As Big Tech continues to experience serious volatility, Bank of America looks further afield and names a number of global tech stocks it thinks will do well despite the uncertainty. Tech stocks have been slammed this year amid a sharp spike in market volatility, with the sector bearing the brunt of a market rotation out of growth and into value names. The impact of a widely anticipated steep rate hiking cycle has also weighed on the group, since it makes growth stocks' future earnings less attractive. The Stoxx Europe 600 Technology Index is down about 24% this year, compared to an 8% decline for the broader European market. In a note from Apr. 20, Bank of America's analysts, led by Frederic Boulan, said appetite for tech stocks "remains limited," with the impact of a weakening European macro picture and slower growth in China yet to be fully realized. However, the bank expects investors to focus on companies' forward-looking messages, particularly when it comes to businesses with more cyclical business models. It expects the sector to post revenue growth of 10% this year, higher than 2021's 9%. "We expect a focus on macro impact in Europe and China, alongside the supply chains and inflation to continue to dominate. Beyond short term pressure, we see the latter factors as structural positives for the space, with a need for more robust supply chain management software solutions. Wage inflation is a drag med term but supports long term pricing power," Boulan added. Software picks Within the software space, Bank of America noted that valuations have bounced back more than 8% since hitting a trough in March, with "the worst of the derating now behind us." Going forward, the bank sees a "unique growth outlook" across the software space and expects revenues and earnings growth to support share price performance in the sector. The bank's top pick in the software space is SAP , which it views as "well suited" to the rotation to value names. The bank expects its shares to move higher as cloud momentum accelerates and as the company's business management products gain traction. Bank of America also expects an acceleration in SAP's revenue and earnings to accelerate toward double-digit by 2023. The bank has a price target of 137 euros ($146.90) on the stock, which closed at around 96 euros on Apr. 25, representing a potential upside of 42.7%. Bank of America also likes Spanish travel technology firm Amadeus IT for its competitive position and "tech leadership." The bank's price target of 70 euros on the stock implies a potential upside of 16.7% to its closing price of around 60 euros on Apr. 25. Payments picks Within the payments space, Bank of America's top pick is Dutch firm Adyen , which it says offers "sector leading" growth. The bank sees the company as structurally well positioned in e-commerce with further upside in new market deployment. The bank has a price target of 2,660 euros on the stock, which closed at around 1,610 euros on Apr. 25, representing a potential upside of 65.2%. The bank also likes London-based Wise for its strong top line and free cashflow outlook as cross border payments grow in popularity. It has a price target of 833 pence ($10.70) on the stock — an implied potential upside of 102.2% to its closing price of around 412 pence on Apr. 25. Read more These stocks look attractive in a beaten-down tech sector, analysts say Goldman says buy these tech stocks to beat the turbulence — and gives one 80% upside Bank of America said it is also bullish on French IT services and consulting firm Capgemini . The analysts like its strong structural tailwinds, such as digitalization and cloud migration, as well as the upside to its mid-term guidance. The bank has a price target of 260 euros on the stock, which implies a potential upside of 38.3% to the stock's closing price of 188 euros on Apr. 25.
A Bank of America branch in San Francisco on Jan. 14, 2021.
David Paul Morris | Bloomberg | Getty Images
As Big Tech continues to experience serious volatility, Bank of America looks further afield and names a number of global tech stocks it thinks will do well despite the uncertainty.