Stock Analysis & Ideas

Raymond James Bets on These 2 Stocks; Sees Over 70% Upside Potential

We see that an interesting pattern has developed in the stock market over the past few weeks. While still down year-to-date, the S&P is showing definite gains, on the order of 6%, for the past two weeks. With the usual headwinds still in play, including high inflation, a stubbornly persistent corona virus, and the Russia-Ukraine war, it’s only natural to wonder why the market has recently jumped.

Writing on the situation for Raymond James, strategist Tavis McCourt writes: “The narrative of ‘There Is No Alternative’ (TINA) likely holds true as real bond yields remain historically low. And in supply constrained economies where inflation is running hot, it is unlikely that investors will move into cash for long… The global investment outlook remains a choice between equities with pricing power and a reasonably strong earnings trend, or bonds with substantially negative real yields. So far investors have chosen equities.”

Against this backdrop, McCourt’s colleagues among the Raymond James stock analysts have picked out two stocks they see as strong gainers in the months ahead – gainers to the tune of 70% or better. We’ve looked up these stocks, using TipRanks database, to find out what makes them stand out.

Integral Ad Science (IAS)

The first stock we’ll look at is Integral Ad Science, a tech company that specialized in analyzing digital media and advertisements, ensuring that ads are viewed by real people and that targeting is contextualized, for more potent impressions. The company addresses issues of brand risk, fraud, and viewability, and evaluates the quality of various digital ad placements. IAS was founded in 2009, today is a $2.4 billion leader in digital ad tech.

Taking advantage of last year’s bullish markets, IAS went public on June 30, 2021. The company made 15 million shares available to the public at $18 each, and raised over $270 million in gross proceeds. Since the IPO, however, shares are down 25%.

While the share price is down after more than 8 months of volatile trading, IAS has seen its revenues grow steadily. The company has released three quarterly reports as a public entity, and the top line has increased from $75 million 2Q21 to $79 million 3Q21 to $102.5 million in 4Q21. The 4Q results are a 31% year-over-year increase. The gain was driven by programmatic revenue, which was up 43% year-over-year to $42.3 million in the quarter. Advertiser direct revenue grew 7% y/y, reaching $43.9 million. The company reported an earnings loss of 3 cents per share in Q4; this was an improvement from the 26-cent Q2 EPS loss and the 6-cent Q3 loss.

Earlier this month, IAS announced an expanding partnership with Facebook parent Meta. The new partnership agreement will increase IAS’s contribution of brand safety and verification services, and will take effect later this year.

Analyst Andrew Marok, in his coverage for Raymond James, lays out his belief that IAS holds a solid position for growth in coming months. He writes, “IAS is relatively insulated from a number of concerns that more directly affect SSPs and DSPs including shifts in the identity landscape (phaseouts of third-party cookies and mobile identifier availability), direct competition from walled gardens, and potential encroachments into the traditional DSP/SSP demarcation. IAS is at least unaffected by many of these headwinds, and in some cases it explicitly benefits. As a result, we see current trading prices representing an attractive entry point for investors.”

To this end, Marok rates IAS shares a Strong Buy, and his $27 price target suggests an upside potential of ~75% in the year ahead. (To watch Marok’s track record, click here)

Overall, IAS gets a Strong Buy rating from the Wall Street consensus, too, with 8 recent analyst reviews that include 7 Buys and only 1 Hold. The stock is selling for $15.44 and its $27.50 average price target indicates a 12-month upside of 78%. (See IAS stock forecast on TipRanks)

ZipRecruiter (ZIP)

The next Raymond James pick is ZipRecruiter, an online marketplace for both job seekers and employers. ZipRecruiter is headquartered in Santa Monica, California, and has additional offices in Tempe, Arizona, London, and Tel Aviv. The company uses AI algorithms to find the best matches between jobs and job seekers, and boasts that its job hunt app is the highest rated employment marketplace for both Android and iOS. The company was founded in 2010, and since that time has had over 2.8 million employers and 110 million job hunters use the service.

ZipRecruiter is another of the many companies that went public during last year’s bull market. The company entered the public markets in May, putting shares up for sale as a direct listing rather than through an IPO. While the stock has been highly volatile since then, ZIP is up 10% since going public.

The tight labor market of recent months, which has seen the economy produce some 10 million unfilled job openings even as unemployment has dropped, has produced a profitable business background for a recruitment marketplace like Zip. The company has seen revenues increase in each quarter since the direct listing, and in the last quarterly report, for 4Q21, the company showed just over $220 million at the top line, up an impressive 93% year-over-year. For the full year, revenue was up 77% y/y to $741 million. The company’s net income was positive at $21 million; income had been negative as recently as 2Q21.

At the beginning of this month, ZipRecruiter announced that the Board had authorized a $100 million share repurchase program. This was followed up on March 21 when the company made public an arrangement with Goldman Sachs for an accelerated repurchase of $50 million worth of ZIP shares. The accelerated repurchase is part of the originally authorized sum.

5-star analyst Aaron Kessler lays out a clear case for ZipRecruiter in his recent note for Raymond James, writing: “Our positive fundamental view is based on: a large recruitment TAM that is increasingly shifting online; a leadership position with strong brand recognition driving a high degree of organic traffic; unique AI-powered matching technology; our expectation for 15%-plus long-term revenue growth and 30%-plus long-term EBITDA margins.”

Given our expectation for continued near-term strength for ZipRecruiter revenues as well as an attractive valuation in our view, we reiterate our Strong Buy rating,” Kessler summed up.

Kessler’s Strong Buy rating comes with a $41 price target, which implies ~76% one-year upside potential. (To watch Kessler’s track record, click here)

ZipRecruiter has a unanimous Strong Buy rating from the consensus of Wall Street’s analysts, based on 4 recent positive reviews. The shares have an average price target of $37.50, giving ~61% upside from the current trading price of $23.31. (See ZIP stock forecast on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

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.

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