The United States emerged as a leader among major developed economies in 2024, achieving the strongest recovery from the COVID-19 pandemic. Annual inflation is nearing the Federal Reserve’s target without a recession. Non-managerial real wages have surpassed pre-pandemic trends, consumer spending continues to outpace expectations, and factory investments have touched record highs.

The Fed implemented two rate cuts earlier this year and is expected to announce a third reduction this week. Rate cuts have contributed to lower borrowing costs, enhanced corporate profitability, and greater investment activity. They bolstered consumer confidence, driving increased spending on goods and services.

Services Sector in Good Shape in 2024

While service activities remained in good shape through the year, their positive impacts on the sector were partially offset by contracting economic activity in the manufacturing sector.

The service sector is currently balancing between growth in services about transportation & warehousing, retail, wholesale, finance & insurance, health care & social assistance, construction; and utilities, professional, scientific & technical Services, and weakness in information, mining, real estate, rental & leasing, and education.

Given this backdrop, AppLovin Corporation APP, Qifu Technology, Inc. QFIN and Dave Inc. DAVE are sound choices at their current price levels.

2024 Trends That Should Prevail in 2025

As service activities remain robust, the demand for business services is expected to grow further in 2025. Notably, the Services PMI, tracked by the Institute for Supply Management, expanded for the fifth consecutive month in November, recording a reading of 52.1%. This marked the 51st instance of expansion in 54 months since the recovery began in June 2020.

Companies that adapted to the evolving work environment by adopting successful remote work models, focusing on digital transformation and maintaining consistent demand for their essential services, performed significantly well this year. With digitization, technological advancements, and remote work becoming integral to modern operations, these businesses are well-positioned to sustain their impressive growth into 2025.

3 Business Services Stocks That Warrant a Look

Here, we have picked three Business Services stocks with Zacks Rank #1 (Strong Buy) or #2 (Buy) that have gained more than 100% in 2024 and have witnessed upward estimate revisions in the past 60 days.

AppLovin: The company develops a software-based platform for advertisers to enhance the marketing and monetization of their content in the United States and internationally.

AppLovin’s recent financial results demonstrate the company’s strong fundamentals and growth potential. AXON 2.0 technology and strategic expansion in gaming studios have significantly boosted revenue growth.

The top line rose 39% year over year and 11% sequentially in the third quarter of 2024. Adjusted EBITDA witnessed a 72% year-over-year surge and a 20% sequential increase in the quarter. Net income increased 300% from the year-ago quarter and 40% sequentially. The company reported a 76% year-over-year revenue increase in 2023 and a 41% rise in adjusted EBITDA.

Although there are potential risks, such as the possibility of slowed growth in the in-game advertising segment and the uncertain impact of non-gaming ventures, AppLovin appears well-positioned for continued growth thanks to its technological advancements and strategic expansion efforts.

The Zacks Consensus Estimate for APP’s 2025 earnings is pegged at $5.89, indicating 45.3% growth from the year-ago level.In the past 60 days, seven estimates for 2025 earnings have been revised upward, with no downward revisions. The Zacks Consensus Estimate for 2025 earnings has increased 41.6% in the past 60 days. APP currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Qifu Technology: The company operates a credit-tech platform. It has been focusing on creating a comprehensive credit-tech platform to cater to the rising needs of financial institutions and borrowers. The platform is based on users’ risk profiles and values, which aid financial institutions in underwriting efficiently from enhanced user profiling and asset matching. Borrowers benefit from this platform as it provides an array of diverse financial institutions and a larger breadth of prices. QFIN improved its user loyalty program with additional benefits to promote retention for the long term.

QFIN made hefty investments in AI to enhance user experience and augment operational efficiency. Qifu Technology has upgraded more than 10 modules in its AI copilot system to increase efficiency. The company anticipates the system to deal with 100,000 calls per day. It is invested in improving the capabilities of its chatbots and communication efficiency. Enhancements include boosting the number of exchanges per call and the frequency of script iteration.

The Zacks Consensus Estimate for QFIN’s 2025 earnings is pegged at $6.4, indicating 12% year-over-year growth. In the past 60 days, two estimates for 2025 earnings have been revised upward with no downward revisions. The Zacks Consensus Estimate for 2025 earnings has increased 18.5% in the past 60 days. QFIN also currently sports a Zacks Rank #1.

Dave Inc.: The company offers a suite of financial products and services through its financial services platform.

DAVE's core offering, cash advances ranging from $50 to $250, has become a lifeline for U.S. customers, helping them avoid costly overdraft fees and meet everyday financial needs. By serving as an alternative to expensive check-cashing services or payday loans, DAVE provides an invaluable solution for consumers seeking financial stability.

Unlike many competitors, DAVE does not charge interest on its cash advances, making its services highly appealing. The repayment process is seamless, with cash advances automatically deducted from the customer’s bank account once their paycheck is credited. This efficient repayment mechanism helps maintain low credit losses, currently at an impressive 1.3% of originations. DAVE further incentivizes responsible borrowing by increasing cash advance limits up to $500 for customers who demonstrate repayment consistency.

The company has incorporated AI in its business model using it in credit models as well as to identify which consumers get cash advance offers and the value of it. Also, this technology assists the company in its call centers by resolving 90% of tickets without involving any agent. This is why Dave can offer top-notch services to its customers at a lower price than its competitors.

DAVE leverages a fully automated machine learning algorithm rather than the FICO-based models used by traditional banks to analyze historical spending, savings, and earnings before making cash advances to its members. This results in efficient disbursements without affecting the credit quality.

The Zacks Consensus Estimate for DAVE’s 2025 earnings is pegged at $4.36, indicating 31.1% year-over-year growth. In the past 60 days, one estimate for 2025 earnings has been revised upward with no downward revisions. The Zacks Consensus Estimate for 2025 earnings has increased by 27.5% in the past 60 days. DAVE currently sports a Zacks Rank #1.

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