We’re well into the Q2 earnings season and the results coming in show a strong overall performance so far.
In fact, according to FactSet, if the S&P 500’s actual growth rate for the quarter hits 74.2% - as appears likely right now - it will amount to the biggest year-over-year earnings growth rate the index has displayed since Q4 2009.
It’s a confidence boosting turn of events and a slightly surprising one, as noted by Oppenheimer’s Chief Investment Strategist John Stoltzfus. Stoltzfus believes stocks have shaken off various macro concerns to “regain their composure" and have proceeded to “climb the proverbial ‘Wall of Worry’ on a Q2 earnings season that not only has thus far succeeded in surprising to the upside but has also provided enough positive commentary from management teams to boost traders’ and investors’ sentiment towards owning stocks.”
As Stoltzfus adds, it’s a “time for equities.” So, basically, everyone wants in on some stock market action.
With this in mind, the analysts at Oppenheimer have been looking for the equities primed to gain in current conditions. And just recently, they’ve tapped two stocks new to the public markets as likely to jump 50% or more in coming months – a solid return that investors should note. We ran the two through TipRanks database to see what other Wall Street’s analysts have to say about them.
PLAYSTUDIOS, Inc. (MYPS)
The first company we’ll look at, PLAYSTUDIOS, lives in the heart of the entertainment and leisure industry – it is a gaming company, closely tied to the Vegas casino world, and well known for developing video games, stand-alone casino games, and online entertainments including slot games and role-playing video games. In recent months, PLAYSTUDIOS has set up partnerships with well-known Vegas names like MGM and Peppermill.
In June of this year, PLAYSTUDIOS entered the public markets through a SPAC merger. ‘SPAC’ refers to special purpose acquisition company, a class of public corporation formed for the express purpose of bringing in investors, raising capital, and then conducting a merger/acquisition with a target company. SPAC’s are usually formed with a target sector in mind, and their main activity is to research likely merger candidates. PLAYSTUDIOS, working in the cash-rich Vegas gaming niche, was a likely target and attracted the attention of Acies Acquisition. The merger was completed on June 22, and the MYPS ticker started trading without need of an IPO.
The merger also brought $220 million in working capital to PLAYSTUDIOS, and the company further deepened its pockets not long after the SPAC transaction completed when it announced a secured credit facility, a five-year arrangement that provides additional liquidity for game development operations.
Since announcing the SPAC back in February, and accelerating since going public, PLAYSTUDIOS has been shifting its focus away from traditional casinos and more toward mobile RPGs and mobile casino gains, especially slots. The company has expanded its rewards and loyalty networks, and has introduced a portfolio of free mobile casino games targeting casual users.
This company has drawn attention from Oppenheimer analyst Martin Yang, who initiates his coverage with a bullish view of the PLAYSTUDIOS’ business model.
“MYPS' social casino games have a proven business model, operated by a forward-thinking and experienced management team. MYPS is in the early stage of taking share in the massive mobile game market. We believe its value proposition to mobile gamers and business partners is unique and compelling. Its playAWARDS loyalty program not only enables a superior player experience with real-world perks, but is also on track to become a stand-alone loyalty-as-a-service product (LaaS) to serve third-party publishers,” Yang noted.
At the bottom line, Yang is quite blunt in his assessment: “We believe PLAYSTUDIOS will have durable growth in sales and profits as the company scales up its game portfolio and reward partners.”
In line with these comments, Yang’s $11 price target suggests a one-year upside potential of 81%, implying that the company will strongly outpace the markets in 2H21. His rating on the stock, appropriately enough, is Outperform (i.e. Buy). (To watch Yang’s track record, click here)
Only one other analyst has recently posted a review on this name also assigning a Buy, giving this stock a Moderate Buy consensus rating. The shares are trading for $6.08 and their $13 average target is even more bullish than Yang’s, indicating a potential for ~114% growth ahead. (See MYPS stock analysis on TipRanks)
Sticking with tech, we’ll change our sights slightly to look at an experience management firm, Sprinklr. Last fall, the company was given an enterprise value of $2.7 billion, making it one of the tech field’s unicorns. The unicorns, of course, are firms valued at $1 billion or higher, a figure that reflects the interconnected strength of their business models and their fund raising capabilities. Sprinklr’s business model is experience management through the SaaS mode, and its platforms allow customers to unify their live chat, emails, and voice communications through an AI engine.
Like PLAYSTUDIOS above, Sprinklr went public recently – but unlike the gaming company, Sprinklr chose a traditional IPO as its vehicle of entry to the public markets. The public offering opened on June 23, and the company realized gross proceeds of $266 million from the sale of 16.625 million shares at $16, below the marketed range of $18-$20.
In another point of interest to investors, Sprinklr has been engaging in expansion activity. Shortly before the IPO took place, the company announced an upgraded partnership with the European performance marketing firm Merkle. The two companies will work together to increase their operations in the Netherlands. This announcement came after April’s news that Sprinklr expanded its operations with Portugal’s EDP, an electric utilities company. In all, Sprinklr has been moving to increase its exposure in the European markets.
Oppenheimer’s analyst Brian Schwartz, rated 5-stars by TipRanks and, in fact, ranked #1 among all of Wall Street’s analysts, opened his firm’s coverage of Sprinklr by describing the firm as a ‘future share gainer.’
“Sprinklr has established itself as one of the leading pure-play SaaS players in the experience management market, and is clearly capturing share from managed service providers and legacy software suppliers that have littered marketing and service departments at enterprise organizations with disparate solutions and/or have struggled to adapt to next-generation SaaS architectures. Our work indicates high customer satisfaction for Sprinklr’s products,” Schwartz opined.
The analyst added, "Sprinklr benefits from real top-line drivers, including a growing salesforce, and new and deepening partnerships (Sprinklr emerging as an enterprise market winner), recovery of COVID-impacted customers, international (EMEA, APJ), public sector (cloud-first mandate), and current and future product cycles (base-growth and ACV lift). We believe CXM can expand its valuation multiples over time with good consistency in quarterly results."
To this end, Schwartz rates CXM an Outperform (i.e. Buy), indicating his belief that the stock will grow faster than the broader markets in the year ahead. Quantifying that belief, he sets a $29 price target, implying a one-year upside of ~53%. (To watch Schwartz’s track record, click here)
This new stock has a Moderate Buy rating from the analyst consensus, after attracting 10 reviews since the IPO. These reviews break down 6 to 4 in favor of the Buys over the Holds. Shares in CXM are selling for $18.9 and the stock’s $24.56 average price target suggests it has room for ~30% upside potential in the next 12 months. (See CXM stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.