Making sense of the markets these days is no easy trick. Inflation is stubbornly high, and rising. The Federal Reserve has embarked on a policy of rate hikes and monetary tightening in response, but there are serious worries that their new path is a matter of too little, too late. The war in Ukraine and further Chinese COVID-lockdowns have promised further shortages of vital commodities and products, just as supply chains were beginning to untangle themselves. It’s no wonder that the big market trend of 2022 so far has been a huge increase in volatility.
Following the insiders is one way to find stocks that are worth buying. After all, the insiders, under scrutiny from shareholders, Boards of Directors, and Federal regulators, don’t trade their own company shares lightly. But how do you know which insiders to follow? Are all insider trades made equal?
They’re not, of course. Some are simple stock adjustments, to fit shareholdings into corporate salary structures, others are related to bonus or severance compensation. But some insider trades are really worth noticing. The Insiders’ Hot Stocks tool, at TipRanks, offers the filters to sift through these trades and find those nuggets – trades that get into the millions, and are sure to raise eyebrows.
We’ve used that data to locate two stocks that have seen recent insiders trades of that impressive magnitude. They made for an interesting bunch, Buy-rated equities with plenty of upside potential, according to the analyst community. Let’s take a closer look.
We’ll start in the world of multichannel digital marketing, where Braze, a New York-based company, offers a cloud-based software package for customer engagement. The platform is scalable, with tools for data analytics and optimization, giving marketers options for retail and e-commerce, media and entertainment, customer onboarding, and improved acquisitions. In short, Braze makes it possible to connect customers with brands.
The company is no newcomer to the digital marketing world. It was founded in 2011, and has built up its niche with a loyal enterprise customer over 1,300 strong. Braze saw its users sent over 1.5 trillion messages through its platform in fiscal year 2022, and saw 64% year-over-year revenue growth to boot.
All of that helps explain the company’s eye-popping IPO. Braze went public on November 17, 2021, putting 7.5 million shares up for sale directly at an initial price of $65 each. The shares jumped up to $95 early on their first day of trading, and closed that day north of $93. The company raised more than $435 million in gross proceeds from the sale, and reached a market value of $5.9 billion. Since then, however, the shares have fallen by half, and the company’s market cap now stands at $4.38 billion.
From an investor’s perspective, however, there is still plenty of potential here. Braze has issued two quarterly reports since going public, and shown consistent year-over-year revenue growth. For fiscal 3Q22, the company showed $64 million at the top line, up 60% y/y, and for Q4 that number grew to $70.4 million, up 64% from the prior year. The company’s dollar-based net retention in fiscal Q4 reached 128%. On a cautionary note, Braze is still reporting quarterly net losses, of 16 cents per share in fiscal Q3 and 18 cents in Q4.
Turning to the insiders, we find that two Board members have made substantial buys in Braze stock in the last couple of weeks. Director Douglas Pepper made two purchases, totaling 399,718 shares, spending a total of $15 million on the stock. He was joined in this move by Matthew Jacobson, also a company Director, who made purchases of the same size, as the same price.
The insiders aren’t the only bulls here. JMP’s 5-star analyst Patrick Walravens is enthusiastic about Braze, writing: “We like Braze for several reasons, including: 1) the company is disrupting a large and growing total addressable market opportunity, estimated at ~$16B in the U.S. alone and has multiple vectors to attack that TAM; 2) Braze is built on a stream processing architecture (vs. batch processing used by most competitors) that optimizes timeliness, receiving and responding to first-party customer data as it occurs in real time; 3) the company posted 64% organic revenue growth in F4Q22, its fourth quarter of acceleration..."
It should be unsurprising, then, that Walravens rates BRZE an Outperform (i.e. Buy). Not to mention, his $75 price target puts the upside potential at ~60%. (To watch Walravens’ track record, click here)
It’s not often that the analysts all agree on a stock, so when it does happen, take note. BRZE’s Strong Buy consensus rating is based on a unanimous 12 Buys. The stock’s $68.64 average price target suggests ~46% upside from the current share price of $46.99. (See BRZE stock forecast on TipRanks)
TeraWulf, Inc. (WULF)
Next up, TeraWulf, is a bitcoin miner, one of many companies that have formed to ride the mounting crypto wave. Since the advent of cryptocurrencies, the cost of mining has increased tremendously, as the computing needs to calculate the next blockchain link increase, and increase again. Crypto mining firms bring together the resources – in capital, in computing capacity, and in energy production – to make those calculations in an economically viable way. The firms profit directly from the bitcoins mined by their operations.
TeraWulf's ‘hook’ for investors is its claim of 90% carbon-free energy to support its mining ops. Bitcoin mining is enormously energy intensive, and environmental pollution from power generation has always been a concern in the industry. TeraWulf boasts that the power needs for its two facilities, in New York State and in Pennsylvania, are almost entirely derived from carbon-free nuclear, hydro, or solar sources.
Getting to the nitty gritty, TeraWulf aims to become the largest North American crypto miner by 2025, with plans to have 800 megawatts of power capacity and more than 23 EH/s of mining capabilities up and running by the end of that year.
TeraWulf was formed in 2021, and later that year merged with IKONICS Corporation. Through that merger, TeraWulf saw the WULF ticker start trading on the NASDAQ on December 14, 2021. The shares close their first day at $20.30, and are since down by 71%. While most of that drop has come during the market volatility this year, a portion of it came in the past week; TeraWulf announced on April 12 the pricing of a new sale of stock, to raise over $20 million. Share prices were hit by fears of dilution.
At least one insider, however, bought big. Paul Prager, CEO and Board Member, made a $2.5 million purchase of 317,259 shares. This followed a buy last month, of 396,447 shares, that totaled $3.076 million.
Joining the bulls on this crypto miner, B. Riley analyst Lucas Pipes, rated 5-stars by TipRanks, sees serious potential in this stock. He writes, “While WULF is relatively early in deployment and just completed its first installations at Lake Mariner, we believe the company has an industry-leading growth profile over the next 24 months... Despite the company's impressive growth profile, favorable ESG position, and low-cost power, WULF continues to look highly discounted compared to its peer group."
To this end, Pipes gives WULF a Buy rating to go along with this bullish outlook, and quantifies it with a $24 price target to indicate potential for ~322% upside in the year head. (To watch Pipes’ track record, click here)
Some stocks slip under the radar, picking up a few analyst reviews, and this is one. Pipes is the only review on record for TeraWulf, which is currently trading at $5.83 per share. (See WULF stock forecast 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.