In this article, we look at the 10 Best Middle East and Africa Stocks To Buy According to Analysts.
MENA’s Economic Outlook for 2024 and the Rising Interest in Private Equity and Venture Capital Investments
According to the Middle East and North Africa Economic Update report published by the IMF in April 2024, the Middle East and North Africa (MENA) region will experience modest growth of 2.7% in 2024, up from 1.9% in 2023. Both oil importers and exporters in the region are expected to grow at similar rates in 2024. The forecasted growth difference between the Gulf Cooperation Council (GCC) economies and developing oil importers (excluding Egypt) is nearly 1%. GDP per capita is expected to rise by just 1.3% in 2024, driven almost entirely by the GCC economies. The impact of ongoing conflicts has ceased economic activity, particularly in Palestine. In Gaza, economic activity has nearly dropped by 86% in the fourth quarter of 2023 compared to the same quarter in 2022. The Palestinian economy’s outlook remains highly uncertain, heavily dependent on the conflict’s progression. The disruptions in maritime transportation, particularly through the Suez Canal, affected both regional and global trade.
Over the past decade, most MENA economies have seen increases in their debt-to-GDP ratios as MENA oil importers struggle to reduce their debt-to-GDP ratios due to high oil prices. Additionally, oil importers have been unable to lower their debt-to-GDP ratios through inflation, mainly due to exchange rate fluctuations and off-budget factors, known as stock-flow adjustments, highlighting the need for greater debt transparency. On the other hand, for MENA oil exporters, periods of high GDP growth are typically associated with smaller increases in nominal debt stocks, leading to a slower rise or even a decrease in the debt-to-GDP ratio.
However, interest in private equity (PE) and venture capital (VC) has been surging in the Middle East and Africa, reflecting a notable shift in investment preferences within the region. According to recent data, provided by Preqin, in collaboration with the Dubai International Financial Centre (DIFC), approximately 65% of investors in the region are either planning to maintain or increase their exposure to private equity this year. Similarly, 56% of investors are keen to do the same with their venture capital investments. This growing interest is partly due to the region’s historical under-investment combined with an optimistic outlook on the regional economic and market conditions.
Despite challenges due to geopolitical tensions, venture capital remains a critical component of the investment ecosystem. The sector is expected to recover as it adapts to the current economic conditions. In the Middle East, investor sentiment towards VC and PE is generally positive. A significant portion of regional investors have reported that their PE and VC investments have met or exceeded expectations. Sectors such as fintech, technology, healthcare, and infrastructure are particularly attractive to investors.
The Middle East and North Africa region is poised for a modest economic recovery in 2024, however, geopolitical tensions and conflicts continue to pose significant challenges. As MENA economies navigate through fluctuating global conditions and regional disruptions, the interest of private equity and venture capital investors reveals the region’s promising outlook for investors and economic stakeholders. With that in context let’s take a look at the 10 best Middle East and Africa stocks to buy according to analysts.
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Our Methodology
For this article, we used Finviz and Yahoo Finance stock screeners plus online rankings to compile an initial list of the 40 largest companies in the Middle East and Africa by market cap. From that list, we narrowed our choices to the 10 stocks that analysts see the most upside to. The list is sorted in ascending order of analysts’ average upside potential, as of August 23. We also included the market cap of the companies as of August 23. The list is sorted in ascending order of their average upside potential as of August 23.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Middle East and Africa Stocks To Buy According to Analysts
10. InMode (NASDAQ:INMD)
Upside Potential: 33.50%
Market Cap: $1.32 Billion
InMode (NASDAQ:INMD) is an Israeli company that specializes in developing, manufacturing, and marketing advanced medical technologies. The company focuses on creating and providing platforms that utilize radio-frequency (RF) technology. The company has 10 patented technologies that are designed to enhance minimally invasive procedures and improve existing surgical techniques across various medical fields. InMode’s (NASDAQ:INMD) technologies are used by professionals in specialties such as plastic surgery, gynecology, dermatology, ENT (ear, nose, and throat), and ophthalmology. The company’s products enable doctors to perform procedures with greater precision, reduced recovery times, and less invasiveness compared to traditional surgical methods. This positions InMode (NASDAQ:INMD) to tap into a large and growing market for medical devices that cater to both cosmetic and functional surgical needs.
