Potential for strong growth
Over the last decade, the rise of "smart technology" has enabled a move away from traditional PCs and laptops. Sales of smartphones and tablets have increased rapidly in recent years and are expected to drive growth far beyond what we see in other technology sectors. But while it can seem as if everyone has a smartphone, penetration rates are quite low, suggesting that further growth is yet to come.
On a valuation basis, technology is trading at a price-to-earnings ratio slightly below the S&P 500, while offering the potential for nearly double the growth. We expect growth to be driven by innovation, with corporations starting to spend again and consumers flocking to new products. In addition, technology company balance sheets are flush with cash.
We see good opportunities in cloud computing—remote data servers that can be accessed via the web—as well as mobile devices and related businesses.
More and more people are upgrading to new technologies, suggesting further growth to come. Given this potential, today's valuations provide an appealing entry point.
Sales of smartphones are rapidly accelerating
We expect subscribers to double by 2015
Source: Gartner, company data, Credit Suisse estimates. As of April 12, 2012.
Given future growth potential, valuations are attractive
Forward P/E of S&P 500 and S&P Tech Index
Multiples
Source: FactSet. As of June 30, 2012. It is not possible to invest directly in an index. Past performance is not indicative of future results.
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Source: Gartner, company data, Credit Suisse estimates. As of April 12, 2012.
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