Analyst expects 20 % growth: – Almost too good to be true
– I was surprised by how sentiment and perception heavily affected some share prices in 2023, says Kristian Spetalen. His top picks are “almost too good to be true”.
Spetalen works as an analyst in Arctic Securities, covering the technology sector in Arctic. He is frequently quoted in Norwegian business media. In this interview, we asked him about surprises, TMT megatrends, sector drivers, who and what to look out for – and much more.
– Which events and other factors surprised you most within the TMT sector in 2023, Kristian?
– A lot happened during 2023. Kahoot and Adevinta were acquired, Nordic Semiconductor disappointed more than anyone anticipated, while Pexip and Link Mobility doubled its value, Spetalen says.
– What really surprised me the most, though, was the degree to which sentiment and perception affected certain stock prices compared to our view of the fundamental factors. Obviously, this is something I have experienced before, but not to such a great extent, he adds.
"Many shares have a lot of upside potential."
TMT right now
The two most important drivers in the sector as we speak are interest rates and (over)delivering on estimates, according to the Arctic analyst:
– The latter part is where I might have a qualified analysis, and I generally believe that many shares have a lot of upside potential if they deliver on our expectations going forward.
Megatrends
Like any other sector, TMT is heavily affected by megatrends, the long-term driving forces that are observable now and will most likely have significant influence on the future.
– Can you pick out three megatrends that disrupt the sector now?
– It is hard not to mention AI, obviously being the most disruptive concept today. Another megatrend I expect to continue is cloud migration (the process of moving applications and data from one location to a public cloud provider's servers), even though there are many steps still to be taken and new actors appear all the time. And finally, I am increasingly paying attention to the general digitalization of the legacy industries and blue-collar workers.
Who will succeed?
Some companies will succeed, and some won’t. Most companies are backed by solid market growth, which makes it hard for Spetalen to predict the winners:
– Most likely, though, those who will not do well are the ones who will be outperformed, either by new technologies or simply because the product is poor.
"Crayon should provide a solid indication on the adaptation of AI."
Watch out for Crayon
– In isolation, Crayon should provide a solid indication on the adaptation of AI among the general population. Crayon is a large Microsoft partner and will, among other things, drive sales of Microsoft Copilot to companies. Another key data point for the general economy is the demand for IT consultants, which has been rather weak lately.
– The increased sales for Nordic Semiconductor might also be an indication of the delta for the economy and the consumer sentiment going forward.
The Arctic favourites
Spetalen and Arctic are particularly positive about Crayon, Link Mobility and Pexip:
– We believe these are good companies looking to continue their growth trajectories. We expect 10-20 % growth and they trade at 10x expected results in 2024. It almost seems too good to be true, but there is always the possibility of overlooking something, Spetalen concludes.