Big Tech is gearing up for a big week, and one longtime tech investor is managing expectations.
With 169 S&P 500 companies and 10 Dow components including Microsoft and Apple set to report earnings in the week ahead, Wall Street is bracing for a wild ride.
Amazon, Facebook and Google parent Alphabet, all of which are under intense congressional scrutiny along with Apple, will also announce their quarterly results.
Paul Meeks, who ran the world’s largest tech fund during the late 1990s and is now a portfolio manager at Independent Solutions Wealth Management, said expectations were high.
“Some companies, if they are disappointing with either the actual results or with the go-forward guidance, are getting hit pretty hard,” Meeks told CNBC’s “Trading Nation” in a Friday interview.
“I’m not worried about all the names that I own in my tech fund, but there are some, particularly since they’ve had big, big moves and outperformance in their stock prices, that probably — if there’s any tinge of disappointment — could have at least a short-term correction,” he said.
Tuesday’s reports from Microsoft and Akamai Technologies and Thursday’s reports from Apple and Activision Blizzard were of particular concern to Meeks, he told CNBC in a Friday email.
Even so, if nothing changes but the stock prices, “I’d probably buy into that weakness,” the investor said.
His favorite name getting ready to report was software giant Adobe.
After going through a “metamorphosis” under a new CEO from being one of the “’80s titans” to a lean software-as-a-service company, Adobe has few obstacles in the current environment, Meeks said.
“Here’s a company that spearheads digital marketing campaigns. And, of course, they were on fire with very aggressive revenue growth before Covid, but Covid and the world I see after Covid will only emphasize that more,” he said. “I still think that out of all the tech majors, this is probably the one that still has ample upside to the price target, which I still think is either 10, 20, 30% higher than its current price.”
Adobe shares closed 1% higher on Friday at $488.50. A 30% rise in the stock from those levels would bring it to around $635 a share.
Other legacy tech companies including Intel, IBM and Cisco might not be so lucky, however, the investor warned. Shares of Intel closed down nearly 11% on Friday after a disappointing earnings report.
“I’m one of the few tech investors … that have been around when those companies were great and they’ve been such dogs and some of them have very attractive dividend yields,” Meeks said.
“The temptation is to get back in,” he said. “But the problem is when you do that, you get into a company that is a yesteryear company that is not in sync with global technology trends and it usually just ends up being a value trap. So, today, a lot of folks have been asking me, ‘Hey, let’s get into Intel, down 11%,’ and I say no way.”
Investors still looking to get into tech do have one major upcoming catalyst, Meeks said.
“We may not be able to do it in the next 11 days before the presidential election, but if and when we do pass the follow-on stimulus package, then I feel much better about the economy, much better about the markets and much better about tech,” he said. “At that point, I would actually advocate a risk-on equities trade and your portfolio at that point probably should have a fairly large exposure to the tech sector.”
Disclosure: Meeks’s Wireless Fund (WIREX) owns shares of Microsoft, Apple, Amazon, Facebook, Alphabet, Akamai Technologies, Activision Blizzard and Adobe. Meeks personally owns shares of Adobe, Activision Blizzard, Facebook and Amazon.
