As we approach the critical earnings season, tech stocks are under the spotlight, and investment firms are scrutinizing various companies for potential gains. Morgan Stanley has identified a selection of overweight-rated technology stocks that present attractive buying opportunities before their quarterly results are released. This article will explore Morgan Stanley’s top recommendations, including Fortinet, Microsoft, Apple, and Atlassian, giving insight into their growth potentials and market dynamics.
Microsoft stands out as one of Morgan Stanley’s favored picks heading into its earnings release on October 30. Although the company’s stock price has increased approximately 14% in 2024, concerns regarding gross margins, capital expenditure, and the monetization of Generative AI have influenced investor sentiment negatively. Analyst Keith Weiss remains bullish on Microsoft, citing its robust Azure cloud computing service and significant tailwinds from AI technologies.
Despite the impending worries reflected in the market, Weiss sees modest upside for Microsoft in its fiscal first quarter due to expected outperformance. He argues that improved investor confidence could catalyze a more considerable stock performance in the second half of the fiscal year, particularly concerning Azure’s growth trajectory. This contradicts the current cautious market sentiment, illustrating that seasoned analysts can identify value even amid skepticism.
Atlassian is another intriguing tech company attracting attention. Despite its shares plummeting over 20% in 2024, Morgan Stanley believes the stock is still a compelling buy. Keith Weiss argues that the company’s growth fears have been overstated. He asserts that Atlassian is on a pathway to return to over 20% growth, fueled by an expanding product portfolio and enhanced cross-sell/upsell strategies.
The firm’s demand checks show a stable market environment for Atlassian’s products, suggesting that the company’s partners are also meeting or exceeding expectations. This stability serves as a strong foundation for potential margin expansion, reflecting the company’s resilience and adaptability in a challenging market. Weiss encourages investors to take advantage of the current dip, presenting an opportunity for substantial returns.
As earnings for Apple approach on October 31, the company’s prospects are painted with a mix of optimism and caution. Analyst Erik Woodring acknowledges the mixed demand for the iPhone 16, posing questions regarding future growth. Nevertheless, he believes that the stock presents a strong buying opportunity ahead of its earnings release. Woodring’s forecasts, which are conservative compared to market consensus, suggest that Apple is likely to post solid earnings metrics for the September quarter.
Despite the uncertainties surrounding iPhone sales, he does not foresee significant changes in investor perspectives following the earnings report. The prevailing sentiment indicates that both bullish and bearish investors are rooted in their positions, implying that any temporary stock underperformance will be short-lived. With Apple’s shares rallying 20% in 2024, it remains an attractive option for both new and seasoned investors.
Fortinet stands out in Morgan Stanley’s recommendation as a strong player in the cybersecurity space. The firm highlights that Fortinet is well-positioned to benefit from a refresh cycle and upsell opportunities within its existing customer base. Despite current trends suggesting stable demand, analysts expect a significant increase in business in the latter half of 2025 as budgets replenish and spending resumes.
This forward-looking perspective aligns with broader trends in cybersecurity, where businesses continue to prioritize investments in protective technologies. Fortinet’s potential for explosive growth draws attention, particularly as vulnerabilities in cyber defenses become increasingly evident across the digital landscape.
As we navigate the complexities of the upcoming earnings season, Morgan Stanley’s analysis of top tech stocks reveals a wealth of opportunities for investors. From Microsoft and Apple to Atlassian and Fortinet, each company brings a distinct set of strengths and growth prospects to the table. While market skepticism pervades the tech sector, Morgan Stanley’s recommendations offer a reminder that diligent analysis can uncover value amidst the noise.
Investors are encouraged to take a closer look at these opportunities, particularly in light of the impending earnings announcements. Whether it’s the promise of Microsoft’s cloud infrastructure, the potential rebound of Atlassian, Apple’s resilience in a mixed demand environment, or Fortinet’s cybersecurity advancements, these companies symbolize the dynamic landscape of technology investments waiting to be explored.