5 stocks to buy for 2022 ……and beyond

While it is never easy to predict and as an Analyst have faced the situation when your predictions turn out way different . Future is unpredictable but the idea as an Analyst should always to be look ahead based on the conditions now and how the base case or ideal case future scenario may evolve. I may stand corrected and may be in a situation where some of these stocks decline significantly from here . But then its all part of the learning as an Analyst and more importantly as an investor

Some common themes as I look ahead for some future stock sto invest

• Industry segment – It is important to look at companies which are in industry segments which are expected to grow significantly in future
• Company fundamentals – The performance of the company in the last 2 years (difficult) given the COVID conditions (and my performance I mean the company’s actual KPIs/ Performance and not the stock performance) matters
• Team / Founders – Some of the founders of these companies are people I have followed and respect for their achievements

Summary of the 5 Tech stocks to consider for 2022 and my logic for this

• BRPHF – Crypto play , Good revenue growth . May grow if Crypto grows
• PAR – Niche Hospitality tech play
• DOCN – Digital Ocean – Focused Cloud play – SMEs and smaller customers
• MITK – Niche Player in KYC and Financial services
• SOFI – Niche Neobank player

Galaxy Digital (GLXY.TO, BRPHF)

(as of 23/12/2021)

Price – 20.66

Market Cap – 6.735 Bn USD

Historical Revenue Growth ( 2021 ) – 1000%

Revenue growth for 2022 (Forecasted) – 80%

Main business – Galaxy Digital Holdings Ltd. is a financial service and an investment management company, which engages in the digital asset, cryptocurrency, and block chain technology sectors. It operates through the following segments: Trading, Principal Investment, Asset Management, Investment Banking, Mining, and Corporate & Other.

Pros

• Good presence in cryptocurrency investments and diversified revenue streams including venture investments and an increasing base of AUM ( Asset Under Management )

Cons

• Significant control by Founders
• Will be susceptible to crypto volatility

My personal opinion

I like Galaxy because

• Easy way to get exposed to cryptocurrency world,
• It is focussed on the institutional buyers
• Diversified fee earning potential  across asset management, prime brokerage etc.

Valuation is a bit expensive and frankly unreliable as there is no historic / reliable method to value crypto focussed platforms like this .

PAR Technology (PAR)

 (as of 23/12/2021)

 Price – 55.22

Market Cap – 1.48 Bn USD

Historical Revenue Growth ( 2020 ) – 14.1%

Revenue growth for 2022 (Forecasted) – 20%+

 Main business – PAR Technology Corp. provides software and hardware support services for the hospitality industry. It operates in the following segments

• Restaurant/Retail segment – Offers point-of-sale (POS) software, hardware, back-office software, systems, services, and integrated technical solutions to the restaurant and retail industries.
• Government segment – Provides intelligence, surveillance, and and technology mission systems support to federal agencies.

 Pros

• Experienced Management ( CEO Savneet Singh )
• Established base of 50000 restaurant locations already

Cons

• Competitive segment
• PAR has not made any significant acquisitions and may need to acquire aggressively to grow further from here

My personal opinion

I like PAE because  Hospitality industry is still underpenetrated and I believe this will be a huge segment especially as we come out from COVID . Many restaurants are not exposed to digital and hence will be looking to expand further and PAR brings the right Hardware/ Software ( Cloud ) focus for the SME F&B companies

Digital Ocean (DOCN)

 (as of 23/12/2021)

Price – 81.26

Market Cap – 8.85 Bn USD

Historical Revenue Growth ( 2020 ) – 25%

Revenue growth for 2022 (Forecasted) – 40%+

Main business –

Digital Ocean provides cloud infrastructure including website hosting, web & mobile apps, video streaming hosting, gaming development, and cloud VPN.

Pros

• Huge market potential in providing cloud services to developers and smaller customers who may require more support than what is provided by the AWS, Google etc
• Profitable and are growing revenues significantly

Cons

• Competitive segment and the hyperscalers may get aggressive on the SME segment once the large enterprise growth diminishes
• PAR has not made any significant acquisitions and may need to acquire aggressively to grow further from here

My personal opinion

I like DOCN because of the focus on SMEs and developers which is a segment that big hyperscalers have not focussed so effectively as of now.  and the way the business seems run . Already profitable so next 2-3 years should see huge profitable growth if they keep to their strategy .

MITK

 (as of 23/12/2021)

 Price – 16.77

Market Cap – 762 Mn USD

Historical Revenue Growth ( 2020 ) – 20%

Revenue growth for 2022 (Forecasted) – 15%+

Main business –

Mitek Systems primarily engages in the innovation of mobile capture and digital identity verification solutions.

 Pros

• Has a potential in the huge market on online digital ID verification business especially in the emerging markets
• Strong revenue growth in past

Cons

• Competitive segment and the big players may get aggressive

My personal opinion

I like MITK because they have a good revenue potential and in a space which has huge potential.

SOFI

(as of 23/12/2021)

Price – 15.09

Market Cap – 12.18 Bn USD

Historical Revenue Growth ( 2020 ) – 20%

Revenue growth for 2022 (Forecasted) – 15%+

Main business –

SoFi Technologies, Inc. provides financial services.  Key offerings include  home loans, personal loans, in-school loans and a credit card. SoFi Technologies develops non-lending financial products, such as money management and investment product offerings, and leverage financial services platform to empower other businesses

Pros

• SoFi has attempted to break the mold by removing the boundaries between various financial services. It has ambitions to become a neobank, a super app for all its customers’ financial services.
• The company seems to have a good and diverse platform ecosystem of services has resulted in spectacular user growth so far, a trend that is likely to grow much bigger in the coming years.

Cons

• Competitive segment and the big players esp the well-funded Neobanks may get aggressive

My personal opinion

SOFI has declined a lot on last 2 quarters and I feel 2022 may be a year for SOFI if it focusses on its product roadmap to show aggressive growth..