September saw some serious market losses, from 5% in the Dow to 9.5% in the NASDAQ. In the wake of it, investors must decide what those losses mean, and how it will impact investment strategy going forward. And for that, investment bank Oppenheimer has some suggestions.
The firm’s 5-star analyst Ittai Kidron has tagged three tech stocks in which he sees plenty of room for near- to mid-term growth. Kidron is an expert in the market’s technology sector, and is rated among the Street’s 25 best analysts, with a 72% success rate to his forecasts and a 34.5% average return on his stock picks.
Using TipRanks’ Stock Comparison tool, we were able to evaluate these 3 stock picks alongside each other to get a sense of what the analyst community has to say.
Smartsheet, Inc. (SMAR)
Kidron’s first pick is Smartsheet, an SaaS company with a cloud-based workspace management and collaboration system. Smartsheet’s products enable faster, more efficient teamwork via remote, letting team members automate, capture, manage, plan, and report on work at any scale. The company boasts over 97,000 customer – including 75% of the Fortune 500 companies. Smartsheet has enhanced its relevance in the online business space by making its product compatible with popular systems such as Dropbox, Google Apps, MSOffice, and Salesforce.
Smartsheet's earnings – while still coming in at a net loss – beat the forecasts by wide margins in Q1 and Q2, and revenues grew steadily in the first half of the year, with the top line currently at $91.22 million. That last number – the company’s FYQ2 revenue – is up an impressive 41% year-over-year.
In another impressive display of Smartsheet’s strength, the company announced last month that it is acquiring the digital asset management company Brandfolder, in a deal worth $155. The acquisition will add Brandfolder’s capabilities to Smartsheet’s products, helping customers to improve efficiency.
Oppenheimer’s Kidron sees a clear path ahead for Smartsheet with this acquisition.
“We suspect Brandfolder's annualized rev. run rate is still small... While we don't expect a material change to Smartsheet's near-term rev. run rate, we view it as a long-term positive from a diversification perspective. We also believe the acquisition can be quickly absorbed from a cost perspective over 1-2 quarters given Smartsheet's normal pace of investment…”
Kidron sets a $65 price target on the stock, implying an upside of 42% for the coming year, and backing his Outperform (i.e. Buy) rating. (To watch Kidron's track record, click here)
Overall, SMAR's Moderate Buy consensus rating is based on 9 Buys and 4 Holds set in recent days. The stock is selling for $45 and the average price target of $60.54 suggests room for 32.5% upside growth. (See SMAR stock analysis on TipRanks)
New Relic, Inc. (NEWR)
Next up is New Relic, another Silicon Valley tech company. New Relic’s products permit software analytics, allowing the customer to use a cloud system to track app performance in order to perfect the software. As New Relic says, it puts analytics, troubleshooting, and optimization all in one place for efficient engineering.
The company has seen modest, steady revenue growth during 2020, and the CY2Q results put the top line at $162.6 million. The EPS net loss held steady in the first half, at 37 cents.
Kidron is generally positive on New Relic, acknowledging headwinds but not shy about his belief that the company can overcome them.
“While we expect the execution challenges to weigh on the shares near term, we also still believe there's value in New Relic One and demand for observationally in general… New Relic's taking an aggressive step to simplify its product positioning and pricing, which could make for a tough 2Q as sale/customers react. Given the increased uncertainty, we believe NT stock performance could be volatile as investors wait for proof points of customer renewals, new customer engagement, and better sales execution, which could emerge late in FY21,” Kidron opined.
These comments are backed by Kidron’s Outperform rating (i.e. Buy), and his $75 price target implies an upside potential of 40% for the stock in the next 12 months.
While the top analyst is bullish on NEWR, the stock only rates a Hold from the analyst consensus. New Relic has 4 Buy reviews, along with 6 Holds and 2 Sells. The stock is priced at $53.61 and has an average price target of $66.70, suggesting a 24% one-year upside. (See NEWR stock analysis on TipRanks)
Last on our list today is Twilio, a cloud server company based in Silicon Valley. This company offers customers a cloud-based communications platform, allowing access to telecom systems via the computer. Twilio’s platform makes it possible for customers to place or receive phone calls, chats, text messages, and even video conversations via connected devices, and built-in security systems keep it safe through user verification.
The sudden move toward remote work and virtual offices in 1H20, precipitated by the coronavirus crisis, would seem on its face to be a boon for a company like Twilio – and the data bears that out. The company saw revenues grow sequentially from 4Q19 to 1Q20, and broke $400 million in the second quarter. The company reported 200,000 active customer accounts at the end of Q1, up 5% year-over-year, and added another 10,000 in Q2. TWLO shares have gained 137% year-to-date; they seemed to shrug off the corona crisis.
Kidron updated his notes on Twilio after hearing management’s Summer 2020 Releases webinar. He notes several important points that underlie the company’s fundamental strength: “Twilio now has 8M registered developers… Cumulatively, it has now reached 3 trillion emails processed… Twilio has made more progress in making its entire portfolio available for healthcare use cases now that Studio and Functions are HIPAA-compliant.”
At the bottom line, Kidron says simply, “We're increasingly confident in Twilio's ability to make platform investments, engage with developers, and expand its lead over competitors during the crisis. Twilio remains a top pick.”
In line with these comments, the analyst rates TWLO an Outperform (i.e. Buy), and his $300 price target implies a 28% one-year upside potential. (To watch Kidron’s track record, click here)
Twilio holds a Strong Buy rating from the analyst consensus, based on 21 reviews including 17 Buys and just 4 Holds. Meanwhile, the average price target stands at $294.50, suggesting a 29% upside potential, and lining up nicely with Kidron’s outlook. (See Twilio’s stock analysis at 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.