With their enhanced contribution to the world economy, emerging economies and markets are poised to grow at a rapid pace in the forthcoming years fueled by ease in inflation levels, widening role, and strengthening footing among developed economies.
Given the economies’ bright prospects, it could be ideal to invest in quality emerging market stocks Taiwan Semiconductor Manufacturing Company Limited (TSM), Alibaba Group Holding Limited (BABA), and MercadoLibre, Inc. (MELI) for diversified growth.
Emerging market and economies plays a crucial role in the worldwide growth and development by offering wide employment opportunities and smart solutions and are poised to grow vastly in the coming years. Major developing economies are expected to see net capital inflows rise by nearly a third to $903 billion in the current year depending upon global growth levels.
Contrary to a slowdown growth in the US, various emerging markets are expected to show higher growth levels amid easing inflation. Morgan Stanley Economists expects global economic growth of 3.1% in 2024 and 2025 with slowing inflation, likely expectations of interest rate cuts, with the European Central Bank expected to start cutting in June followed by the U.S. Federal Reserve in September.
Amid downside risks like upcoming US elections, persistent headwinds in China, and escalating tensions in the Middle East, the emerging economies enjoy an economic growth premium over those of developed markets. The emerging market economic growth appears stronger as the developed markets’ growth slows.
Also, the baseline forecast is for the world economy to continue growing at 3.2% in 2024 and 2025, where emerging market and developing economies will grow 4.3% in 2023 to 4.2% in both 2024 and 2025.
Given the industry’s bright prospects, let’s delve into the fundamentals of the three best emerging market stocks: TSM, BABA, and MELI.
Taiwan Semiconductor Manufacturing Company Limited (TSM)
Based in Hsinchu City, Taiwan, TSM manufactures, packages, tests, and sells integrated circuits and other semiconductor devices internationally. The company provides a range of wafer fabrication processes and offers customer and engineering support services.
On April 24, TSM unveiled its newest semiconductor process, advanced packaging, and 3D IC technologies for powering the next generation of AI innovations with silicon leadership. The company launched the TSMC A16TM technology, consisting of leading nano-sheet transistors with innovative backside power rail solutions.
It also introduced its System-on-Wafer (TSMC-SoW™) technology, an innovative solution to bring revolutionary performance to the wafer level.
TSM’s net revenue increased 16.5% year-over-year to $18.87 billion for the first quarter that ended March 31, 2024. Its gross profit grew 9.8% from the year-ago value to $10.01 billion. The company’s income from operations of $7.93 billion, indicates growth of 7.7% from the prior year’s quarter.
In addition, the company’s net income and EPS of $7.17 billion and $0.28 indicate growth of 8.8% and 8.9% year-over-year, respectively.
Street expects TSM’s revenue for the second quarter (ended June 2024) to increase 29.2% year-over-year to $19.94 billion, and its EPS is expected to grow 21.6% year-over-year to $1.39 for the same quarter. Moreover, the company has surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is remarkable.
Over the past six months, TSM’s stock has soared 71.2% and 67.1% over the past year to close the last trading session at $173.82.
TSM’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Quality, and Momentum and a B grade for Sentiment. It is ranked #9 out of 92 stocks in the Semiconductor & Wireless Chip industry.
In addition to the POWR Ratings we’ve stated above, we also have TSM’s other ratings for Value, Stability, and Growth. Get all TSM ratings here.
Alibaba Group Holding Limited (BABA)
Based in Hangzhou, China, BABA provides technology infrastructure and marketing reach to help merchants, brands, retailers, and other businesses engage with their customers internationally. It operates in seven segments: China Commerce; International Commerce; Local Consumer Services; Cainiao; Cloud; Digital Media and Entertainment; Innovation Initiatives and Others.
On June 7, BABA entered into a collaboration with UEFA EURO 2024™, making it the official B2B E-commerce partner of UEFA EURO 2024™ in the U.S. and China. The partnership bodes well with the existing agreement and adds various opportunities for small and medium-sized enterprises on Alibaba.com to leverage the increased demand around the tournament.
On June 6, BABA launched Alibaba Guaranteed, to help simplify global sourcing and provide a more flexible and reliable supply chain for small and medium-sized enterprises in the U.S. and beyond. Alibaba Guaranteed allows buyers to source with added confidence and they can also take advantage of after-sales services.
Alibaba Guaranteed marked a significant step for SMEs and global sourcing by redefining the fulfillment standard of B2B cross-border trade.
For the fourth quarter that ended March 31, 2024, BABA’s revenue increased 6.6% year-over-year to $30.73 billion and its income from operations was $2.04 billion for the quarter. The company’s non-GAAP net income and EPS came in at $3.38 billion and $0.18 for the quarter, respectively.
Furthermore, the company’s adjusted EBITDA and free cash flow were $4.27 billion and $2.13 billion for the quarter, respectively.
Analysts expect BABA’s revenue for the fiscal year (ending March 2026) to increase 7.8% year-over-year to $151.26 billion. Its EPS for the same period is expected to grow 12.1% year-over-year to $9.19. Furthermore, BABA has surpassed the consensus revenue estimates in three of the trailing four quarters.
Shares of BABA have surged marginally over the past three months to close the last trading session at $73.31.
BABA’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has a B grade for Momentum and Quality. BABA is ranked #11 of 39 stocks in the B-rated China industry.
Click here to access additional ratings of BABA for Growth, Value, Sentiment, and Stability.
MercadoLibre, Inc. (MELI)
Headquartered in Montevideo, Uruguay, MELI operates online commerce platforms. The company operates in two segments: Mercado Libre Marketplace; and Mercado Pago FinTech platform. It provides an automated online marketplace for buying and selling, and a financial technology platform for online transactions and payments.
MELI’s trailing-12-month gross profit and EBIT margins of 56.49% and 14.62% are 52.7% and 88.6% higher than the respective industry averages of 37% and 7.75%. Likewise, the stock’s trailing-12-month net income margin of 7.23% is 50.2% higher than the industry average of 4.82%.
For the first quarter that ended March 31, 2024, MELI’s net revenues and financial income increased 36% year-over-year to $4.33 billion. Its gross profit grew 25.4% from the prior year’s quarter to $2.02 billion. The company’s income from operations came in at $528 million, up 26.3% from the year-ago value.
Also, the company’s net income and EPS rose 71.1% and 70.8% from the year-ago value to $344 million and $6.78, respectively.
Street expects MELI’s revenue and EPS for the second quarter (ended June 2024) to grow 38.1% and 61.2% year-over-year to $4.72 billion and $8.32, respectively. Furthermore, the company surpassed the consensus EPS and revenue estimates in all four trailing quarters, which is remarkable.
Shares of MELI have gained 4.2% over the past six months and 33.5% over the past year to close the last trading session at $1592.60.
MELI’s strong fundamentals are reflected in its POWR Ratings. MELI has a B grade for Quality, Momentum, and Growth. It is ranked #29 among 53 stocks in the B-rated Internet industry.
To access MELI’s ratings for Value, Sentiment, and Stability, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
TSM shares were trading at $175.29 per share on Tuesday afternoon, up $2.96 (+1.72%). Year-to-date, TSM has gained 69.51%, versus a 15.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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