For Immediate Release
Chicago, IL – August 5, 2024 – Today, Zacks Investment Ideas feature highlights Uber Technologies UBER and AppLovin APP.
2 Tech Stocks to Buy on the Dip Amid Market Pullback
Today’s episode of Full Court Finance at Zacks breaks down the recent technology-driven stock market selloff. The episode then dives into Uber Technologies and AppLovin before their upcoming earnings releases to see if investors should buy these tech stocks trading at least 25% below their highs.
Healthy Stock Market Pullback
Wall Street is finally selling stocks and locking in profits on overheated technology companies and other areas as Q2 earnings season ramps up. The Nasdaq got rejected at its 50-day moving average on Thursday, closing 2.3% lower as investors recalibrated stocks amid concerns about the economy and artificial intelligence-based gains.
Despite what some may say or think, the market pullback is healthy since stocks and indexes cannot climb straight up. The Nasdaq climbed too far above key long-term and short-term moving averages. The Nasdaq also hit very overbought levels in terms of the Relative Strength Index (RSI) (bottom part of the chart)—it is used to help determine if a stock or index is too expensive or too cheap based on its recent performance.
Healthy stock markets are full of peaks and valleys even in the strongest bull runs. Investors must remember that periods of stock market weakness or downturns in strong individual stocks are often the best times to buy. This idea is the basis for one of Warren Buffett’s most famous quotes about buying stocks.
Now let’s dive into Uber and AppLovin stock to see if investors should consider buying UBER and APP on the dip before their upcoming earnings releases.
Buy Uber Stock Down 25% from its Highs?
Uber Technologies stock fell 5% on Thursday extending Uber’s recent drop and its broader 25% downturn from its February highs. Uber posted its first full-year profit as a public company in 2023 by expanding its ride-hailing and delivery businesses while streamlining its operations.
Wall Street sold the stock as Uber’s FY24 consensus earnings per share (EPS) estimate slipped over the last few months. Yet, Uber’s most recent/accurate FY24 EPS estimate is 42% above consensus.
Uber is projected to grow its revenue by 17% in 2024 and 2025 to hit $50.67 billion next year—up from $13 billion in pre-Covid 2019. The ride-hailing company’s earnings outlook remains strong and Uber is expected to boost its monthly active platform consumers by 10% to 165 million in 2024.
Uber’s core businesses are especially popular with higher-income consumers, shielding them from inflation concerns. The firm is expanding its delivery business in Asia through a key acquisition and Uber just announced a multi-year strategic partnership with EV-maker BYD. Uber is poised to play a significant role in the driverless vehicle revolution across ride-hailing, delivery, and freight/trucking.
Uber stock has soared 180% off its 2022 lows even though it has pulled back 25% from Uber’s February highs. Uber could find support near its 50-week moving, trading at its most oversold RSI levels since it bottomed in the summer of 2022 (it hit its most overbought RSI levels in February).
Uber stock trades 35% below its average Zacks price target and at a 95% discount to its highs at 39.9X forward earnings. Uber’s PEG ratio—factors in the longer-term EPS growth outlook—offers 52% value compared to the Zacks Tech sector.
Some investors might want to wait until after Uber reports its Q2 financial results on August 6. But Wall Street loves the stock, with 35 of the 42 brokerage recommendations Zacks has at “Strong Buys.”
Is AppLovin Stock Worth Investors’ Attention Down 35%?
AppLovin is an app monetization firm that designs tools to help app developers improve marketing, revenue generation, and beyond to boost profitable expansion. Wall Street fell in love with AppLovin’s AI-enhanced features that are helping APP grow its sales and earnings. APP stock also bounced back as digital advertising rebounded after its 2022 slowdown.
AppLovin is projected to post 32% sales growth in 2024 from $3.28 billion to $4.33 billion and then pop 10% next year to $4.77 billion—up 230% vs. 2020. Zacks estimates call for AppLovin’s adjusted EPS to soar 202% to $2.96 a share in 2024 and climb 21% higher next year.
AppLovin stock skyrocketed over 650% since late 2022, including an 85% YTD run to blow away the Tech sector. APP’s surge was fueled by AppLovin’s soaring earnings outlook, with its FY24 estimate up 250% YoY. AppLovin stands to benefit from our app and smartphone-obsessed world.
AppLovin stock fell 2.6% on Thursday and APP is down 18% from its 52-week highs. Investors also have the chance to buy APP stock 35% below its all-time highs heading into its Q2 earnings release on August 7. APP trades right near its 21-week moving average and below its 50-day.
Turning to valuation, AppLovin trades at a 95% discount to its three-year highs at 23.3X forward 12-month earnings. APP trades 45% below its three-year median and 13% below the Zacks Tech sector. Plus 11 of the 16 brokerage recommendations Zacks has are “Strong Buys.”
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AppLovin Corporation (APP) : Free Stock Analysis Report
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