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MORGAN STANLEY: Buy these 5 tech stocks set to benefit from the ongoing digital transformation, a robust IT spending backdrop, and the rise of cloud computing (INTU, MSFT, CRM, NOW, PANW)

Published by Business Insider on Wed, 14 Jul 2021


<p><img src="https://static1.businessinsider.com/image/60eeead1a8d8c00019b0313a-2400/GettyImages-1306394025.jpg" border="0" alt="Nasdaq exchange" data-mce-source="VIEW press/Getty Images" data-mce-caption="Clover Health listed on the Nasdaq in January."></p><p></p><bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><p>Low interest rates, monetary and fiscal stimulus, and retail investors' unprecedented move into equities over the past year have helped tech stocks outperform the larger market.</p><p>According to a JD Power survey published in April, more than <a href="https://markets.businessinsider.com/news/stocks/retail-traders-online-brokers-strain-stock-market-accounts-jd-power-2021-4">10 million new brokerage accounts</a> were opened in 2020, and <a href="https://markets.businessinsider.com/news/stocks/stock-market-retail-investors-trillion-jpmorgan-trading-activity-levels-meme-2021-6">JPMorgan data</a> shows that retail investors, who tend to be <a href="https://markets.businessinsider.com/news/stocks/retail-trading-2021-stock-market-volume-russell-us-morgan-stanley-2021-6">overweight tech</a>, are on pace to pour $1 trillion into stocks this year.</p><p>The Federal Reserve also has yet to signal its intent to taper the $120 billion of assets it purchases each month in order to prop up the US economy as it recovers from the pandemic.</p><p>With all of this money flowing in it's no wonder that the S&amp;P 500 has repeatedly reached new highs, performing incredibly well since mid-July of last year (up 37%). Investors worried that the market is beginning to look overvalued aren't aloneMorgan Stanley Wealth Management's chief investment officer Lisa Shalett recently said that stocks' historic rise has pushed the <a href="https://markets.businessinsider.com/news/stocks/stock-market-outlook-sp500-correction-tech-bubble-lisa-shalett-2021-7">odds of a 15% correction</a> up substantially. However, Shalett noted that secular growth trends "may support resilience" in some areas.</p><p>Morgan Stanley analysts led by Keith Weiss detailed a few of these secular growth trends in a note to clients on July 13, along with the results of the firm's second-quarter 2021 Chief Information Officer (CIO) Survey.</p><p>The survey revealed that CIOs' top priorities for 2021 include 1) a move to more cloud computing, 2) continuing the digital transformation, and 3) adding more security software.</p><p>These secular growth trends should boost related tech stocks, considering that IT spending growth expectations have stabilized at a faster pace of recovery than was seen during the 2009/2010 cycle, according to Morgan Stanley.</p><p>CIOs also now expect 37% of workloads to be operated on the public cloud within two years. And 46% of CIOs believe IT spending as a percentage of revenue will increase by 2024, while just 7% of CIOs expect a decrease in IT spending over the same period.</p><p>CIOs in the survey also revealed their three top digital transformation initiatives: 1) marketing/CRM, 2) analytics, and 3) customer service.</p><p>Weiss and his team of analysts broke down five growth-at-a-reasonable-price (GARP) stocks that are set to benefit from these initiatives amidst a wave of digital transformation spending, increasing IT budgets, and growth in cloud computing and security software.</p><p>The analyst said all of these top picks are held at "overweight" by the investment bank and boast "strong underlying unit economics and durable multiples."</p><p>Below, Insider detailed these five top tech stocks. Also included are the stocks' tickers, price targets, and the upside to those targets, as well as the secular trend that Morgan Stanley says each stock should benefit from.</p><h3>1. Intuit</h3><img src="https://static4.businessinsider.com/image/60eeed84a8d8c00019b03149-400-300/1-intuit.jpg" alt="" /><p><p><strong>Ticker:&nbsp;</strong><a href="https://markets.businessinsider.com/stocks/intu-stock">INTU</a></p><p><strong>Price Target:</strong> $511</p><p><strong>Upside to Price Target:&nbsp;</strong>1%</p><p><strong>Secular Trend(s): </strong>Digital Transformation of Small Businesses</p><p><em>Source: Morgan Stanley</em></p></p><br/><br/><h3>2. Microsoft</h3><img src="https://static2.businessinsider.com/image/60eeee0a61b8600019f16fdd-400-300/2-microsoft.jpg" alt="" /><p><p><strong>Ticker: </strong><a href="https://markets.businessinsider.com/stocks/msft-stock">MSFT</a></p><p><strong>Price Target:</strong> $300</p><p><strong>Upside to Price Target: </strong>7%</p><p><strong>Secular Trend(s): </strong>Cloud Computing and Data/Analytics</p><p><em>Source: Morgan Stanley</em></p></p><br/><br/><h3>3. Salesforce</h3><img src="https://static4.businessinsider.com/image/60eeee90a8d8c00019b03155-400-300/3-salesforce.jpg" alt="" /><p><p><strong>Ticker:&nbsp;</strong><a href="https://markets.businessinsider.com/stocks/crm-stock">CRM</a></p><p><strong>Price Target:</strong> $285</p><p><strong>Upside to Price Target: </strong>16%</p><p><strong>Secular Trend(s): </strong>Front Office Applications, Analytics, and Cloud Computing</p><p><em>Source: Morgan Stanley</em></p></p><br/><br/><h3>4. ServiceNow</h3><img src="https://static3.businessinsider.com/image/60eeef06a8d8c00019b03159-400-300/4-servicenow.jpg" alt="" /><p><p><strong>Ticker: </strong><a href="https://markets.businessinsider.com/stocks/now-stock">N</a><a href="https://markets.businessinsider.com/stocks/now-stock">OW</a></p><p><strong>Price Target:</strong> $662</p><p><strong>Upside to Price Target: </strong>17%</p><p><strong>Secular Trend(s):&nbsp;</strong>Digital Transformation and Cloud Computing</p><p><em>Source: Morgan Stanley</em></p></p><br/><br/><h3>5. Palo Alto Networks</h3><img src="https://static4.businessinsider.com/image/60eeefa161b8600019f16ff5-400-300/5-palo-alto-networks.jpg" alt="" /><p><p><strong>Ticker: </strong><a href="https://markets.businessinsider.com/stocks/panw-stock">PANW</a></p><p><strong>Price Target:</strong> $515</p><p><strong>Upside to Price Target: </strong>17%</p><p><strong>Secular Trend(s): </strong>Cloud Security</p><p><em>Source: Morgan Stanley</em></p></p><br/><br/>
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