InMode (NASDAQ:INMD) faced some challenges recently, as the company’s stock was negatively impacted by the attack on Israel and concerns about increased seasonality affecting its revenues and earnings. Despite these setbacks, InMode (NASDAQ:INMD) remains a strong investment due to its innovative aesthetic treatments that utilize cutting-edge radio-frequency technology. The company’s significant growth trajectory is supported by its advanced treatments, which outperform competitors. InMode (NASDAQ:INMD) is also well-regarded for its technological leadership, robust balance sheet, and impressive gross margins exceeding 80%. Its current valuation, with a forward EV-to-EBITDA multiple of 6, reinforces its potential as a promising investment. In its fourth quarter 2023 investor letter, Wasatch Micro Cap Value Strategy stated the following regarding InMode (NASDAQ:INMD):
“InMode Ltd. (NASDAQ:INMD) was also a detractor. This Israeli company develops aesthetic treatments for the face, body and skin. The treatments harness novel radio-frequency technology. Inmode has experienced extremely strong growth, which we think will continue because the company’s treatments are very effective and far ahead of the competition. During the quarter, however, the stock was down due to the attack on Israel and a forecast of increased seasonality in Inmode’s revenues and earnings. Nevertheless, we still like Inmode based on its technological edge, strong balance sheet, gross margins in excess of 80% and a valuation of a 6 multiple based on forward EV-to-EBITDA.”
In Q2, InMode (NASDAQ:INMD) reported that its revenue decreased 36.5% year over year to $86.4 million, and pro forma revenue reached $102.6 million, which includes pre-orders of new platforms that have not yet been delivered. The company achieved a gross margin of 81%, and a pro forma gross margin of 82%. Sales outside the U.S. contributed $40.9 million, representing 47% of total revenue, which is a 17% decline compared to Q2 2023. Minimally invasive technology platforms accounted for 87% of total revenues during this period. Operating expenses decreased by 11% year-over-year to $51 million, with sales and marketing expenses reducing to $45.1 million, largely due to a revenue shortfall. The company holds $729.2 million in cash, marketable securities, and deposits as of June 30, 2024, and generated $42.1 million from operating activities in the quarter. InMode (NASDAQ:INMD) completed a share repurchase program, acquiring 8.37 million shares at an average price of $17.97 per share. In the year 2024, InMode (NASDAQ:INMD) expects revenue between $430 million and $440 million, a reduction from the previous guidance of $485 million to $495 million. The gross margin is expected to remain stable, ranging between 82% and 84%, consistent with earlier projections. However, income from operations has been revised from $150 million to $155 million, down from the previous forecast of $169 million to $174 million. Similarly, earnings per share are now anticipated to be between $1.92 and $1.96, compared to the earlier guidance of $2.01 to $2.05.
On Jul 17, InMode (NASDAQ:INMD) secured an additional FDA 510(k) clearance for its Morpheus8 technology, marking it as the first fractional radiofrequency microneedling device approved for soft tissue contraction. This new clearance allows the Morpheus8 Applicators to be used in dermatologic procedures requiring soft tissue coagulation or hemostasis, thereby broadening the technology’s applications. Alongside this, InMode (NASDAQ:INMD) has introduced the IgniteRF and OptimasMAX platforms, which incorporate the Morpheus8 handpieces and support a variety of treatments including minimally invasive radiofrequency and intense pulsed light skin treatments. These developments are poised to significantly benefit InMode’s (NASDAQ:INMD) earnings by increasing the adoption of Morpheus8 among medical professionals and expanding its patient base. The enhanced product offerings and expanded indications are expected to drive additional revenue through higher sales of Morpheus8 devices and treatments. Moreover, with over 2.5 million procedures performed globally and high consumer demand, these advancements reinforce InMode’s (NASDAQ:INMD) position as a market leader, potentially boosting its market share and overall financial performance.
InMode (NASDAQ:INMD) is employing a multifaceted strategy to boost its sales. The company is prioritizing the sale of its new systems, particularly the Optimus Max and IgniteRF platforms, which offer advanced technology and user-friendly features. These systems are designed to complement existing platforms such as BodyTite, FaceTite, and NeckTite, which provide doctors with a comprehensive suite of tools for various treatments. Additionally, InMode (NASDAQ:INMD) is implementing selective trade-in programs for customers who have fully paid off their previous systems, encouraging them to upgrade to the Optimus Max while still focusing on new system sales. The company is also expanding its international sales efforts, experiencing growth in markets outside the U.S., and leveraging a large sales team and distributor network across 96 countries. To protect its market share, InMode (NASDAQ:INMD) is actively combating the spread of counterfeit products, particularly Chinese copies of popular systems like Morpheus8, through legal actions. Moreover, the company is committed to continued innovation, developing and promoting new features and technologies that set their products apart from competitors, such as the enhanced energy levels and advanced software of the Optimus Max, which are expected to drive increased demand.
InMode (NASDAQ:INMD) is trading 7.91 times its earnings, which is a 60.74% discount compared to the sector median of 20.14. In the second quarter, InMode’s (NASDAQ:INMD) stock was held by 14 hedge funds with stakes worth $117.68 million. Renaissance Technologies is the largest shareholder in the company with a stake worth $37.72 million as of June 30. The stock is trading at $15.73 as of August 28. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $21, which represents a 33.5% upside potential from its current level.
