Which way is the market going? After January’s pullback, February kicked off in style with all three major indexes posting strong gains in the month’s first two sessions.
It will be interesting to see what lies in store for the markets next, although drama-wise, it will be hard to match last week’s headline grabbing antics. The mainstream media couldn’t get enough of the GameStop short squeeze story, as retailers took on the hedge funds and for once beat the big guns at their own game.
Oppenheimer’s chief investment strategist John Stoltzfus believes last week’s events highlight “the democratization of financial markets via technology.”
“More than anything last week’s market action reminded us of the ubiquitous nature of technology that has allowed a relatively small group of market players to take on the hedge funds,” Stoltzfus said. “Coupled with globalization, technological innovation has challenged employment, wages, and the pricing of goods and services all the while facilitating ways in which humanity does a myriad of things at work and at play while driving methodologies once thought of as cutting edge into the dust bins of time.”
Taking all of this into consideration, we used TipRanks’ database to take a closer look at two stocks flagged by Oppenheimer analysts for their solid growth prospects.
Atlassian Corporation (TEAM)
We’ll start with a workplace software company, Atlassian, whose products are designed to streamline workplace digital operations. The Australian-based company is responsible for Jira, the well-known issue tracking app, and Confluence, a team collaboration software. Atlassian has seen demand for its products grow over the course of the ‘COVID year;’ the push to online work through telecommuting and remote offices has put a premium on quality office software.
This is clearly visible in the run of the company’s recent fiscal second quarter results. Atlassian saw its revenues grow sequentially from $459.5 million to $501.4 million, a gain of 9.1%. The year-over-year gain was even more impressive, at 22%. The company’s liquidity position is solid, too, with $180 million in free cash flow for 3QFY21, and a cash-on-hand position of $1.8 billion.
The fiscal results came along with solid customer growth during the quarter. The company added a net of 11,600 new customers to rolls, and finished the quarter with a total customer count exceeding 194,000. This includes active subscriptions and maintenance agreements.
Like most of the business world, Atlassian saw losses last winter when the corona crisis first took hold. The company quickly recovered, and for the past 12 months shows a net share appreciation of 60%.
Covering this stock for Oppenheimer is 5-star analyst Ittai Kidron. He is impressed by the company’s move from server-based products to Cloud-first, and sees the transition as a net-positive for the company. Regarding Atlassian’s investment quality, Kidron takes an unequivocally upbeat position.
“There’s no change to our thesis and bullish stance. The strong results/new customer metrics reinforce our confidence in management’s execution/strategy. And our recent cloud analysis gives us confidence in the soundness/opportunity of Atlassian’s pivot to a cloud-first business model, suggesting good room for upside as the transition unfolds,” Kidron opined.
In line with his optimistic approach, Kidron rates TEAM an Outperform (i.e. Buy), and his $350 price target implies a one-year upside of 47%. (To watch Kidron’s track record, click here)
Kidron might be Wall Street’s most prominent TEAM bull, but the business software maker hardly lacks support elsewhere. TEAM’s Moderate Buy consensus rating is based on 11 Buys and 4 Holds. These analysts anticipate shares to rise ~11% from current levels, as the $264.85 average price target indicates. (See TEAM stock analysis on TipRanks)
Tufin Software Technologies (TUFN)
Sometimes, a company can be well-positioned for the market’s changed conditions, but still need a running start before it gets going. That’s Tufin. This software company specializes in firewall management and network security – vital niches at any time, in our digital world, but even more important nowadays as remote work and telecommuting grow more prominent. Tufin’s products allow companies to automate security systems to optimize visibility and control, and keep in compliance with security standards.
The roller coaster ride of the corona year was hard on Tufin. The stock fell 57% last winter – and worse, for months afterward it just could not regain traction. In the past three months, however, Tufin has seen a strong turnaround, and the stock is up 176% since early November.
In its last reported quarter, 3Q20, Tufin showed good sequential gains even as the year-over-year numbers were flat or down. Revenues, at $25.6 million, were flat yoy but up more than 11% from Q2. Two bright spots for the quarter included maintenance and professional services where revenue increased by almost 11%, to reach $15.6 million. The company’s cash flow in the third quarter quintupled to $15.7 million.
While Tufin has had a difficult time finding its stride in the past year, Oppenheimer analyst Shaul Eyal believes that the best is ahead for this cybersecurity company.
“We believe the improved outlook is partly driven by sector trends impacting most security vendors. In addition, the COVID-19 era has seen an uptick in cyber-crime activity accelerated by the rapid rise in remote work. This uptick, along with enterprises’ cloud initiatives, should enable TUFN to maintain healthy growth,” the 5-star analyst commented.
It should come as no surprise, then, that Eyal stays with the bulls. To this end, he keeps an Outperform (i.e. Buy) ratings and $22 price target on the stock. Investors could be pocketing a gain of 21%, should this target be met in the twelve months ahead. (To watch Eyal’s track record, click here)
However, the Street does not share this optimism. Right now, TFUN stock has 4 analyst reviews on record, breaking down to 1 Buy and 3 Holds. Meanwhile, the $18.50 price target suggests a modest 2% upside from the current share price. (See TFUN 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.
