Jefferies Upgrades Tech to Overweight (XLK)

August 22, 2016 7:44 AM EDT
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Price: $47.53 +0.27%

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Jefferies upgraded the Information Technology sector from Market Weight to Overweight following a strong earnings season.

Strategist Steven DeSanctis highlighted:

  • The second quarter reporting season was solid for the sector with nearly five times as many earnings beats than misses.
  • Even though overall valuations are stretched, the group looks reasonable with four of the six measures we track trading below their long-term averages.
  • The revision ratio remains strong with more upward revisions than downward and 2016's earnings and sales estimates seem awfully low so we can expect to see lots of beats going forward.
  • If the Fed finally raises rates in December, this group will benefit.
  • M&A activity is running at a record pace in small caps and over 30% of all deals are occurring in this sector. We think this trend continues.

Related ETFs:

Technology Select Sector Spdr Fund (NYSE: XLK)

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