During the onset of COVID-19 in 2020-21, everybody and his uncle took to their trading apps to buy up speculative assets like there was no tomorrow. Tomorrow came, though, and the IPO bubble burst dramatically and destructively. If there’s any silver lining, it’s that depressed asset prices sometimes bring buying opportunities. Be sure to narrow your search to high-growth, high-conviction businesses, though – and there happen to be at least two Israel-focused companies with the potential to rise from the ashes and thrive in 2023.
JFrog (NASDAQ: FROG)
JFrog is a software company with operations in Israel that offers a hybrid multi-cloud platform, mostly for businesses. In late 2020, JFrog went public amid great fanfare, and the share price immediately spiked to $85.
Fast-forward to November of 2022, and FROG stock deflated like an old tire to the $23 level. Could JFrog leapfrog back to its former glory, then?
The answer is definitely yes, as the demand for cloud storage, management, and monitoring should persist well into 2023 and beyond. JFrog remains a power player in the cloud space, and the company’s cloud revenue expanded 60% year-over-year to $21 million. That’s significant, as cloud revenue represents 29% of JFrog’s total revenue.
Also, bear in mind that JFrog achieved these results despite elevated inflation, aggressive central bank policy, and the lingering threat of a global recession.
So, did JFrog’s fiscal resilience translate to profitability? The answer depends on how you measure the company’s income. GAAP-measured, JFrog disclosed a net loss of $0.24 per share for the third quarter. On the other hand, the company reported non-GAAP-measured earnings per share of $0.02 for Q3.
Hence, JFrog can claim profitability if they measure it in a certain way. Going forward, JFrog expects to generate Fiscal Year 2022 revenue between $280 million to $281 million – so just maybe, it’s time for investors to put their faith and capital into a cloud comeback story in the making.
What is the Forecast for JFrog Stock?
FROG has a Strong Buy consensus rating based on three Buys and one Hold rating assigned in the past three months. The average JFrog stock price target of $28 implies 28.03% upside potential.
Monday.com (NASDAQ: MNDY)
Israel-based Monday.com is another technology startup that had tremendous promise during the 2020-2021 IPO explosion. The company provides a cloud-based visual work operating system to help developers and organizations build work management tools and software applications.
U.S.-based investors might not even have heard of Monday.com, but this company is no joke. Believe it or not, Monday.com’s platform is used by over 152,000 customers in more than 200 countries and territories. The company’s stock rocketed from $178 to $444 in 2021, but that rally wasn’t meant to last forever.
Frankly, financial traders got ahead of themselves during that astounding share-price run-up. A pullback was both necessary and healthy, and MNDY stock’s recent pullback below $100 presents a compelling opportunity for enterprising tech startup investors.
Is Monday.com barely in survival mode now? Not at all – if anything, the software developer is beating the odds and thriving despite severe macroeconomic headwinds.
What does success look like for Monday.com? It looks like $136.9 million in third-quarter 2022 revenue, which indicates 65% year-over-year growth for Monday.com. The current quarter could also be a big winner for Monday.com, as the company projects revenue of $140 million to $142 million for Q4, representing year-over-year growth of 47% to 49%.
Turning to the company’s bottom line, we can discern a recovery story in progress, even if profitability is currently elusive. Specifically, Monday.com’s third-quarter 2022 non-GAAP operating loss totaled $2.2 million – not an ideal results, but an improvement versus the $9.4 million loss from Q3 of 2021.
Monday.com founder and co-CEO Roy Mann didn’t hesitate to tout his company’s blockbuster third quarter, and he even added an eye-opening statistic for good measure. “This quarter once again demonstrated our ability to drive growth from both new and existing customers, particularly at the enterprise level where we expanded our base to over 1,300 customers,” Mann clarified.
What is the Forecast for MNDY Stock?
MNDY has a Strong Buy consensus rating based on 13 Buys and 1 Hold rating assigned in the past three months. The average Monday.com stock price target of $153.15 implies 56.55% upside potential.
Conclusion: It’s Time to Give JFrog and Monday.com a Second Chance
Israeli tech startups are bound to have their ups and downs. As the era of IPO mania came to its inevitable close, investors can pick up the pieces and buy shares of promising businesses at discount prices. Do JFrog and Monday.com fit the bill? Check their financial and operational results, and you’ll find a couple of abandoned tech firms in rapid comeback mode. With your due diligence done, feel free to consider a moderately sized but nonetheless confident position in FROG and MNDY stocks.