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Investment Insight: Seizing Opportunities Amid Market Volatility Unlocking Hidden Value: Tech Stocks on the Decline

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By Ronald Tech


Weathering the Storm: A Healthy Stock Market Pullback

After an incomprehensibly rampant ascent, Wall Street is in the throes of a long-overdue pruning of tech stocks, fueled by concerns over economic stability and the vertiginous surge of AI-driven gains. The Nasdaq, having edged perilously beyond its 50-day moving average, stumbled by 2.3% in Thursday’s tumult, signaling a recalibration in the investor mindset.

Stock indices, akin to swaying branches, must weather periodic storms to thrive in the forest of the market. Even the most robust bull markets are punctuated by peaks and troughs, offering sagacious investors a chance to sow seeds of prosperity when the tempest rages.

A Diamond in the Rough: Uber’s Tempting 25% Discount

Among the wounded warriors of this market skirmish is the indomitable Uber Technologies Inc., whose stock price has slumped by 5% recently, extending its broader descent of 25% from the zenith of February. Yet, despite this apparent setback, Uber has shown resilience by posting its inaugural profit for a full fiscal year in 2023, an achievement realized through an expansion of its ride-hailing and delivery domains and a conscious streamlining of its operations.

Although Wall Street’s confidence in Uber has wavered in light of declining FY24 earnings-per-share estimates, Uber’s most recent EPS projection stands tall at 42% above consensus. Projections also indicate an impressive 17% revenue growth in 2024, with a surge in monthly active platform users anticipated, underscoring Uber’s enduring appeal within the consumer landscape.

Cracking the Code: AppLovin’s Enigmatic 35% Pricing Quirk

Casting our gaze towards the cryptic realm of AppLovin Corporation, an app monetization specialist, we discover a prodigious entity flourishing amidst the market tumult. Unveiling AI-empowered tools that aid app developers in navigating the capricious waters of marketing and revenue generation, AppLovin has enraptured Wall Street with its substantial sales growth projections.

AppLovin’s anticipated 32% revenue surge in 2024 and a further 10% jump in the ensuing year emphasize its vibrant trajectory. Adjusted earnings per share are set to exhibit a remarkable 202% escalation to $2.96 in 2024, followed by a subsequent 21% ascent in the subsequent year, cementing its status as a beacon of growth in a sea of uncertainty.

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Are the wealthy getting away with not paying their fair share of taxes, or are they carrying an unfair burden? The debate over the top tax bracket rages on as concerns about income inequality and the concentration of wealth at the top of the economic ladder continue to make headlines. Senators Bernie Sanders and Elizabeth Warren have both proposed a wealth tax on the ultra-rich, while even multi-billionaire Warren Buffett has vocally expressed support for the idea, suggesting that it is fair for wealthy Americans to be taxed at a higher rate.

Currently, the top federal income tax rate stands at 37%, applicable to incomes of $539,000 and higher for single taxpayers and $647,850 and higher for couples filing jointly. However, historical data reveals that the top marginal tax rate has been significantly higher in previous eras. In 1944 and 1945, it peaked at a staggering 94%, and in the late 1980s, it hit a low of 28% under former President Ronald Reagan.

Historical Context and Present Day

The taxation of the wealthy has fluctuated significantly throughout U.S. history, demonstrating both higher and lower levels of taxation than the current status. This historical perspective adds complexity to the ongoing debate regarding whether the rich are paying their fair share of taxes. Despite the disputes, recent data from the IRS sheds light on the current tax scenario.

Top 1% Tax Contributions

In 2020, the top 1% of taxpayers—those earning $561,351 or more—contributed a significant 42.3% of the total tax revenue collected. This translates to the top 1% paying more income taxes than the bottom 90% combined. Astonishingly, the top 1% paid a staggering $723 billion in income taxes, while the bottom 90% collectively contributed $450 billion.

State-Level Analysis

Examining the tax burden on the wealthiest individuals at the state level yields interesting findings:

Alabama Minimum income to be considered 1%: $404,560 Average income of the 1%: $1,107,769 Average income tax paid by the 1%: $263,845 Average tax rate of the 1%: 23.82% Alaska Minimum income to be considered 1%: $466,905 Average income of the 1%: $999,772 Average income tax paid by the 1%: $253,754 Average tax rate of the 1%: 25.38% Arizona Minimum income to be considered 1%: $485,146 Average income of the 1%: $1,464,848 Average income tax paid by the 1%: $369,426 Average tax rate of the 1%: 25.22% Arkansas Minimum income to be considered 1%: $387,666 Average income of the 1%: $1,483,925 Average income tax paid by the 1%: $313,266 Average tax rate of the 1%: 21.11% California Minimum income to be considered 1%: $726,188 Average income of the 1%: $2,430,790 Average income tax paid by the 1%: $655,180 Average tax rate of the 1%: 26.95% Colorado Minimum income to be considered 1%: $609,919 Average income of the 1%: $1,799,148 Average income tax paid by the 1%: $465,284 Average tax rate of the 1%: 25.86% Analysis of Minimum Income of the Wealthiest 1% and Average Tax Rates by State Analysis of Minimum Income of the Wealthiest 1% and Average Tax Rates by State


The Meteoric Rise of AppLovin Stock and its Potential for Investors

The Phenomenon of AppLovin Stock

Without a doubt, AppLovin stock has been on a meteoric rise, soaring over 650% since late 2022, leaving the entire Tech sector in its dust with an impressive 85% year-to-date surge. The fuel for this skyrocketing journey has been AppLovin’s optimistic earnings outlook, with a remarkable 250% year-over-year increase in its FY24 estimate. In our digitally-immersed world, AppLovin is strategically positioned to reap the benefits of our app and smartphone-centric culture.

The Recent Ups and Downs

However, the road to success is never without its bumps. On Thursday, AppLovin stock experienced a slight dip of 2.6%, and is currently positioned 18% below its 52-week highs. Despite these fluctuations, investors now have the opportunity to purchase APP stock at a striking discount – 35% lower than its all-time highs – just ahead of its eagerly anticipated Q2 earnings release on August 7. The current trading position of APP places it near its 21-week moving average and beneath its 50-day average.

Valuation and Investment Potential

Delving into the realm of valuation, AppLovin is currently trading at a substantial 95% discount compared to its three-year highs, translating to 23.3 times the forward 12-month earnings. Furthermore, APP is trading 45% below its three-year median and 13% beneath the Zacks Tech sector. To add a cherry on top, 11 out of the 16 brokerage recommendations from Zacks have labeled APP as a “Strong Buy.”

The Investment Opportunity Ahead

From a slight portentous perspective, the current scenario presents itself as an intriguing opportunity for investors to capitalize on AppLovin’s potential. The recent modest pullback serves as an ideal opening to embark on the AppLovin journey. While acknowledging that not all pinnacle picks emerge victoriously, the potential of this particular investment could surpass previous Zacks’ Stocks Set to Double, like the exemplary case of Nano-X Imaging which exhibited a commendable +129.6% surge in a brief span of slightly over 9 months.

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