One of the more intriguing tech companies many growth investors have been following of late has been Alfi (ALF). This tech company, focusing on providing interactive, intelligent software to clients seeking to optimize their advertising, has been on the move this year.
Indeed, shares of Alfi, which debuted in early May at $2.90 per share, have tripled to nearly $9 per share at the time of writing.
There appears to be significant interest in hyper-growth companies operating with a recurring revenue business model in high-growth segments. ALF stock certainly finds itself in this category. (See Alfi stock charts on TipRanks)
Let’s dive into what’s been moving ALF stock of late.
Business Model Seen as Undervalued
Investors in ALF stock certainly like the company’s AI and machine learning-oriented business model. Via proprietary algorithms, Alfi provides enterprise users with the ability to reach their consumers with hyper-targeted ads and entertainment. This has proven to be a key differentiator that partners have jumped on of late.
Uber (UBER) and Lyft (LYFT) are two of the company’s core clients. Alfi’s move to install digital advertising screens via Lenovo tablets has proven to be an intriguing pilot. In early July, the company announced it would be expanding its initial pilot to 10 markets, meaning an additional 10,000 digital advertising screens between these two competitors.
Utilizing advertising during customer rides to generate incremental revenue is not a new model. However, Alfi’s ability to make deals with the two largest ride-hailing companies as their preferred vendor of this technology could be a big long-term deal for investors. As well, while the current agreement is focused on specific markets in Florida, expectations are that a national rollout could be just around the corner.
Recurring revenue business models such as Alfi’s, which provide extremely high amounts of gross margin and operating leverage, as well as an improved passenger experience and revenue for the company’s partners, is a win-win-win type of scenario. Accordingly, this company has become a hot small-cap stock for growth investors to latch on to (the company’s market cap is still approximately $124 million, leaving lots of room to run from here).
These factors suggest investors believe the market is undervaluing ALF stock. With the company announcing a $2-million buyback plan in June, it appears Alfi agrees with this perspective.
Can Retail Investors Continue to Boost ALF Stock?
Aside from an otherwise intriguing business model, another reason investors have jumped on ALF stock is the company’s potential as a short-squeeze candidate. Indeed, Alfi is a company that has been highly shorted, and at a relatively low share price. These factors are reason enough for many retail investors to speculate on short-term spikes in ALF stock.
To date, it appears retail investors have been on the money in predicting such moves. The rapid share price appreciation we saw with ALF stock earlier this year suggests this is a company that could indeed see a squeeze (if it hasn’t already). The question now is whether retail investors will keep showing up for this stock, or if interest will wane over time.
What Analysts Are Saying About ALF Stock
According to TipRanks’ SmartScore tool, ALF stock has a Neutral rating, with a score of four out of 10. Blogger opinions of the stock appear to be Bullish, while TipRanks Investors’ sentiments are graded as Very Positive.
For now, it appears ALF stock is one that is likely to experience highly volatile moves. Investors seeking more stable growth may be better served looking elsewhere. However, those with a nose for stocks with significant near-term potential may want to take a look at this stock.
Disclosure: Chris MacDonald held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.