Volatile markets, an uncertain future, and certainly unsettled present have investors on edge. They want clear winners for their investments, but these days such sure winners are harder and harder to find. In the last six months, the S&P 500 may be up 3.7%, its gains have been interspersed with episodes of losses and extreme price shifts. What’s needed here, to calm investors, is a tool to find the stocks that weather today’s market environment.
TipRanks presents the Smart Score, a single number distilled from no less than 8 different factors measured and tracked by AI algorithms. The Smart Score follows such factors as analyst, blogger, and news sentiment, to see what the conventional wisdom is on a stock; hedge fund activity, insiders trades, and individual investor actions, to see what investors of all sizes are actually doing; and the technical and fundamental analysis factors that market analysts have traditionally used in rating stocks. The result is single-digit score providing a gestalt opinion of the stock at question.
We’ve dipped into the TipRanks database to find three tech stocks that have all received a ‘Perfect 10’ from the Smart Score analysis. Let’s see what makes them stand out.
Momo, Inc. (MOMO)
Coming to us from China, Momo brings a mobile app for social media and instant messaging. The app is free, but the company monetizes it in a variety of ways, but mainly through paid subscriptions for enhanced services and integrated third-party games.
The social networking app environment is a proven money maker, and Momo has proven adept at monetizing it. In the company’s last reported quarter, the Q2 report released back in August, it showed a 32% revenue growth, along with the fourth quarter in a row of 110 million-plus daily active users. Management guided toward 17% to 19% revenue growth for Q3, and in December we’ll find out if they are right.
MOMO’s perfect Smart Score is based on five of the factors: strongly positive analyst sentiment, 92% bullish blogger opinions, a 2.2 million share increase in Q2 purchases by major hedge funds, and strong technical and fundamentals.
JPMorgan’s Alex Yao, writing as part of a team, sees Momo doing well in the second half of this year. He writes, “We expect 3Q19 to be another solid quarter for Momo with revenue upside... While Momo’s growth momentum remains strong, we believe the growth potential of Momo/Tantan is not fully factored into the current share price.” Yao’s group put a $47 price target on the stock, suggesting a 40% upside in line with their bullish thesis. (To watch Yao's track record, click here)
In an October 17 report, UBS analyst Jerry Liu updated his Buy rating on MOMO shares. He wrote, “Momo has managed through recent regulatory issues with no significant long-term impact, and the most sensitive periods this year have passed. We remain positive on the stock given upside potential…” Going into some additional detail, Liu adds, “We are still positive on Momo as its shift from live streaming to dating and audio and video-based virtual gifting in newer products with smaller group settings broadens the use case, driving user, paying conversion and ARPPU improvements. Investors are focusing on the maturing live streaming market, but underestimating the value-added services opportunity.” Liu’s price target of $42 indicates a 25% upside.
Overall, Momo has a Strong Buy consensus based on 3 recent Buy ratings. As the reports here show, that consensus is likely to grow stronger in coming weeks. Shares are selling for $33.51, and the $43 average price target implies a 25% upside. (See MOMO stock analysis on TipRanks)
With Proofpoint, we are looking at one of Silicon Valley’s stalwarts. This online security company thrives on businesses’ need for secure email, along with archiving, inbound security, and data loss prevention on outbound messages. The flow of messages in and out of a system is a natural weak point in digital security, and Proofpoint offers proven solutions.
The company’s competent position in its niche underlies its perfect Smart Score. The analysts see it as a Strong Buy, the bloggers are 100% bullish (as opposed to the sector average, of 65% bullish), and the news reports on PFPT are also 100% bullish. The hedge funds made modest increases to their holdings of this stock last quarter.
All of that is good, but the technical indicators are PFPT’s best. The positive simple moving average, showing that the 20-day average is higher than the 200-day average, indicates the stock is trending upwards, while the 31% momentum shows it has gained in the last 12 months. The stock is up 37% year-to-date, another indication of upward momentum.
Top analysts are sanguine about Proofpoint’s continued performance. Steven Koenig, of Wedbush, says, in a report titled Steady as She Goes, “We see several growth drivers: a favorable competitive environment, cross-sell/upsell and traction with bundles, growing international traction, acceleration of emerging products, and the recent FedRAMP certification that could drive public sector deals.” His $140 price target indicates confidence in a 21% upside in the next 12 months. (To watch Koenig's track record, click here)
Chiming in from Deutsche Bank, Gray Powell sees the stock as attractively priced. He writes, “we are rolling forward to a 2021 target EV/FCF multiple of 27x. For comparison purposes, our target continues to equate to 33x 2020E EV/FCF on a normalized basis. These multiples are roughly in line with the average of other mid-cap software names exhibiting revenue growth in the 20%+/- range.” Powell’s $147 price target implies an upside of 27%.
Proofpoint’s Strong Buy consensus rating, mentioned briefly above, is based on 9 buys and 1 hold set in the last three months. This stock comes with a price of $115, and an average target price of $144 suggests a 23% upside. (See Proofpoint stock analysis on TipRanks)
This software company, based in New York, offers a Video Management Platform, a package that manages the premium ads in online digital videos. In short, Telaria makes money by helping customers track their monetization efforts. There is nothing in the online world that can’t be somehow turned to profit.
Telaria is the smallest of the companies on this list, with a market cap of just $347 million, and in the last eight quarters it has only reported positive EPS once, but its technical indicators are strong. The simple moving average is positive, and the stock shows 170% momentum over the past 12 months. Asset growth in that time has been 50%. Recent news sentiment on this stock is 100% bullish, as are the financial bloggers’ opinions. The hedge funds made a modest increase in their holdings of this stock.
Jason Kreyer, 5-star analyst with Craig-Hallum, sums up Momo’s prospects succinctly: “We remain encouraged by the backdrop for connected TV advertising given the volume of new programming set to hit the market in the coming months. There remains a significant delta between CTV viewership and ad dollars, which we expect will narrow over time.” His price target on this stock, $11, implies a robust upside potential of 45%. (To watch Kreyer's track record, click here)
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