Proactive Investors – UBS analysts have unveiled their top stock picks for the remainder of 2024 across the Technology, Media, and Telecom (TMT) sectors.
Broad themes across the US technology, media, and telecom sectors in 2024 center on market competition, AI-driven growth, and cost optimization.
In business services, a slowing labor market is impacting human capital management firms, while the broadband sector faces heightened competition from fixed wireless and fiber networks. AI demand is driving discussions in hardware, especially around servers and PCs, while internet giants like Amazon face concerns over returns on investments in AWS and same-day delivery.
Elsewhere, software companies are grappling with SaaS optimization efforts, particularly in cutting underutilized licenses, while generative AI continues to gain attention as companies experiment with new tools.
In media, Spotify is gaining market share despite a slowdown in the music industry, and payments processors like Visa and Mastercard (NYSE:) are expected to benefit from long-term trends in SaaS-driven merchant acquiring.
Overall, the sector faces both opportunities and challenges as the year progresses.
Below are 11 Buy-rated companies poised for growth, according to UBS.
Business, Education & Professional Services: Dayforce (NYSE:)
UBS sees continued momentum for Dayforce (NYSE:DAY) as the company moves upmarket. The firm’s faster implementations and increased reliance on global system integrators are expected to drive growth. Notably, the company’s $500 million stock buyback is seen as a strong signal of confidence.
Cable, Satellite & Telecom Services: AT&T
Valued similarly to other declining telecom assets, AT&T Inc (NYSE:T, ETR:SOBA) stands out for its ability to sustain low-single-digit EBITDA growth. UBS attributes this to low wireless churn, upgrades, and ongoing fiber gains, which could provide support in a challenging telecom landscape.
Internet Largecap: Amazon
Amazon.com Inc (NASDAQ:) is one of UBS’s top picks for its ability to capture more consumer spending through its fulfillment regionalization efforts. Faster delivery times and higher service levels are expected to enhance gross merchandise volume (GMV) growth. Additionally, Prime Video with Ads is seen as a high-margin opportunity, potentially boosting profitability.
Internet Small & Midcap: Zillow (NASDAQ:)
UBS believes the market underestimates the ramp of Zillow Showcase through FY2025. With the housing cycle showing signs of turning, Zillow (NASDAQ:Z) could benefit from renewed momentum in the real estate sector.
IT Hardware & Electronics Manufacturing Services: Dell
Dell Technologies Inc (NASDAQ:DELL) is UBS’s top pick in this segment due to the company’s growing strength in AI-optimized servers and an upcoming refresh cycle in PCs. As AI-enabled PC penetration increases, pricing tailwinds could further drive demand for Dell’s products.
Media: Spotify
UBS sees significant upside for Spotify Technology SA (NYSE:SPOT) as the company focuses on pricing actions and efficiency initiatives. The introduction of new pricing tiers and monetization strategies could push EBITDA estimates for 2026-2027 up by 5-10%.
Payments, Processors & IT Services: Visa
Visa Inc (NYSE:NYSE:, ETR:3V64) continues to demonstrate strong profitability and revenue growth, supported by its value-added services (VAS) contributions. UBS notes the market has underestimated Visa’s growth resilience, which should continue even through a moderate recession.
Semiconductors & Semiconductor Capital Equipment: AMD
Advanced Micro Devices (NASDAQ:) Inc (NASDAQ:AMD, ETR:AMD) remains a top pick thanks to its competitive GPU roadmap. UBS notes that AMD’s superior memory bandwidth and its move towards full-system solutions make it a strong contender against rivals like NVIDIA (NASDAQ:). UBS expects data centers to account for 70% of AMD’s operating profit next year.
Software Largecap: Oracle
UBS predicts that Oracle Corp (NYSE:NYSE:, ETR:ORC) can maintain over 50% growth in Cloud Infrastructure, driven by AI-related infrastructure revenue, key customer ramp-ups, and database migrations to Azure. These factors could lead to reaccelerated revenue growth in FY2025 and FY2026.
Software Small & Midcap: Braze (NASDAQ:)
Braze (NASDAQ:BRZE) is seen as well-insulated from ‘shelfware’ dynamics that have pressured subscription models in the software sector. Its unique approach to customer engagement makes it a standout in this category.
Bonus: CyberArk
CyberArk (NASDAQ:CYBR) is another favored pick, with UBS highlighting continued upward revisions to annual recurring revenue (ARR) and free cash flow (FCF) estimates. The identity security sector remains relatively strong, and CyberArk is expected to benefit from these trends.
