July 8th, 2024 | 06:45 CEST
Growth of 100% possible with stocks like Alibaba, Verve Group, Super Micro Computer, and GameStop
The NASDAQ is rushing from high to high. While it was primarily stocks with AI fantasy at the beginning of the year, there has even been a resurgence in e-mobility in recent weeks. Tesla reported surprisingly high deliveries in the second quarter, and Volkswagen bought into the startup Rivian to solve its software problems. This brings new fantasy for investors. However, with such advanced upward trends, it is important to find followers, meaning stocks that have not yet performed as well. We are therefore taking a closer look at some typical "growth stocks" as the revaluation overseas is likely not yet complete.
time to read: 5 minutes
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Author:
André Will-Laudien
ISIN:
ALIBABA GROUP HLDG LTD | KYG017191142 , VERVE GROUP SE | SE0018538068 , SUPER MICRO COMPUT.DL-_01 | US86800U1043 , GAMESTOP CORP. A | US36467W1099 , ALIBABA GR.HLDG SP.ADR 8 | US01609W1027
Table of contents:
"[...] In Canada, there is $1.75 of debt for every dollar of disposable income - and that was true even before the pandemic. [...]" Karim Nanji, CEO, Marble Financial
Author
André Will-Laudien
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
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Alibaba Group - Present daily at the World Cup, yet overlooked
In an environment of booming tech stocks, it seems strange when some stocks simply do not follow suit. The Alibaba Group, founded by the charismatic Jack Ma, is one such example. After the manager criticized the Chinese government's economic policy in an unusually harsh manner in October 2020, he has not appeared in public since. The Alibaba Group, which he built up, has increased its turnover from USD 10 billion to an astonishing USD 130 billion in the last ten years, but its share price has fallen from USD 92 to USD 72. In the meantime, however, the value was over USD 260, which is more akin to a fair valuation.
So, why the current gloom? Investors fear that an escalation of the geopolitical conflicts between the US, Russia, Taiwan, and China could lead to a de facto expropriation along the lines of Russian ADRs in the US. Growth-oriented investors, therefore, prefer to err on the safe side and buy US equities. Alibaba and its subsidiaries are present daily in the form of perimeter advertising for the European Championships in Europe, making the stock a hot topic in Germany once again. From an analytical point of view, we agree with the 41 "Buy" recommendations on the Refinitiv Eikon platform. With a P/E ratio of 9, the share is extremely undervalued. The average price expectation of the experts is USD 108.50, a premium of almost 50% on the current price of USD 74. Nevertheless, the political risk remains high.
Verve Group - The next takeover is a perfect fit
We have recently reported several times on MGI Media & Invest SE. The Annual General Meeting took place in June and the renaming to Verve Group was approved. In the last few days, the news has been pouring in. Shortly after the AGM, Verve issued 27.11 million shares in an accelerated bookbuilding process at 16.60 Swedish kronor. At the same time, both CEO Remco Westermann and CFO Paul Echt acquired shares in the range of EUR 1.68 to EUR 1.76. In addition, the CEO also participated in the aforementioned capital increase in the amount of SEK 19.92 million or around EUR 1.74 million. The family office Oaktree Capital Management was also significantly involved in the subscription. In total, the share capital increased by around 17% and gross proceeds of around SEK 450 million were raised.
Immediately after the capital measures, it was announced that Verve will acquire 100% of Jun Group from American Advantage Solutions Inc. The transaction price is reportedly EUR 170 million. Jun Group's mobile-focused business, with direct access to over 230 Fortune 500 advertisers and agencies in the US, is a perfect fit with Verve's market-leading, US-centric mobile supply-side platform. The transaction will result in a more balanced distribution model with 30% demand-side and 70% supply-side business.
With this coup, Verve is significantly expanding its market share in programmatic advertising and significantly increasing its forecast figures for 2024. Pro forma, the revenue forecast has risen from the original EUR 350 to 380 million to EUR 380 to 400 million. The estimate for adjusted EBITDA is now EUR 115 to 125 million (after EUR 100 to 110 million). In the medium term, the Company now expects revenue growth of 25 to 30% per annum with an EBITDA margin of 30 to 35%. Due to the new size, the net leverage ratio will also be reduced to 1.5 to 2.5 times EBITDA. In 2023, the Company generated revenue of EUR 322 million and adjusted EBITDA of EUR 95 million. The bar for the current year is significantly higher.
Verve achieves another milestone with the increase of the 2022 bond (maturing in 2026) by EUR 65 million. On the one hand, the debt instruments can be placed at 102.50% due to high demand, and on the other hand, the maturing 2020/24 bond is being replaced. With the new bond, Verve has significantly reduced its financing costs compared to the last bond issue. Based on this, there is a savings potential of around EUR 10 million through refinancing at better terms in the future. The new total volume of the 2022/26 bond now amounts to EUR 240 million. At the beginning of July, Alex Stil, a highly respected manager in the industry, was finally brought on board as Chief Commercial Officer. Investors are enthusiastic about the wealth of value-creating transactions and have raised the share price from EUR 1.50 to EUR 2.25 in just 4 weeks. The two research houses, GBC and First Berlin, expect price targets of EUR 6.00 and EUR 4.90, respectively, over the next 12 months. So the party is in full swing again!
Super Micro Computer - The figures continue to spiral upwards
We have often reported on Super Micro Computer (SMCI) in recent months. The sell signal below the USD 1,000 mark proved to be correct. The subsequent correction ran in line with the interim weakness of industry leader Nvidia to a low of USD 686. Due to a pronounced high-tech rally, the share price has approached the USD 1,000 mark again in the last 4 weeks, only to fall back to around USD 800 in a correction. We believe the stock should now have consolidated, especially as the benchmark Nvidia is preparing to climb to new highs. Fundamentally, SMCI expects revenue to increase by a good 100% to USD 14.9 billion in 2024, with net profit rising to around USD 1.37 billion. With a price increase of over 300%, SMCI shares are the best value in the S&P 500 so far in 2024. 12 out of 17 analysts are still urging investors to buy, while the average price target on the Refinitiv Eikon platform has fallen from USD 1,040 to USD 1,018 in the last 3 weeks. Due to its high volatility, we believe the stock is only suitable for risk-conscious investors.
GameStop - The meme rally is fading
In a small side note, we would like to briefly comment on GameStop. "Roaring Kitty", aka US investor Keith Gill, is under investigation for alleged share price manipulation, which could negatively impact sentiment among "meme traders" in the short term. Immediate recommendations are currently not to be expected, and given a valuation with 2x expected revenue for 2024 and non-existent profitability, the GME share price could falter significantly. However, the gaming retailer now has more than USD 1 billion in cash following various capital increases. There is, therefore, no threat of insolvency in the short term. In April, the share was still at around USD 10; in June, the ups and downs fluctuated between USD 47 and USD 18. Those who shy away from heat and dramatic fluctuations should stay away.
Sell in May and go away" was the wrong stock market adage this year. Since May, the NASDAQ has been on the rise, gaining a full 10% so far. Understandably, not everyone has been able to keep pace. Anyone who bet on MGI Media & Games Invest shares in May will now find the stock in their portfolio under the name Verve Group with a 40% gain.
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