We recently compiled a list of the 10 Best Emerging Tech Stocks to Buy Now. In this article, we are going to take a look at where Xperi Inc. (NYSE:XPER) stands against the best-emerging tech stocks to buy.
Tech Industry’s Dominance is Here to Stay
Despite the recent market volatility of September, tech stocks remain a promising investment opportunity due to their strong earnings, potential for growth driven by AI capex investments, and solid financial fundamentals.
While quite a few analysts think it’s essential to diversify your portfolio away from tech to manage risks, especially in the middle of such a fluctuating market, the sector offers significant potential for long-term sustainable returns.
We recently covered UBS Global Wealth Management head of Americas Asset Allocation Jason Draho’s opinion in another article, 10 Best Tech Stocks To Buy Right Now Under $10. He thinks that while a balanced portfolio is essential for consistent long-term gains, tech stocks should not be shied away from for the rest of 2024. Here’s an excerpt from that article:
“While he’s optimistic about the technology sector, he acknowledged that the volatility will likely persist due to concerns about export controls and AI monetization. However, several factors make this sector attractive for the rest of the year. First, companies reported strong earnings results, although they may not be as spectacular as desired. Second, the AI capex investment story has potential upside for next year. Third, from a portfolio perspective, these companies are high-quality with solid earnings and balance sheets.
He thinks that this market volatility is acyclical. The recent sell-off in the tech sector was not primarily due to economic concerns but rather to sector-specific issues. Despite this, tech giants will continue to benefit from the AI capex investment story. While there may be short-term challenges, the long-term outlook for these companies remains positive. Focusing on the tech sector, rather than the broader MAG 7, is a better strategy for investors seeking to capitalize on the AI boom.”
Just last week, Mad Money host and former hedge fund manager Jim Cramer discussed his perspective on investing in Big Tech stocks during market downturns.
He believes that major technology firms, which are integral to ongoing robust trends like data centers and accelerated computing, should be viewed as attractive buying opportunities when the market weakens, instead of the opposite sentiment. So, when markets face a pronounced slow growth, tech stocks, particularly the large-cap leaders, are something to invest in, not divest from.
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Cramer pointed out that September is historically the weakest month for the market, with consistent profit-taking. But, he sees this as a circular argument rather than a sign of an economic downturn. He believes the broader selling pressure in September is due to tech stocks meeting but not exceeding expectations.
On Wednesday, Chris Verrone, a strategist at Macquarie, in a discussion about buying financial stocks when they enter an oversold condition, also talked about the underperformance of the tech sector, especially the larger, established companies due to their perceived status as bond substitutes.
Verrone suggested that rate cuts could boost cyclical sectors, but experience shows mixed results. While tech has been a leader, other sectors like consumer discretionary and staples have also shown strength.
He believes that the market’s leadership changes are due to long-term planning. He notes that larger tech companies might be struggling because they are perceived as safer investments, similar to bonds. According to him, financials have performed well this year and are a potential investment opportunity, especially given their current oversold state. However, the financial sector typically performs better in the late fall.
Methodology
To compile our list, we used the Finviz stock screener to screen for technology companies with a market cap between $250 million and $1 billion. We then selected 10 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Xperi Inc. (NYSE:XPER)
Market Capitalization as of September 11: $396.26 million
Number of Hedge Fund Holders: 23
Xperi Inc. (NYSE:XPER) is a multinational technology company that develops software for consumer electronics and connected cars, as well as media platforms for video service over broadband. It offers solutions in areas such as audio, video, and imaging technologies.
The company has 3 key growth areas: connected TV advertising, in-car entertainment, and video-over-broadband. Management believes that these markets will double in size over the next 5-7 years. The goal is to have 20 million monetizable endpoints by the end of 2025.
This includes 7 million devices connected to the platform by that time, 3 million IPTV households using the video-over-broadband solution, and DTS AutoStage in 10 million cars. These 20 million devices could generate nearly $200 million in additional revenue by 2026.
Total revenue for the second quarter of 2024 was approximately $119.59 million, down 5.74% from last year’s reported revenue. Pay TV, the largest revenue category, was up 5%. The Q2 increase was primarily driven by IPTV growth, which was up 45% year-over-year.
The loss per share was $0.67 and consumer electronics revenue declined by 40% due to large deals last year. Connected Car revenue increased by 41% due to a multi-year deal with an Asian automotive supplier. Media platform revenue declined by 25% due to a decline in advertising revenue.
Panasonic announced that they are Xperi Inc.’s (NYSE:XPER) sixth TiVo OS partner. Panasonic smart TVs powered by TiVo are now available in Europe. The company also signed a deal with a top 5 supplier of smart TVs in the US market (launch in next spring). Today, smart TVs powered by TiVo are available in 15 countries across Europe, including the largest economies under 17 different brands.
Xperi Inc. (NYSE:XPER) has successfully transformed its business, streamlining its product portfolio and improving its operations. These strategic initiatives have positioned the company for long-term growth and profitability. It is held by 23 hedge funds currently.
Overall XPER ranks 8th on our list of the best emerging tech stocks to buy. While we acknowledge the potential of XPER as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than the stocks on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
