2024

Epic

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 Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our&nbsp;<a href="https://tokenist.com/terms-of-service/" style="text-decoration:underline;color:#3c7b7b" target="_blank" rel="noreferrer noopener" class="deco-link">website policy</a>&nbsp;prior to making financial decisions.
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<p class="has-drop-cap">The macro landscape shifted dramatically since the March 2020 stock market crash. <a href="https://tokenist.com/magnificent-seven-post-earnings-whos-leading-the-race/" class="deco-link">Magnificent Seven stocks</a> became a hybrid growth hedge after the Fed’s unprecedented intervention to flood the economy with money, rampant inflation, and the resultant hiking cycle.</p> 
<p>Holding these stocks, Roundhill’s Magnificent Seven ETF (MAGS) returned 10% year-to-date, vs the broader S&amp;P 500 (SPX) market index at 5.2%. Yet, Big Tech’s unrelenting gains could end this year.</p> 
<p>According to Monday’s UBS Global Research report, Big 6 Tech (excluding TSLA) stocks’ earnings per share could decline from the forecasted 42.2% this year to 15.5% by Q1 2025. The report noted that this would not come from puncturing the AI hype balloon, but due to “difficult comps and cyclical forces”.</p> 
<p>On the upside, the report noted that neglected tech stocks could see tailwinds, from 11.1% to nearly 26% EPS gains by Q1 2025. The question is, which tech stocks should be selected as the Big Tech group cools down?</p> 
<h3 id="advanced-micro-devices-nasdaq-amd">Advanced Micro Devices (NASDAQ: AMD)</h3> 
<p>Compared to Nvidia, AMD stock gained 66% over one year vs. NVDA’s massive 188% boost. Year-to-date, however, it is clear that investors neglected AMD, as the stock returned 1.8% vs. 58%, respectively. From its 52-week low price of $81.02, AMD shares are now 44% above at $146.64 per share.</p> 
<p>While this is still impressive, <a href="https://tokenist.com/amd-vs-nvidia-in-2024-which-ai-stock-makes-more-sense-for-your-portfolio/" class="deco-link">AMD has yet to capitalize</a> on its own AI chip rollouts. Countering Nvidia’s H100 in performance and cost-effectiveness, AMD’s MI300 is poised to significantly increase the company’s market share as it supplies the burgeoning AI infrastructure.</p> 
<p>According to Piper Sandler analyst <a aria-label=" (opens in a new tab)" href="https://www.tipranks.com/experts/analysts/harsh-kumar" target="_blank" rel="noreferrer noopener nofollow" class="deco-link">Harsh V. Kumar</a>, the price-to-performance ratio of the new chips could boost AMD’s market share by up to 30%. Historically, AMD has followed this strategy, sharing a duopoly for GPUs with Nvidia and a duopoly for CPUs with Intel.</p> 
<p>Per Nasdaq’s aggregated data, the average AMD price target is now $203.23 vs the current $146.64 per share. Interestingly, the low estimate at $140 is close to the present price level.</p> 
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<h3 id="tencent-holding-otc-tcehy-adr-stock">Tencent Holding (OTC: TCEHY) – ADR stock</h3> 
<p>For investors confident that US-China tensions will fizzle out due to interlinked economies, Tencent provides solid exposure to China’s mature gaming, payment processing, e-commerce, logistics, cloud computing, and social media sectors.&nbsp;&nbsp;</p> 
<p>For the full year 2023, <a aria-label=" (opens in a new tab)" href="https://www.tencent.com/en-us/investors/quarter-result.html" target="_blank" rel="noreferrer noopener nofollow" class="deco-link">Tencent reported</a> a 34% YoY operating profit increase and profit attributable to shareholders up by 36% YoY, delivering total revenue of $86 billion. This is a 10% uptick from 2022. Considering that China has a larger market, with Tencent holdings spread across the US as well, such as Epic Games, Riot Games, it is safe to say that TCEHY is a <a href="https://tokenist.com/investing/growth-investing/" rel="dofollow" class="deco-link">growth</a> blue chip stock.</p> 
<p>Tencent’s yearly low stock price is $34.51 vs the current $40.80 per TCEHY share. Wall Street Journal’s price target for TCEHY stock is $52.49 per share, potentially giving investors a 28.6% return twelve months ahead. On the downside, WSJ’s low estimate is only $36.82 per share.</p> <iframe src="https://tokenist.substack.com/embed" width="100%" height="320" style="border:1px solid #EEE; background:white;" frameborder="0" scrolling="no"></iframe> 
<h3 id="shopify-inc-nasdaq-shop">Shopify Inc. (NASDAQ: SHOP)</h3> 
<p>Year-to-date, this e-commerce/fintech company is down 8.5% while still up 31% from its 52-week low of $45.50 per share. Compared to a massive unrealized loss of $3 billion in 2022, Shopify turned around its fortunes with <a aria-label=" (opens in a new tab)" href="https://investors.shopify.com/financial-reports/default.aspx" target="_blank" rel="noreferrer noopener nofollow" class="deco-link">reported</a> $1.4 billion unrealized gains for 2023.</p> 
<p>Likewise, Shopify’s yearly subscription revenue grew 23% to $1.8 billion. Most tellingly, the e-commerce pioneer increased free cash flow significantly, from negative $186 million the year before $905 million. For the 2024 outlook, the company expects continued double-digit growth in the low twenties percentage rate.</p> 
<p>Given that Shopify relies on online shopping as its core business model and e-commerce is forecasted to grow at 15.80% CAGR (2024-2029), this puts Shopify on a solid appreciation path. Per Nasdaq’s aggregated data, the average SHOP price target is $82.07 vs. the current $70.03 per share. The low estimate is close following this YTD decline, at $63 per share.</p> 
<p><strong><em>Do you think the UBS analysis will be proven correct? Is Big Tech overloaded? Let us know in the comments below.</em></strong></p> 
<p><em>Disclaimer: The author does not hold or have a position in any securities discussed in the article.</em></p> 
<p>The post <a rel="nofollow" href="https://tokenist.com/3-smaller-tech-stocks-to-buy-as-focus-shifts-from-megacaps/">3 Smaller Tech Stocks to Buy as Focus Shifts from Megacaps</a> appeared first on <a rel="nofollow" href="https://tokenist.com">Tokenist</a>.</p>

3 Smaller Tech Stocks to Buy as Focus Shifts from Megacaps

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