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Will 2024 Be a Year of 'Electric Eleven'? Tech ETFs to Gain

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The tech sector has been seeing the rise and death of acronyms of giants for the past few years. First came the FAANG, then the Magnificent Seven. And then Wall Street analysts started doubting the strength of the tech sector, quickly focusing on the term "Fantastic Four" to eliminate several of the biggest laggards in 2024.

Now, Wall Street analysts are redefining the tech sector with the emergence of the "Electric Eleven," a group of companies poised for growth and innovation. Evercore ISI has coined the latest term, as indicated in a Yahoo Finance article.

Composition of the Electric Eleven

Comprising stalwarts like Airbnb ABNB, Alphabet (GOOG, (GOOGL - Free Report) , Amazon (AMZN - Free Report) , Booking Holdings (BKNG - Free Report) , DoorDash DASH, Meta Platforms META, Netflix (NFLX - Free Report) , Shopify (SHOP - Free Report) , Spotify (SPOT - Free Report) , The Trade Desk (TTD - Free Report) and Uber (UBER - Free Report) , the Electric Eleven represents a strategic selection of companies primed for double-digit revenue growth and margin expansion.

For example, Netflix enacted new price increases on very large user bases, which in turn would boost growth rates. The analyst also expects most of these stocks to produce 20%+ earnings growth, which is premium earnings growth, as the S&P 500 usually records high single-digit or very low double-digit rise in earnings.

Airbnb expected current-quarter earnings growth: 66.67%

Alphabet expected current-quarter earnings growth: 27.35%

Amazon expected current-quarter earnings growth: 161.29%

Booking Holdings expected current-quarter earnings growth: 20.69%

DoorDash expected current-quarter earnings growth: 82.93%

Meta Platforms expected current-quarter earnings growth: 61.74%

Netflix expected current-quarter earnings growth: 55.90%

Shopify expected current-quarter earnings growth: 1500%

Spotify expected current-quarter earnings growth: 158.1%

The Trade Desk expected current-quarter earnings growth: -4.35%

Uber expected current-quarter earnings growth: 362.5%

ETF Exposure 

These stocks can be played via the ETF route as well. One or more companies have exposure in ETFs like MicroSectors FANG+ ETN (FNGS - Free Report) , First Trust Dow Jones Internet Index Fund (FDN - Free Report) , Invesco NASDAQ Internet ETF (PNQI - Free Report) , Global X Cloud Computing ETF (CLOU - Free Report) and ProShares On-Demand ETF OND.

Driving Forces Behind the Electric Eleven

Mark Mahaney, Senior Managing Director at Evercore ISI, highlights the transformative power of generative AI as a key driver propelling these digital-first companies forward. Leveraging this technology, they're poised to enhance products, processes and shareholder value, the Yahoo Finance article indicated.

Supporting Strong Demand Trends

Beyond the all-embracing influence of generative AI, the demand for Internet services across various verticals remains robust. Generative AI & Technology ETF CHAT should definitely be under focus. The fund is already up 18.7% this year.

But sectors such as cloud, advertising, retail, mobility and entertainment have been experiencing accelerated growth, buoyed by factors like market stabilization, easing comps and industry-specific catalysts. Most of these areas have a couple of very specific tailwinds, like the Olympics, elections, etc., this year.

Evercore ISI believes that cloud revenues are likely to see faster growth in 2024 than in 2023 for names like Google, Amazon and Microsoft. Retail should see faster growth for players like Amazon. Hence, these digital-first companies are great beneficiaries of gen AI, per the above-mentioned analyst.

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