Market Outlook: Bank earnings beat as tech stocks trade below value

Major U.S. banks delivered first-quarter earnings beats, with results largely meeting expectations and signalling stability in consumer behaviour. Attention is now turning to elevated oil prices and how they could shape corporate guidance and economic conditions.

BNN Bloomberg spoke with David Sekera, Chief U.S. Market Strategist at Morningstar, who says technology stocks are trading at significant discounts, with investors increasingly focused on tangible evidence that artificial intelligence can drive revenue growth and efficiency.

Key Takeaways

• U.S. banks are broadly fairly valued, with stable consumer behaviour and strong trading revenues supporting earnings results.
• Elevated oil prices could lead to cautious corporate guidance and add uncertainty during earnings season.
• Technology and AI stocks are viewed as significantly undervalued, with investors looking for proof of real-world growth impact.
• A barbell strategy balancing value stocks like energy with growth names in tech and AI remains a preferred approach.
• Some consumer-facing stocks may face downside risk as inflation pressures lower-income households and curb discretionary spending.

Read the full transcript below:

ANDREW: So both Morgan Stanley and Bank of America posted first-quarter earnings beats, and their forecasts were in line with expectations. Let’s get more from David Sekera, chief U.S. market strategist at Morningstar. David, great to see you again. Thanks for joining us. How are you playing the big U.S. banks, or any reaction to these earnings numbers today?

DAVID: Yeah, I’d say the biggest reaction was they’re actually kind of boring. I think when you think about the banks, you know, boring is usually pretty good. Generally, bank stocks are pretty fairly valued. You know, according to our valuation models, if you look at guidance for, you know, the next quarter, I’d say net interest income margins pretty much in line with expectations. You know, at this point, the big banks aren’t seeing any change in consumer behaviour. You know, they talked a little bit about private credit, and while they thought their exposure there is pretty manageable. Yeah, I still have a lot of concerns. I think there are a lot of losses in the private credit markets that need to be taken, but I think that’s going to be much more in those private credit funds and the BDCs than the banks themselves. You know, investment banking off to a very strong start this year, specifically M&A doing very well, equity capital markets doing very well. And I think you noted earlier very big increases in their trading revenues, but of course a lot of that was driven by the volatility this past quarter. So I really look at those as really just being a one-time gain. So in my mind, the banks are pretty boring. I would say, for earnings season overall, my biggest concern is just going to be with oil prices still as elevated as they are, and the uncertainty that we have. You know, will management teams come out and either give, you know, weaker-than-expected guidance to account for that, or just larger ranges of guidance? And if so, you know, would that disappoint the marketplace?

ANDREW: How is your strategy on tech right now when it comes to a name like Broadcom or CRM Salesforce, which, of course, has been battered by concerns over AI?

DAVID: Well, specifically coming into 2026 and our outlook, we noted a number of different reasons why we thought this year was going to be even more volatile than last year. Recommended coming into the year with a barbell-shaped portfolio. So essentially, half of the portfolio being in very high-quality value stocks, especially energy. Energy coming into the year was one of the most undervalued sectors according to our valuations. But then balance that with, you know, the high tech, the AI stocks, you know, and so forth. So then, on the March 30 episode of the Morning Filter, which is our weekly podcast, I recommended to start harvesting, you know, some profits in energy and reinvesting that into beaten-down growth and AI stocks. So at this point, especially going into earnings season, I think you’re now in the position. You’ll want to ride those positions to the upside. You know, growth stocks very undervalued, AI stocks, we see a lot of valuation there that looks extremely attractive. So I think you want to wait until those valuations move back up. So once we get through earnings season and a lot of these stocks, we think, like a Broadcom and a Salesforce, both have lots of upside, once those get back to fairly valued, then you take profit there and rotate back into that balanced portfolio.

ANDREW: What about the U.S. consumer? Are you interested in names such as Walmart or Target even?

DAVID: Yeah, when I think about the U.S. consumer and what’s going on there, you know, if you look at stocks like Walmart and Costco, you know, those are great companies, wide economic moats, companies that we think have long-term, durable competitive advantages, but specifically those are one-star-rated stocks, meaning we think that they’re significantly overvalued. When I look at the earnings multiples that the market is paying for those stocks today, there are 40 times, 50 times this year’s earnings, just huge earnings expectations that the market has that when you think about like a Walmart, for example, and their operating margin, yes, you can get a little bit more margin from here, but I just think the market is pricing in too much growth for too long among those companies.

ANDREW: Yeah, that’s interesting. Walmart off its highs. Give us your take on some other traditional names. Now you touch traditional tech darlings. What about Microsoft? They are seen as just an aircraft carrier that will sail through the challenge of AI.

DAVID: Yeah. I mean, Microsoft is probably our top pick in the technology sector today. It’s a five-star-rated stock, that’s our highest rating, trades almost a 40 per cent discount to our fair value. I think one of the reasons that we find it to be very attractive is that Microsoft stock has been pulled down with the entire software sector, but yet they have a portfolio of businesses that we think will naturally balance one another out, no matter how AI works out over time. So if you take the one extreme, which the market is pricing in, in software that AI has a huge disruption or displacement of the software business, that means our expectations for some of the other AI businesses, like Azure and Copilot, are probably too low and going to offset that from the downside. Conversely, if AI isn’t the catalyst that the market is currently pricing in, maybe you get some slowing in Azure and their other AI businesses, but then their traditional businesses will take over and provide the upside there. If I look at our model, we’re looking for a compound annual growth rate over the next five years of 16 per cent, yet the stock is trading at under 22 times our 2026 earnings estimate, which, if you look at kind of that historical multiple on this company, that’s probably the lowest it’s been in quite a while.

ANDREW: You have a couple of names, consumer names that you would avoid right now. eBay, you don’t see bright prospects for them in the near term.

DAVID: Yeah. So I think it’s twofold. So one, if oil prices stay high and inflation stays high, you know, and you think about which types of consumers get hit the most, you know, the low-income, moderate-income households. That’s why I’m very concerned about eBay, in and of itself. But even getting away from that, if you just look at our base case model, that stock’s trading at a 43 per cent premium to our fair value, puts it in two-star territory. So any kind of consumer retrenchment that we see here, I think really would end up pushing that stock pretty far to the downside.

ANDREW: And Darden Restaurants is another name you’d be wary of.

DAVID: Exactly. This is a one-star-rated stock trading at a 26 per cent premium to our long-term intrinsic valuation. And of course, you just figure from the consumer point of view, if you’re under a lot of pressure from inflation, you know, discretionary spending is the first place that you’re going to pull back. So I think Darden could get hit from the revenue perspective, but at the same point in time, I think they could also get hurt from the margin perspective. I would think a restaurant chain like that would have a hard time pushing through their own cost increases as fast as they could get their menus, you know, to start moving up. If I look at where the stock is trading right now, it’s about 18 and a half times our 2026 earnings estimate. That’s the very high end of kind of that normalized range. So I think this one could get hit twice. You could see both the multiple selloff as well as earnings could get pushed down at the same time.

ANDREW: David, thank you very much indeed.

DAVID: Well, thank you.

ANDREW: David Sekera, chief U.S. market strategist at Morningstar.

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This BNN Bloomberg summary and transcript of the April 15, 2026 interview with David Sekera are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.