What happened
Many tech stocks remained under siege on Monday in the face of rising interest rates that many believe will inch higher with a fresh new Federal Reserve hike in two days' time. One victim of this sentiment at the start of the week was online game company Roblox (NYSE: RBLX), which took a hit when an analyst identified the stock as one to avoid. Consequently, Roblox's shares closed Monday more than 6% lower.
So what
The analyst providing the opinion was Bernstein's Toni Sacconaghi, who is cautiously bullish on the near future of tech stocks. In a new research note published that morning, Sacconaghi stated that some titles in the sector are undervalued at current prices.
"Tech's five-year growth expectations relative to the market ex tech are below historical averages ... which we view as a positive," he reasoned.
That being said, the prognosticator feels that the sector as a whole is less attractively valued than it was back in June. With this combination, Sacconaghi said he continues to recommend investors hold a "largely balanced barbell" of tech companies that promise either growth or value. He also believes pricey stocks backing low-quality companies are to be avoided, as they are particularly vulnerable if the sector should continue to decline.
Now what
Sacconaghi helpfully provided a list of stocks to stay away from in such an environment, and, yes, Roblox was on it. At least it was in good company, as that lineup included tech companies still popular with a chunk of the investing public, such as Palantir, Atlassian, and Palo Alto Networks.
Those titles have been battered along with their tech peers, but many investors and certain analysts consider them now to be promising value plays.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Atlassian, Palantir Technologies Inc., Palo Alto Networks, and Roblox Corporation. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
