Techs on a Pullback? Analysts Offer Up Some Picks
Stocks have hit a bump. Interest rates are rising, there's uncertainty about when the Federal Reserve will ease up on the monetary stimulus, volatility in Japanese markets is rattling investors worldwide and U.S. economic growth remains sluggish.
But some market participants see this pullback as an opportunity for investors to get into economically sensitive areas of the market, such as technology.
Alison Deans of Varick Asset Management warned that there could be more weakness for stocks over the next few months but said that cyclicals are a place investors will want to be longer term.
"My feeling is there will be a leadership change," she said. "As we start to see the economy pick up, corporations are going to start reinvesting capital, consumers are going to start spending more money. So, I think those industries are more economically sensitive."
JPMorgan's bullish U.S. equity strategist, Thomas Lee, also sees the longer-term case for technology.
"I think one of the more important stories over the next three to five years is if we're in a regime shift of rising rates and the U.S. economy is strengthening—everyone is going to focus on cyclical profit growth, and that's going to favor the cyclical stocks," he said.
Tech, in particular, is cheap compared with defensive areas such as consumer staples.
"If technology is trading at a 13 times price/earnings and staples are nearly 20 times but you're getting almost the same EPS growth, similar dividend yields, maybe it makes sense to be buying some of these technology stocks," Lee said.
(Read More: 'Underlying Bullish Story' for Stocks: Strategist)
But which ones?
Head in the Cloud
Cloud computing and mobility have been among the big themes in tech investing.
Last week, Goldman Sachs upped its view on software and certain areas of the Internet space to attractive from neutral, citing the potential for an acceleration in the economy and IT spending in the second half. That could lead the group to outperform, the analysts say.
The broker put cloud-computing play Salesforce.com on its Conviction Buy list.
"We continue to view CRM as one of the premier growth stories in software as it continues to expand its footprint and define new product categories," Goldman analysts wrote in a research note. "With the stock down 10 percent year-to-date vs. the S&P 500 up 14 percent we see getting [the fiscal first quarter] out of the way and accelerating bookings growth in the balance of the year making CRM an attractive candidate to 'catch-up.' "
Goldman's note didn't mention CRM's acquisition of ExactTarget for about $2.5 billion.
(Read More: Cramer Wary of Salesforce.com's Latest 'Land Grab')
Analysts are generally bullish on Salesforce.co, with a median price target of $50, implying nearly 30 percent upside from current levels.
Intel Catches an Upgrade ... and a Downgrade
Intel, a relative outperformer over the past month, caught an upgrade to outperform from FBR Capital Markets. According to FBR, Intel may be able to offset falling PC sales will initiatives in networking and foundry.
"We now believe the company has enough new avenues of opportunity to replace a large swath of lost PC units," the brokerage wrote.
Turning around its fortunes in mobile chips could also help, the analysts said. Intel recently unveiled mobile chip technology Silvermont, which promises better performance and less power consumption.
Other analysts are less convinced.
Piper Jaffray cut Intel to underweight, writing in a research note, "The optimism around the new CEO, Silvermont and the launch of Haswell has caused shares to rise, though we believe underlying fundamentals remain unchanged and the company's core PC business is in a state of decline."
Their $20 price target on the stock implies about 20 percent downside.
Time to Love Apple Again?
Now that Apple has detailed plans to return more cash to shareholders, attention has returned to its product lineup.
Wall Street has been hoping that innovations will renew the excitement that once surrounded the stock. And Apple may start to do that at the developers conference that begins Monday, analysts said.
(Read More: Guess Which Tech Giant Is Beating Apple and Google)
"Whether it's something as benign as a streaming-music service that competes with a Spotify or a Pandora, or whether it's something that has a bit more substance to it, like a mobile payment, it's really laying the groundwork for WWDC for future products," Piper Jaffray analyst Gene Munster told CNBC.