Today’s installment of Full Court Finance at Zacks delves into the recent September selloff in the stock market and provides insight into the potential trajectory of the market in the upcoming period. In addition, the episode focuses on three Zacks Rank #1 (Strong Buy) technology stocks—Taiwan Semiconductor, Spotify, and AppLovin—that may present opportune investment options for investors seeking long-term gains.

Taiwan Semiconductor: Pioneering the Technological Landscape

Taiwan Semiconductor Manufacturing Company (TSM) constructs the most intricate and cutting-edge components that underpin global economy and technological advancements. With a reported 61% market share in semiconductor foundry in Q4 2023, TSM is leagues ahead of its closest competitor.

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Taiwan Semi’s diverse client base, including tech behemoths like Nvidia and Apple, positions TSM as a significant player in various high-growth sectors. With a Zacks Rank #1, TSM is forecasted to expand its earnings by 25% in 2024 and 28% in 2025, bolstered by 24% revenue growth in both years.

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Despite a 60% YTD surge, TSM stock remains undervalued, trading below its highs. Currently, Taiwan Semi trades at a substantial discount compared to historical multiples and sector averages.

Spotify Technology: Innovating the Music Industry

Spotify Technology S.A. (SPOT) revolutionized the music industry with its paid streaming services. Holding a commanding 32% share of the global streaming music market in 2023, Spotify outperformed its competitors by a significant margin.

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Efficiency enhancements and strategic pricing adjustments have propelled Spotify to a profitable stance, prompting a surge in EPS estimates. Expected to deliver significant growth in earnings and revenue in the coming years, Spotify is on a trajectory towards becoming a strong investment option.

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With a remarkable surge in stock value, Spotify is poised for continued growth, offering investors an opportunity to capitalize on its potential at a reasonable valuation.

AppLovin: The Hidden Gem of Tech Stocks

AppLovin Corporation (APP) plays a pivotal role in assisting companies and application developers in driving innovation and success.

The Path to Prosperity

AppLovin’s innovative machine learning and AI engine, AXON 2.0, are reshaping the landscape for its clients in the mobile gaming industry and beyond. The company’s relentless pursuit to acquire and retain its ideal users, enhance customer value, and refine marketing strategies has borne fruit, evidenced by its revenue growth of 17% last year. Such advancements come on the heels of a remarkable 93% surge in 2021 and yet another strong showing in 2022.

AppLovin’s stellar performance in the market was further solidified by its recent beat-and-raise quarter in early August. This performance not only underscores the company’s potential to expand its market share in mobile gaming but also hints at venturing into new advertising realms, signaling a bright future ahead.

Financial Fortitude and Market Sentiment

With AppLovin’s FY24 and FY25 earnings estimates soaring by 14% and 17% respectively, the company’s growth trajectory seems unstoppable. These figures represent a remarkable 150% increase from the previous year, solidifying AppLovin’s position with a Zacks Rank #1 (Strong Buy).

Wall Street has showered AppLovin with affection, attributing much of its success to the cutting-edge AI features that are significantly boosting returns on investment for its clients. In a world consumed by smartphones, mobile gaming and apps stand out as a hidden gem of growth potential. Analysts predict a whopping 35% revenue growth for AppLovin in 2024, translating to a remarkable 255% surge in EPS. The company is projected to follow up this stellar performance with growth rates of 14% and 20% in 2025.

Market Performance in Focus

AppLovin’s stock has soared an impressive 800% since the conclusion of 2022, outshining Nvidia’s 560% growth. Although the stock has witnessed a 105% surge over the past year, it currently sits 5% below its 52-week highs and 15% lower than its 2021 peaks. Despite these fluctuations, AppLovin is trading at a significant discount of over 95% compared to its three-year highs, 50% below its median valuation, and at a 12% discount to the Zacks Tech sector, standing at 22.2X forward 12-month earnings.

Final Thoughts

In a world where technology reigns supreme, AppLovin’s remarkable journey speaks volumes about the power of innovation, adaptability, and customer-centric strategies. As the company continues to redefine the mobile gaming landscape and explore new advertising horizons, investors are keenly watching to see how this rising star will further illuminate the ever-evolving tech industry.