The U.S. business services sector has benefited from strong economic fundamentals. The sector has posted double-digit returns over the past year, despite facing record high interest rates and extremely strict financial regulations from the Federal Reserve.
In this area, the technology services industry is mature and the demand for services is good. Revenues, profits, and cash flows are expected to gradually reach pre-pandemic levels, which will enable most industry participants to pay stable dividends.
Growth in the technology services industry has increased the number of remote workers in the wake of the pandemic. In this era of digital transformation, enterprises are actively seeking common ground between on-premises and cloud infrastructures that can provide flexible, easy-to-deploy hybrid solutions.
The business software industry is benefiting from strong demand for multi-cloud-enabled software solutions given the ongoing migration from legacy platforms to modern cloud-based infrastructure.
Industry players are incorporating tools like artificial intelligence and machine learning into their applications to make them more dynamic and results-oriented. The growing demand for enterprise software that increases productivity and improves decision-making processes is a key driver. According to Market.us, the global artificial intelligence market will be worth $177 billion in 2023 and is expected to reach a staggering $2.75 trillion by 2032. .
Over the past year, the Zacks Defined Business Services sector has delivered a double-digit return of 22.8%, while the Technology Services industry has returned an impressive 64.1%. Year-to-date, the Business Services and Technology Services sectors have advanced 6.5% and 14.2%, respectively. The Technology Services industry ranks within the top 24% of Zacks-ranked industries, so it is expected to outperform the market over the next three to six months.
our picks
We've narrowed our search to five technology services stocks with solid upside potential in 2024. These stocks have seen positive earnings estimate revisions within the past 30 days. Each of our picks carries a Zacks Rank #1 (Strong Buy).You can see See the complete list of today's Zacks #1 Rank stocks here.
The chart below shows the price performance of five stocks year-to-date.
AppLovin Co., Ltd. (app – Free Report) is working to build a software-based platform for mobile app developers to better market and monetize their apps in the U.S. and internationally. APP provides a technology platform that allows developers to market, monetize, analyze, and publish their apps.
AppLovin's revenue and earnings growth rates for the current fiscal year are expected to be 31.7% and over 100%, respectively. The Zacks Consensus Estimate for current-year earnings has improved 16.4% over the past seven days.
Duolingo Co., Ltd. (Duor – Free Report) is a mobile learning platform operating in the US, China, UK and overseas. DUOL offers courses in 40 different languages through the Duolingo app, including Spanish, English, French, German, Italian, Portuguese, Japanese, and Chinese. DUOL also offers a digital language proficiency assessment exam.
Duolingo's revenue and earnings growth rates for the current fiscal year are expected to be 37.8% and over 100%, respectively. The Zacks Consensus Estimate for current-year earnings has improved 25.4% over the past seven days.
DocuSign Inc. (documents – Free Report) provides a cloud-based e-signature software platform that enables businesses to digitally prepare, execute, and execute contracts in the United States and internationally. DOCU's sales have benefited greatly from continued customer demand for its flagship product, electronic signatures.
Despite this growing demand, the market for electronic signatures remains largely untapped, which positions DocuSign to expand electronic signatures around the world. DOCU remains focused on continued customer acquisition, service improvement, and international expansion.
DocuSign's sales growth rate for this fiscal year (ending January 2025) is expected to be 5.8%, and profit growth rate is expected to be 8.7%. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the past 30 days.
Spotify Technology SA (spot – Free Report) provides audio streaming services worldwide. SPOT operates through his two segments: Premium and Ad-Supported. The Premium segment offers subscribers unlimited online and offline streaming access to a catalog of music and podcasts without commercial interruptions.
Our ad-supported segment provides subscribers with on-demand online access to our music catalog and unlimited online access to our podcast catalog using computers, tablets, and compatible mobile devices. SPOT also provides sales, distribution and marketing, contract research and development, and customer support services.
Spotify Technology's revenue and profit growth rates for the current fiscal year are expected to be 16.5% and over 100%, respectively. The Zacks Consensus Estimate for current-year earnings has improved 36.2% over the past 30 days.
SPX Technologies Co., Ltd. (SPXC – Free Report) supplies infrastructure equipment serving the heating, ventilation, and cooling (HVAC) and detection and measurement markets worldwide. SPXC operates in two segments: HVAC and Detection and Measurement.
The HVAC segment engineers, designs, manufactures, installs and services packaged and process cooling products and artificial air movement solutions for the HVAC industrial and power generation markets, as well as boilers, heating and ventilation products for the residential and commercial markets. The Detection and Measurement segment provides underground pipe and cable detectors, inspection and rehabilitation equipment, and robotic systems.
SPX Technologies' revenue and earnings are expected to grow 14.8% and 24.4%, respectively, for the current fiscal year. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the past seven days.
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