Buy These Highly Ranked Technology Services Stocks as Rate Cuts Loom
It’s no secret that technology-driven companies can benefit immensely from a lower inflationary environment.
With the Federal Reserve expected to cut the national interest rate average by 25-50 basis points this week, it's noteworthy that the Zacks Technology Services Industry is in the top 28% of over 250 Zacks industries.
Providing popular services to consumers, this vibrant business industry has several stocks that boast a Zacks Rank #1 (Strong Buy).
Notably, the innovation and creativity of these businesses should be enhanced by a more favorable operating environment. Attesting to this scenario is the industry’s strong price performance with the Zacks Technology Services Market rising +20% year to date and up more than +50% over the last year.
That said, here are three highly-ranked technology services stocks that should have more upside after receiving a strong buy rating.
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AppLovin APP
Investor sentiment has been sky-high for AppLovin which provides an application technology platform that helps developers create apps for businesses. To that point, AppLovin’s stock has skyrocketed over +160% this year to roughly match the stellar performance of AI chip giant Nvidia NVDA.
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After going public in 2021, AppLovin’s rapid stride to profitability has justified the hype in its stock with high double-digit EPS growth expected in fiscal 2024 and FY25. The company’s top line expansion is very compelling as well with total sales now expected to climb 35% this year and projected to rise another 13% in FY25 to $5.04 billion.
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Duolingo DUOL
Like AppLovin, Duolingo went public in 2021 and is one the fastest-growing technology services companies as a provider of a mobile language learning platform. Duolingo’s improved financial metrics have been fueled by its subscription growth with services extending to math and music courses along with language certifications that appeal to business professionals.
Expecting high percentage top and bottom line growth in FY24 and FY25, Duolingo’s stock is up +20% year to date and has soared over +150% in the last year. Headquartered in Pittsburgh, many analysts have remained bullish on Duolingo’s market position as language learning companies such as Germany-based Babble have put off their bids to launch IPOs in the US among other markets.
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Docusign DOCU
The agreement cloud services of Docusign have become a mainstay for sending and receiving business documents and this commonality should continue. Simplifying this process away from scanning or faxing, Docusign’s business remains a disrupter and shouldn't be overlooked despite DOCU dipping -4% year to date.
Trading at a very reasonable 16.5X forward earnings multiple, Docusign shares are still up nearly +30% over the last year with EPS expected to increase 15% in FY24 and projected to rise another 6% in FY25 to $3.65. Plus, Docusign's sales are forecasted to increase by 6% in FY24 and FY25 with projections edging toward $3 billion.
More reassuring is that Docusign has strengthened its balance sheet with it noteworthy that the company’s cash and equivalents are near $1 billion compared to pre-pandemic levels of $656 million in 2019.
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Takeaway
Considering rate cuts will likely benefit the Zacks Technology Services Industry, earnings estimate revisions have remained higher for AppLovin, Duolingo, and Docusign. This makes their attractive growth trajectories more compelling and suggests short-term upside in addition to being viable long-term investments.
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AppLovin Corporation (APP) : Free Stock Analysis Report
Docusign Inc. (DOCU) : Free Stock Analysis Report
Duolingo, Inc. (DUOL) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report