Even after the recent mini-banking crisis, investments in emerging markets are poised to “perform pretty strongly in the years ahead,” TD Securities analyst Mitul Kotecha told CNBC on March 20. “Even this year once we get through this shock, our assumption is that the dollar will continue to weaken,” the analyst stated, boosting emerging market currencies and helping investments in those nations. Kotecha named Brazil and Mexico two of the best-emerging countries to invest in. Morgan Stanley and BlackRock have recently shared Kotecha’s optimism on emerging markets. This column will identify three tech stocks to buy in emerging markets.
So far in 2023, the Street has been quite enamored with tech stocks. So with heavyweight analysts calling for investors to plow funds into emerging markets and the Street embracing tech, now is a great time to buy tech stocks in emerging markets.
Here are three great choices within that category.
Tech Stocks to Buy: America Movil (AMX)
As part of America’s large onshoring trend, many U.S.-based companies are building or preparing to build factories in Mexico. For example, Elon Musk’s Tesla (NASDAQ:TSLA) recently announced that it would build a large factory in northern Mexico. Indeed, according to the New York Times, “During the first 10 months of last year, Mexico exported $382 billion of goods to the United States, an increase of more than 20 percent over the same period in 2021,”
The Mexican economy should get a big boost from the trend, lifting telecom company America Movil, which operates in 24 nations in Latin America but focuses primarily on Mexico and Brazil. AMX obtains 35% of its EBITDA from Mexico. The company says that it is the leading telecom company in terms of market share in both Mexico and Brazil.
In addition to traditional telecom services, America Movil operates dozens of data centers that it utilizes “to manage a number of cloud solutions.” The company says that, within Mexico, it has 81.36 million “wireless subscribers.”
In addition to getting a lift from the improving Mexican economy, AMX’s top and bottom lines are likely to be meaningfully raised by increased utilization of 5G technology in the coming years.
Trading at just 8.5 times analysts’ average 2024 earnings per share estimate, AMX stock’s valuation is very attractive.
The growth of Latin American e-commerce company MercadoLibre (NASDAQ:MELI) is truly extremely impressive.
Last quarter, for example, MELI’s gross merchandise volume jumped 35% year-over-year, excluding currency fluctuations. Not surprisingly, the company cited Mexico and Brazil, where its currency-neutral GMV climbed 22% and 28%, respectively, as the key to its Q4 growth. Increasing its active user base 27% YOY in Q4 to almost 44 million, MELI’s fintech business is also rapidly expanding.
Last quarter, MercadoLibre’s overall sales soared 56.5% YOY, excluding currency changes, and the revenue of its fintech unit soared an incredible 93% YOY on a currency-neutral basis to more than $1.3 billion.
Unlike many e-commerce companies, MELI is very profitable, as its operating income jumped to $1.03 billion last year from $441 million in 2021. Meanwhile, its 2022 top line was $10.54 billion versus $7.07 billion in 2021.
In a note to investors on March 3, British bank Barclays raised its price target on MELI stock to $1,475 from $1,250. The firm expects MELI to continue to gain market share in Brazil, and it maintained an “overweight” rating on the shares.
In line with my previous predictions, Xpeng (NYSE:XPEV), a China-based electric-vehicle maker, is becoming a leader in driving-assistance technology.
During the company’s fourth-quarter earnings call on March 17, its CEO, He Xiaopeng, reported that its driving assistance system, XNGP, “outperformed peers’ actual on-road performance in the United States.”
In other words, XNGP, powered by advanced AI technology, is superior to any offering available in the U.S. The system will be rolled out in more than ten Chinese cities in the second half of this year.
Moreover, Xpev believes that, by mid-2026, XNGP will be able to operate vehicles on a level similar to that of “a human driver with three years of driving experience.” The firm added that, at that point, human drivers utilizing the system will only have to take any actions an average of once every 100 kilometers.
However, the Street, which tends to have a largely short-term term viewpoint, was probably more excited by Xpeng’s announcement during the call that its orders had surged 100% in February compared with January.
“Our new order intake in February increased 100% over the previous month. With the strong momentum of P7i orders, following its official launch, we expect to see a considerable month-on-month growth of total new order intake in March,” He, the company’s CEO, stated.
While Xpeng appeared to attribute the surge to its introduction of a new “sports sedan,” I believe the coming launch of XNGP also likely played a role in the huge order surge.
As of the date of publication, Larry Ramer owned shares of XPEV. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Consumer Discretionary, Automotive, Cloud, Retail, E-Commerce, Electric Vehicles, Software, Technology