While our access to financial information is greater than it ever has been, there's a sad truth that remains the same: A few popular stocks dominate all of the headlines.
At a recent conference for Motley Fool writers, Pulitzer Prize winning columnist Steven Pearlstein mused that, "If Tesla farts," it'll be the lead story at every business news outlet.
Image source: Getty Images.
While there's nothing wrong with covering the companies everyone wants to hear about, it does mean that lots of winners could be flying under the radar. Today, three Motley Fool analysts tell you why you should be paying more attention to Axon Enterprises (NASDAQ: AAXN), Changyou.com (NASDAQ: CYOU), and SunPower (NASDAQ: SPWR).
It's about so much more than Tasers
Brian Stoffel (Axon Enterprises): For most of its life as a public company, Axon was known as TASER International. And while the company still counts on weapons sales for the bulk of its profits, investors should be paying more attention to its Evidence.com platform.
Axon's mission is "to protect life." Most of the time, that's meant replacing bullets with electric shocks. But accelerated by a wave of controversial police shootings, the company's efforts at providing body cameras for America's police force has gained steam. Earlier this year, the company said it would equip any police officer in America with a free camera and one year subscription to its Evidence.com platform for video storage.
The idea is that while the cameras themselves have no real economic moat around them, the subscriptions to Evidence.com would provide a very sticky source of revenue for Axon. It would also mean very high switching costs for police departments that wanted to migrate to another platform -- requiring massive costs, retraining of entire forces, and the potential loss of critical evidence.
As fellow Fool Travis Hoium recently pointed out, Axon's service divisioin -- which includes Evidence.com -- is growing at 161% year over year and has gross margins of 70%. That's the type of growing business you just can't ignore.
An under-the-radar video-game company
Keith Noonan (Changyou.com): It's easy to ignore a company you've never heard of, and for most American investors, that's the case with Changyou.com. The Chinese company does most of its business in the video-game industry, but it's also got a fast-growing movie advertising business that could turn into a long-term performance driver.
According to a report from Niko Partners, the Chinese games market will grow from $26 billion in 2017 to $35 billion in 2021. The report also anticipates that massive multiplayer-online games, Changyou's core competency, will increase from 78% of the market in 2016 to 84.5% of the market in 2021. The growth outlook for China's movie industry, and Changyou's cinema advertising business, by extension, is also promising.
Trading at roughly 10 times forward earnings estimates and with a price-to-earnings-growth ratio of roughly 0.2, Changyou looks like an appealing value play in the Chinese entertainment industry. It's also backed by a strong balance sheet. With a market cap of roughly $2 billion, the company holds about $800 million in cash and short-term assets net of debt. This puts its forward EV-to-EBITDA ratio at less than 6 -- another metric that points to shares being cheap at current prices.
With ongoing growth opportunities in its movie advertising business and the mobile games market expanding at a rapid clip, Changyou has big growth opportunities ahead.
The future of energy
Travis Hoium (SunPower): The stock market doesn't seem to have much love for the solar industry right now, despite the fact that it's upending traditional utilities around the world. One company that's particularly forgotten is SunPower, the high-efficiency solar panel manufacturer.
SunPower is one of the world leaders in distributed solar, projects that are installed on rooftops or near homes and businesses. Its high efficiency is more cost effective than traditional panels for these solar projects, and that's where it's put most of its sales efforts in recent years.
But SunPower isn't just a distributed solar company. It also makes a solar panel called P-Series that's constructed by shingling commodity solar cells, making it cost effective versus commodity competitors. When combined with the Oasis power block that includes trackers and inverters, SunPower can provide a turnkey solution to solar developers around the world.
One of the reasons SunPower's shares have sold off recently is uncertainty around the trade case in front of the International Trade Commission. If the ITC and, ultimately, President Trump decide to put punitive tariffs on imported solar panels, it could put SunPower at a disadvantage in the U.S. But the reality of the situation is that under tariffs, SunPower's high-efficiency panels would be in higher demand, and it still wouldn't be giving up international sales, which are a growing focus for the company long term.
Solar energy only accounts for about 1% of electricity supplied globally, yet it's the most cost-effective source of renewable energy in much of the world. With that in mind, SunPower is well positioned with the most efficient solar panels in the industry and long term that will drive tremendous value for shareholders.
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Brian Stoffel owns shares of Axon Enterprise and Tesla. Keith Noonan has no position in any of the stocks mentioned. Travis Hoium owns shares of Axon Enterprise and SunPower. The Motley Fool owns shares of and recommends Axon Enterprise and Tesla. The Motley Fool has a disclosure policy.