Analyst touts eBay, Infosys Technologies

The gloom hanging over tech stocks deepened a bit this week when Merrill Lynch downgraded the sector to "underweight" from "equal weight," citing increased hawkishness by the Fed.

"Without liquidity, (the technology) sector is likely to underperform," wrote chief investment strategist Richard Bernstein in a research note.

But a lot of the problems in the sector are "company-specific," said Scott Kessler an Internet analyst at Standard & Poor's.

"Tech stocks really haven't done anything since 2003, though earnings have increased substantially," he said on CNBC's "Squawk Box." "So we see some pretty nice values in the sector."

"With the economic uncertainty, we want to gravitate toward companies that have secular growth trends at their backs," Kessler said.

Among the stocks he likes are eBay (EBAY, news, msgs), Yahoo! (YHOO, news, msgs), financial information provider FactSet Research Systems (FDS, news, msgs) and global technology services firm Infosys Technologies (INFY, news, msgs)

Get additional details below, and use the CNBC.com on MSN tools, including Stock Scouter, to learn more about each company. Keep up with the Street with MSN Money's Market Summary. And check out top picks from pros on CNBC.

EBay

The company operates the world's biggest online shopping community, with 180 million registered users, who use the company's Web site to buy and sell goods once relegated to garage sales and antique stores.

The San Jose, Calif., company's Web site lets users list items for sale, browse through listed offerings organized by topics and bid on items.

To boost growth, eBay has expanded into new regions, including China, India, South Korea, Spain and Taiwan. It acquired comparison shopping site Shopping.com and took a 25% stake in electronic bulletin board Craigslist. It also expanded its network of local classified-ad sites, called Kijiji, and it acquired Skype, a maker of software that allows free calls to be made over the Internet.

Its acquisition of PayPal has been its most successful diversification effort. PayPal, which accounts for about one-quarter of eBay's revenue, saw its payment receipts grow by 44% in the first quarter.

The "negative sentiment" on eBay shares is "very, very strong," Kessler said. "We think the company is going to have a solid quarter. We think the competition from Google (GOOG, news, msgs) is here, but we don't think it's going to substantially impact the stock performance."

EBay and Yahoo! last spring announced a wide-ranging partnership aimed at bolstering their businesses in the face of common foe Google and a hyper-competitive Internet landscape. Get the analysts' take on the eBay-Yahoo! partnership.

The company recently announced an initiative to make money by promoting eBay auctions on their Web sites.

According to Zacks, the average brokerage recommendation for eBay is hold. EBay on July 12 was rated 4 out of 10 on StockScouter.

Infosys Technologies

The company is one of India's biggest software outsourcing company, in terms of sales.

The Bangalore-based company counts many big U.S. companies as clients. Projects cover all aspects of software development.

Infosys on July 12 reported that strong demand and a gain of 28 new clients lifted net profit by 43% in the April-June quarter. The earnings report helped depositary shares of U.S.-listed Indian stocks rebound from the July 11 terrorism shock in Mumbai, the Indian financial capital.

The company expects demand for outsourcing to continue to grow, as more companies face pressure to lower costs. Infosys on July 12 raised its expectations for full-year revenue and earnings per share.

Credit Suisse last month upgraded Infosys to "outperform" from "neutral," saying that "execution issues" had been resolved and "its revenue growth trajectory could be on an upswing." Analyst Bhuvnesh Singh raised his earnings-per-share estimates for the next three years.

While Kessler included Infosys on his "mid-year power picks portfolio," another Standard & Poor's analyst downgraded the stock on July 12. Analyst Dylan Cathers cited valuation in lowering his recommendation to "neutral" from "outperform."

According to Zacks, the average brokerage recommendation on Infosys Technologies is moderate buy.

Infosys Technologies on July 12 was rated 10 out of 10 on StockScouter.

Yahoo!

Yahoo's flagship Web site is a used millions of times each month to search the Internet for information, communicate with others via e-mail and instant messages, and buy merchandise.

Susquehanna analyst Marianne Wolk upgraded Yahoo! on July 10 to "positive" from "neutral" and maintained a $32.50 price target on the stock. "We believe June results, due July 18, could modestly exceed estimates and possibly beat the high end of guidance for the first time in several quarters," Wolk wrote in a note to investors.

According to Zacks, the average brokerage recommendation for Yahoo! is moderate buy.

Yahoo! on July 12 was rated 5 out of 10 on StockScouter.