from the COVID-driven boom to the same extent. “Deceleration in large cap tech and acceleration in mid cap tech should lead to a reversal in stock leadership,” they say.
Non-tech companies also should see earnings shift, from a projected 3% fall in the first quarter to 19% in the first quarter of 2025.
This shift may be “disruptive” in the short term but the strategists reiterated their 5,400 call for the S&P 500 SPX for the end of the year. “This target remains supported by broadly positive fundamentals and a robust economy,” they say.
-Steve Goldstein