We are well into the second quarter earnings season and the results coming in show strong overall performance so far.
According to FactSet, if the S&P 500’s actual growth rate for the quarter reaches 74.2% — as it now seems likely — it will be the largest year-over-year earnings growth the index has shown since the fourth quarter of 2009.
It’s a confidence-inspiring turn of events and a somewhat surprising one, as noted by John Stoltzfus, Oppenheimer’s Chief Investment Strategist. Stoltzfus believes equities have shaken off several macro concerns to “gain their composure” and have continued to “climb the proverbial ‘Wall of Worry’ on a Q2 earnings season that has not only delivered a positive surprise thus far, but has also generated enough positive commentary from management teams to boost stock ownership sentiment among traders and investors.”
As Stoltzfus adds, it’s a “time for stocks.” So basically everyone wants to participate in a stock market promotion.
With this in mind, Oppenheimer’s analysts started looking for the stocks that were poised to make a profit in the current circumstances. And they recently tapped into two stocks that are new to the public markets and are likely to rise 50% or more in the coming months — a solid return that investors should note. We’ve gone through the two TipRanks Database to see what other Wall Street analysts have to say about them.
PLAYSTUDIOS, Inc. (MYPS)
The first company we look at, PLAYSTUDIOS, resides at the heart of the entertainment and leisure industry – it is a gaming company closely associated with the Vegas casino world and known for developing video games, stand-alone casino games, and online entertainment, including slots and role-playing games. In recent months, PLAYSTUDIOS has established partnerships with well-known Vegas names such as MGM and Peppermill.
In June of this year, PLAYSTUDIOS entered the public markets through a SPAC merger. “SPAC” refers to a special purpose acquisition company, a class of public companies created for the express purpose of attracting investors, raising capital and then executing a merger/acquisition with a target company. SPACs are usually formed with a target industry in mind, and their main activity is researching potential merger candidates. Operating in the cash-rich Vegas gaming niche, PLAYSTUDIOS was a likely target and caught the attention of Acies Acquisition. The merger was completed on June 22 and the MYPS ticker began trading without the need for an IPO.
The merger also brought $220 million in working capital to PLAYSTUDIOS, and the company deepened its wallet not long after the SPAC transaction was completed when it announced a secured credit facility, a five-year deal that provides additional liquidity for game development activities.
Since the announcement of the SPAC in February and accelerating since it went public, PLAYSTUDIOS has shifted its focus away from traditional casinos and more towards mobile RPGs and mobile casino winnings, especially slots. The company has expanded its rewards and loyalty networks and introduced a portfolio of free mobile casino games aimed at casual users.
This company has caught the attention of Oppenheimer analyst Martin Yang, which initiates its coverage with an optimistic view of PLAYSTUDIOS’ business model.
“MYPS social casino games have a proven business model, managed by a forward-thinking and experienced management team. MYPS is in the early stages of taking a share in the huge mobile games market. We believe the value proposition for mobile gamers and business partners is unique and compelling. The playAWARDS loyalty program not only delivers a superior player experience with real-world benefits, but is also on track to become a standalone loyalty-as-a-service (LaaS) product to serve third-party publishers Yang noted.
In short, Yang is quite blunt in his assessment: “We believe PLAYSTUDIOS will have sustainable growth in sales and profits as the company scales its game portfolio and rewards partners.”
In line with these comments, Yang’s price target of $11 suggests upside potential of 81% for one year, implying that the company will greatly outpace the markets in 2H21. Fittingly enough, his rating on the stock is Outperform (ie Buy). (To view Yang’s track record, click here)
Only one other analyst recently posted a review on this name that also awards a buy, giving this stock an average buy consensus rating. The shares are trading at $6.08 and their average target of $13 is even more bullish than Yang’s, indicating a potential for growth of ~114%. (See MYPS stock analysis on TipRanks)
Staying with technology, we will change our view slightly to look at an experience management company, Sprinklr. Last fall, the company received an enterprise value of $2.7 billion, making it one of the tech sector’s unicorns. The unicorns, of course, are companies valued at $1 billion or higher, a figure that reflects the interconnected strength of their business models and their ability to raise funds. Sprinklr’s business model is experience management through SaaS mode, and the platforms allow customers to unify their live chat, emails, and voice communications through an AI engine.
Like PLAYSTUDIOS above, Sprinklr recently went public, but unlike the gaming company, Sprinklr opted for a traditional IPO as a means of entry into 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 for $16, below the market range of $18-$20.
Another interesting point for investors is that Sprinklr is engaged in expansion activities. Shortly before the IPO, the company announced an enhanced partnership with European performance marketing firm Merkle. The two companies will work together to increase their activities in the Netherlands. This announcement came in the wake of April news that Sprinklr has expanded its business to include Portuguese electricity company EDP. Overall, Sprinklr is on the move to increase its exposure to European markets.
Oppenheimer’s Analyst Brian Schwartz, rated with 5 stars by TipRanks and in fact ranked #1 among all Wall Street analysts, opened his company’s coverage of Sprinklr by describing the company as a “future stock winner.”
“Sprinklr has established itself as one of the leading pure-play SaaS players in the experience management market, clearly capturing market share from managed service providers and legacy software vendors who have littered marketing and service departments at enterprise organizations with disparate solutions and/or are struggling to adapt to the next generation of SaaS architectures. Our work indicates a high level of customer satisfaction with Sprinklr’s products,” said Schwartz.
The analyst added: “Sprinklr is benefiting from real top drivers, including a growing sales force and new and deepening partnerships (Sprinklr emerges as winner of the enterprise market), recovery of COVID-affected 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.”
Therefore, Schwartz rates CXM as an outperform (ie, buy), indicating that he believes the stock will grow faster than the broader markets in the coming year. To quantify that belief, he sets a price target of $29, implying a one-year gain of ~53%. (To view Schwartz’s track record, click here)
This new stock has a Moderate Buy rating from the analyst consensus, having picked up 10 ratings since the IPO. These ratings split 6 to 4 in favor of the Buys over the Holds. Shares in CXM are selling for $18.9 and the average price target of $24.56 suggests there is room for ~30% upside potential over the next 12 months. (View CXM Stock Analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are those of the recommended analysts only. The content is for informational purposes only. It is very important to do your own analysis before making any investment.