Data from the United States Technology Sector Analysis reports an impressive 28% growth over the past year, coupled with a forecasted annual earnings increase of 17%. This surge has resulted in renewed optimism for consumers seeking to invest in the stock market. The robust earnings growth suggests profitability and attractiveness for investors seeking potential gains.
Moreover, the sector’s long-term growth prospects have convinced investors to hold onto their investments, reducing overall market volatility. As the technology industry plays a pivotal role in the U.S. economy, its strength bolsters overall stock market performance, and sector innovation, job creation, and diversification allow for further growth.
Investors are more optimistic about the stability of the stock market, and these three undervalued technology stocks are the ones to buy this month for long-term returns.
Taiwan Semiconductor Manufacturing Company (TSM)
Taiwan Semiconductor Manufacturing Company (NYSE:TSM) is the largest worldwide electronic chip manufacturer, supplying many of the world’s technological giants such as Apple, Google, and Amazon with chips. TSM is up 21.09% YTD. Over 90% of analysts on Yahoo! Finance rate TSM stock a buy or higher rating, with a prediction for a median price target of $114 for 2024 signifying a 25% growth.
As the forerunner in the global semiconductor industry, TSM holds a 54% market share as 90% of advanced chips are produced by this company. Additionally, the manufacturer is successfully poised in an expanding sector, with global projections for the market to grow to $1.38 trillion by 2029 at a 12.2% CAGR. A gradual transition to electronic-powered utilities leads to immense demand, as suggested by the recent semiconductor shortages.
In Q2 2023, TSM reported a 4.9% decline in revenue YoY and YTD revenue decreasing by 3.7% as a result of brief semiconductor shortages across the globe. However, net income in July increased by 13.6% month-over-month and the company retains a net income margin of 43.33%. EPS and revenue estimates were additionally beaten by 5.11% and 0.43%.
Despite a down year for the overall semiconductor industry, projections for 2024 mark a revenue growth of 6% for the sector. Along with the increased demand for semiconductor chips by its customers, TSM is slated for commercial success. With Apple controlling 26% of the company’s business, Taiwan Semiconductor’s financials will see long-term increases in upcoming quarters with the release of the latest iPhone 15, featuring a USB-C charging port. The inclusion of the latest industry standards guarantees Apple, increases in customer base and recurring purchases. The strategic move not only secures a strong market position for Apple, but also reinforces Taiwan Semiconductor’s position as a key supplier of cutting-edge components.
TSM marks as a strong long-term investment due to the promising sector it dominates in terms of market share, as well as the merchant benefits to its main customer, Apple.
Adobe Incorporated (ABDE)
Adobe Incorporated (NASDAQ:ADBE) is a software system company highly renowned for its multimedia and creative software products. It is considered the industry standard for careers such as designers and video editors.
ABDE stock is up 64.55% YTD at $553.75 and is covered by 30 analysts who project a 12-month median to high price of $576 to $660, or a 4% to 19.2% upside.
The global software market grew from $1333.48 billion to $1500.20 billion from 2022 to 2023 and is expected to grow at a 12% CAGR from 2023 to 2027 to reach $2357.31 billion. Growing digitalization is a key factor in the immense growth of the industry, and enterprise data with the increase of automation in business will generate long-term growth.
This quarter, Adobe has resulted in $4.82 billion in revenue, which grew 10.40% YoY. This is 8.22% more than the sector median of 9.61%. The company has also showcased growth as its working capital growth YoY grew 139.96% and is 21,122.40% more than the sector median of 0.66%. Adobe has also shown growth via its levered FCF growth margin of 19.73% beating the sector median of 10.66 by 85.14%.
Adobe surpasses its competition by offering designers an intuitive and adaptable platform to be creative. Adobe also uses groundbreaking technology and connects data to constantly keep updating its platform. These features make Adobe the industry standard, as creators worldwide prefer the company. In addition, Adobe has recently integrated AI to increase its customizability and efficiency among consumers. This new feature has allowed Adobe to retain old and even new users and is paving the way toward consistent long-term growth.
ADBE stock is due to grow given its recent successful implementation of AI technology. The company has been surpassing its competition with the products and services it provides, and consumers will continue seeking Adobe.
ExlService Holdings Incorporated (EXLS)
ExlService Holdings Incorporated (NASDAQ:EXLS) is a software company that provides data analytics to allow customers to manage their daily operations such as billing and customer relationship management. EXLS stock is currently worth $28.87, and Yahoo! Finance reports 8 analysts having a mean 12-month price target on EXLS to reach $35.53, with the range spanning from as low as $32.40 to as high as $40.00.
Despite EXLS stock being down 14.76% YTD, ExlService Holdings’ recent quarterly financials have been adequately growing and providing the needed for EXLS stock. Revenue of $405 million grew 16.79% YoY which beat analyst expectations by 1.31% and diluted EPS of $0.29 increased by 38.1% which additionally beat analyst expectations by 8.46%. The company’s net income of $49.07 million increased by 36.89% YoY, demonstrating Exlservice Holdings’ ability and long-term potential growth to maintain strong growth in its financials.
ExlService Holdings just earned an XCelent Award from Celent for its 2023 Policy Administration Systems. The Celent report highlights its data and analytical capabilities, interoperability across different solutions, and product configuration as primary attributes of LifePRO, which is the system that is designed to manage various aspects of life insurance policies. Such recognition not only boosts the company’s reputation within the industry, but also serves as a testament to its dedication to delivering high-quality solutions. This award can open doors to new opportunities and partnerships, as it showcases ExlService Holdings as a trusted and capable provider of cutting-edge policy administration systems.
Investors should buy EXLS stock as the XCelent Award from Celent will expand its market reach, and continue to drive growth and success for the stock.
On the date of publication, Michael Que did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
The researchers contributing to this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.