Zacks Investment Ideas feature highlights: AppLovin and Sea Limited
Chicago, IL – June 4, 2025 – Today, Zacks Investment Ideas feature highlights AppLovin APP and Sea Limited SE.
President Trump spooked investors late last week by claiming that China broke its trade agreement with the US. President Xi of China responded over the weekend, stating it was the US that failed to remain in accordance with the unwritten terms of the deal.
It was the latest flare-up in the tariff war. And yet despite the headlines, markets appear to be looking past the noise (as they often do).
There are countless examples of this throughout history. And in just the last few days, we've seen fairly calm trading through not just this tit-for-tat argument over who broke the rules first, but a whole bunch of events including increased steel tariffs, a Ukraine attack on Russian airbases, and a terrorist attack in Boulder, Colorado.
It's a sign that markets are now reacting in a different way to tariff news, as opposed to prior months where we saw daily volatility at the slightest hint of the word. The fact that stocks are seeing through any short-term uncertainty adds to the bullish case.
The market is now telling us two things. First, it's to expect a quicker-than-anticipated resolution to most tariff issues and trade wars. And alongside that, the assumption is that inflation remains under control, which will allow the Fed to resume the rate-cutting process. This should provide a further tailwind to equity prices.
Inflation has remained tame this year even in the face of President Trump's tariffs. The Fed's preferred inflation gauge – the 'core' PCE index – rose 2.5% on an annual basis in April, below the 2.7% annualized rate recorded in March. Core prices rose 0.1% on a monthly basis.
April's Consumer Price Index (CPI) report showed inflation pressures actually eased, despite it being the first month that many tariffs were in effect. Data from the Bureau of Labor Statistics showed that consumer prices increased just 2.3% over the prior year, below estimates of 2.4%. It marked the lowest annual increase since February 2021.
Despite the evidence, some Fed officials remain unconvinced. Minutes from the Fed's May meeting revealed members acknowledged 'difficult tradeoffs' that could impend their dual mandates of maximum employment and price stability.
Minneapolis Fed President Neel Kashkari stated last week that there is now a 'healthy debate' within the Fed about whether any inflation prompted by Trump's tariffs will be transitory. While several officials are 'looking through' the potential effects, Kashkari hinted he'd like to maintain the current rate 'until there is more clarity on the path for tariffs and their impact on prices.'
Federal Reserve governor Chris Waller is in the transitory camp. In a speech in Seoul, South Korea on Monday, Waller said that any tariff-induced inflation 'will not be persistent' and that inflation expectations 'are anchored.'
In a more dovish signal, Federal Reserve Bank of Cleveland President Beth Hammack recently indicated that policymakers could move forward with a rate cut in June if the data comes in as expected.
'If we have clear and convincing data by June, then I think you'll see the committee move if we know which way is the right way to move at that point in time,' Hammack said.
Market participants are pricing in two rate cuts this year, with the first likely coming in September.
Fed Chair Jerome Powell met with President Trump at the White House last week to discuss economic developments including for 'growth, employment, and inflation.' It's no secret that Trump has been vocal about his distaste for Powell's unwillingness to lower interest rates.
Several stocks are making new 52-week highs before the major US indexes. Stocks that leap into new high ground ahead of the indexes typically go on to lead during any subsequent rally.
A Zacks Rank #1 (Strong Buy), AppLovin operates a mobile app marketing platform which provides tools to developers to improve the monetization and marketing of their content in the United States and internationally.
The Palo Alto, California-based company's business to date has largely been driven by ads for mobile gamers, but that is changing as the company looks to diversify. AppLovin's newer e-commerce beta program includes several hundred advertisers, including companies involved in the beauty and cosmetics industry.
AppLovin surpassed earnings estimates in each of the past eight quarters, and has delivered a trailing four-quarter average earnings surprise of 22.9%. There's been a lot of chatter about APP stock potentially slowing down this year following last year's 712% meteoric rise. But analysts are projecting the momentum to continue in 2025.
Full-year EPS estimates have been raised by 23.02% in the past 60 days to $8.39 per share. If the company is able to achieve this, it would translate to a phenomenal growth rate of 85.2% versus last year. Revenues are anticipated to climb 24.3% to $5.85 billion.
Another stock that is outperforming this year is Sea Limited, a Singapore-based tech company that provides the largest e-commerce offering in Southeast Asia. Part of the Zacks Internet – Software industry group, which currently ranks in the top 22% out of approximately 250 industries, Sea also offers digital financial services as well as digital entertainment and gaming services.
A combination of improving e-commerce margins and faster growth in the more profitable gaming and financial services segments bodes well for Sea stock in 2025.
Analysts covering SE stock raised their fiscal 2025 EPS estimates by 1.44% in the past 60 days. The Zacks Consensus Estimate currently stands at $4.23 per share, reflecting 151.8% growth versus last year. Analysts forecast Sea's businesses will collect more than $22.37 billion in total revenues this year, a 32% jump relative to 2024 figures.
Many individual stocks are now forming proper bases, another sign that this latest push higher has legs. These two leaders are outperforming the market and are poised for further advances.
Declining volatility surrounding tariffs and a tame inflation trend suggest more gains are on the horizon. While the Fed remains divided on the path for its policy rate, market participants are still pricing in two cuts this year.
Be sure to take advantage of all that Zacks has to offer to uncover leading stocks as this bull market resumes.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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