One long-time tech analysts is predicting the 2023 rebound in tech stocks may look like an iconic hairstyle.

Jeffries analyst Brent Thill says, “We believe in the mullet trade… where it’s kind of business in front, party in back. Hopefully that plays out. [That] it may end up just being a dragged-out, really tough 2023 is the risk, and it may end up being a back half ’24 reemergence from this rather than sometime in early next year.”

The mullet hairstyle, which began in the seventies and was popular through the nineties, featured a closely cropped, clean cut front, mated to a back of the hairstyle which featured long, wildly flowing locks.

Thill went on to describe 2023 as featuring more “pain” in the first half of the year, followed by a “flowy, long, exciting” rally on the backside of the year.

As technology companies are confronting the downturn in the economy, and the associated decreases in demand, they are drawing their moves from their recession playbooks, enacting cost-cutting measures and reducing staff to weather whatever is coming.

Thill noted, “In our coverage, close to 80% to 90% of technology companies will show a deceleration in growth in 2023 and tech stocks don’t work in decelerating growth.”

Thill predicted that earnings multiples will decrease in the near term, though they will stabilize later on. Some portfolio managers however are hoping that the companies of the Nasdaq would simply face the music and cut their guidance for the year now.

Paul Meeks, portfolio manager at Independent Wealth Solutions Management, said in a recent interview, “Hopefully companies guide very ugly because it’s in their benefit to do so for next year And if we see inflation under control, the last of the Fed rate hikes, the nastiest of all possible recession nasty numbers reflected with these tech companies’ forecasts, I will feel pretty good because, in the meantime, the valuations on some of these tech names will be right.”

While some companies like Amazon (AMZN) and Salesforce (CRM), have begun the year with sizable layoffs to cut costs, semiconductor companies have merely warned of reduced demand. That may ultimately allow them to recover faster once the turnaround begins.

Thill noted, “Perhaps semis and the internet [stocks] will be the ones that come back first. I think software still has some lag because they have recurrent contracts, and it takes time for that to unwind before you see the weakness.”

Mullet photo courtesy allygirl520 (allison), via Wikimedia Commons