Technology has become an integral part of life today. Last year's stay-at-home mandates, the popularity of remote working, and increasing demand for digital transformation across almost every sector are boosting the tech industry's prospects. In addition, space tourism, cryptocurrencies, non-fungible tokens (NFTs), and the metaverse have gained mainstream attention, and the tech sector is showing signs of exuberant growth.
By 2025, there are expected to be 75 billion connected devices globally, bringing the Internet of Things (IoT) number to thrice the 2019 level. Moreover, the so-called 'Santa rally' commenced this week with the tech industry taking the lead in driving the benchmark indices to all-time highs.
The Technology Select Sector SPDR Fund (XLK) has gained 19.7% over the past six months, outperforming the broader SPDR S&P 500 ETF Trust’s (SPY) 11.6% gains over the same period. Given the backdrop, Wall Street analysts predict that tech stocks ironSource Ltd. (IS), Flywire Corporation (FLYW), and Cognyte Software Ltd. (CGNT) will rally by more than 40%. These stocks went public this year.
ironSource Ltd. (IS)
IS, which is based in Tel Aviv-Yafo, Israel, operates as a business platform for app developers and mobile operators. The company operates through two platforms–its Sonic solution suite for developing and monetizing apps, games, and content and its Aura solution suite for relevant content to enhance device usage. The company went public through a reverse merger with blank check company Thoma Bravo Advantage on June 29, 2021.
On October 25, IS announced that it had entered an agreement to acquire Bidalgo, a marketing software company. The acquisition is expected to enhance IS' portfolio of marketing-focused products and strengthen its market presence across the App economy.
On October 21, IS declared the launch of Mediation Custom Adapters that enable developers to access any network by leveraging the company's mediation tools. The product should add to the company’s revenue stream.
For its fiscal third quarter, ended September 30, IS' revenue increased 59.6% year-over-year to $140.45 million. Its non-GAAP gross profit improved 63.5% from the prior-year quarter to $124.41 million. Its non-GAAP net income and non-GAAP net income per ordinary share came in at $46.27 million and $0.04, respectively, up 76.4% and 33.3% from the same period last year.
The $0.10 consensus EPS estimate for the next year (fiscal 2022) indicates a 66.7% year-over-year increase. And the $712.06 million consensus revenue estimate for the coming year reflects a 31.8% rise from the current year.
The stock has gained 3.2% in price intraday to close yesterday's trading session at $7.80.
The 11 Wall Street analysts rating IS have rated it Buy. The 12-month median price target of $14.25 indicates an 82.7% potential upside. The price targets range from a low of $10.50 to a high of $16.00.
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Flywire Corporation (FLYW)
Boston-based FLYW is a payment-enabling software company that operates in the United States and globally. The company's platform enables payment flows across payment types, options, and multiple currencies, as well as direct connections to alternative payment methods. It went public in a traditional IPO process on May 26, 2021, on Nasdaq Global Select Market.
On December 15, FLYW announced that it had acquired WPM, a software provider that enables secure payment experiences for educational institutions in the United Kingdom. The acquisition is expected to increase FLYW's existing education payments business, expand its customer base, and bolster its market share in the education sector of the U.K.
In September, an enterprise workflow automation software provider Ontario Systems announced its partnership with FLYW to provide a digital solution for healthcare clients. The partnership might benefit the company by extending the new solution to a broader audience.
FLYW's revenue increased 61.1% year-over-year to $67.79 million in its fiscal third quarter, ended September 30. Its income from operations rose 104.8% from the same period last year to $11.10 million. Its net income and net income per share attributable to common stockholders improved 91.4% and 100%, respectively, to $9.99 million and $0.08.
Analysts expect FLYW's revenue to increase 30.5% year-over-year to $234.80 million in the next year (fiscal 2022).
FLYW's shares have gained 4% in price since it started trading on May 26 to close yesterday's trading session at $36.51. It has gained 3.2% over the past five days.
Of the five Wall Street analysts rating FLYW, four have rated it Buy, while one has rated it Hold. The 12-month median price target of $53.00 indicates a 45.2% potential upside. The price targets range from a low of $47.00 to a high of $57.00.
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Cognyte Software Ltd. (CGNT)
CGNT, which is headquartered in Herzliya Pituach, Israel, operates as a security analytics software provider to governments and enterprises worldwide. The company's offerings include an open software that fuses, analyzes, and visualizes disparate data sets for security organizations, investigative analysis, and operational intelligence analytics. Based in Herzliya, Israel, the company went public after a spin-off from Verint Systems Inc. (VRNT) on February 2, 2021.
On December 16, CGNT was named a leader in Frost & Sullivan's Frost Radar™ Digital Intelligence Solutions 2021 Report. Regarding this acknowledgment, Amit Daniel, CMO of CGNT, said, "This recognition validates our ongoing efforts to develop innovative solutions powered by artificial intelligence, machine learning, and predictive analytics to disparate big data sets at scale and generate timely, meaningful, and valuable insights from multiple sources."
For its fiscal third quarter, ended October 31, CGNT's total non-GAAP revenue increased 4.4% year-over-year to $118.72 million. Its non-GAAP gross profit improved 4.4% from the prior-year quarter to $87.49 million. And for the nine months ended October 31, the company's non-GAAP gross margin rose 2.1 percentage points to 73.3%.
The Street’s $0.89 EPS estimate for the next year (fiscal 2023) indicates an 11.2% rise from the current year. The Street’s $524.49 million revenue estimate for the coming year reflects a 9% year-over-year improvement. Also, CGNT has an impressive surprise earnings history; it has topped consensus EPS estimates in each of the trailing four quarters.
Over the past five days, the stock has gained 1.5% in price to close yesterday's trading session at $15.25.
Four out of the five Wall Street analysts rating CGNT have rated it Buy, while one has rated it Hold. The 12-month median price target of $21.75 indicates a 42.6% potential upside. The price targets range from a low of $17.00 to a high of $26.00.
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IS shares were trading at $7.69 per share on Wednesday afternoon, down $0.11 (-1.41%). Year-to-date, IS has declined -30.09%, versus a 29.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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