9. Oddity Tech (NASDAQ:ODD)
Upside Potential: 33.65%
Market Cap: $2.10 Billion
Oddity Tech (NASDAQ:ODD) is an Israeli beauty and wellness company that leverages data science and AI to offer personalized beauty solutions. Through its innovative digital platforms, the company serves approximately 50 million users worldwide and is disrupting the traditional market in the beauty and wellness sectors. This innovation not only differentiates Oddity Tech (NASDAQ:ODD) from its competitors but also makes it a pioneer and provides a significant competitive advantage.
In Q2, Oddity Tech (NASDAQ:ODD) achieved a revenue of $193 million, marking a 27% year-over-year increase. Additionally, the company reported a record adjusted EBITDA of $62 million, reflecting a 49% year-over-year growth. The net income for the quarter reached a record $45 million, up 52% from the previous year, while the adjusted net income soared by 58% to $51 million. The company’s strong financial performance was further highlighted by its record first-half net operating cash flow of $105 million and free cash flow of $104 million. Adjusted EBITDA is now projected to be approximately $60 million, significantly higher than the previous guidance of $53-56 million. This increase reflects ODDITY Tech’s (NASDAQ:ODD) operational efficiency and ability to capitalize on its market opportunities. Additionally, the adjusted diluted EPS is expected to be around $0.69, surpassing the prior forecast of $0.61-0.64. This upward revision in earnings per share highlights the company’s strong earnings potential and its capacity to deliver value to shareholders. Oddity Tech (NASDAQ:ODD) has a total of 17 patents, out of which 7 have been granted. The acquisition of Revela, a biotech startup, has further enhanced its capabilities, particularly through the establishment of Oddity Labs, which focuses on discovering new molecules for beauty products using AI. This investment in R&D is expected to drive future growth and innovation. The company intends to acquire additional brands that will further support its growth strategy, offer diversification, and reduce risks associated by relying on its current two brands, “Il Makiage” and “SpoiledChild.
While Oddity Tech (NASDAQ:ODD) is a relatively young company, its innovative approach and strategic investments position it for long-term success. The company’s ability to generate and patent new molecules through Oddity Labs provides a sustainable competitive edge. Oddity Tech (NASDAQ:ODD) presents a compelling investment opportunity. Its innovative use of AI, strong financial performance, and potential for future growth make it an attractive stock for investors looking for long-term value. The stock appears to be undervalued, Oddity Tech (NASDAQ:ODD) is trading 17.90 times its earnings, which is a 15.89% discount compared to the sector median of 20.75. The company’s earnings are expected to grow by almost 30% this year. In the second quarter, Oddity Tech’s (NASDAQ:ODD) stock was held by 21 hedge funds with stakes worth $211.06 million. The stock is trading at $36.91 as of August 28. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $49.33, which represents a 33.65% upside potential from its current levels.
8. D-Market Electronic (NASDAQ:HEPS)
Upside Potential: 34.07%
Market Cap: $864.52 Million
D-Market Electronic (NASDAQ:HEPS) opearting as Hepsiburada.com, is a leading Turkish e-commerce platform. The company offers a wide range of products, from electronics to fashion, and operates a robust logistics network across Turkey. D-Market Electronic (NASDAQ:HEPS) is often regarded as the Amazon of Turkey and provides similar services including marketplace operations, payment solutions, and last-mile delivery. D-Market Electronic (NASDAQ:HEPS) has over 64 million members across 30 product categories. D-Market Electronic (NASDAQ:HEPS) provides goods and services through its hybrid model, which combines first-party direct sales (1P model) and a third-party marketplace (3P model) with almost 102 thousand merchants.
In Q1, D-Market Electronic (NASDAQ:HEPS) reported that its revenue increased 45% year-over-year to $344 million. This growth, presented as inflation-adjusted, highlights the company’s ability to deliver real growth despite Turkey’s challenging economic environment with nearly 70% annual inflation. The company’s gross contribution margin also saw a notable improvement, climbing to 10.5% from 9.3% in the prior year, indicating successful cost management and operational efficiency. The company achieved an EBITDA of $8.9 million in Q1 2024, a significant leap from $3.58 million in Q1 2023. D-Market Electronic (NASDAQ:HEPS) continues to expand its customer base and product offerings, driving higher engagement and loyalty. The company recorded a 22% increase in total orders, with its gross merchandise value growing by 42.5%. Despite only a modest 1.4% rise in active customers the company. The company maintained a net cash position, ending Q1 with nearly $250 million in cash and short-term investments against under $20 million in financial debt. D-Market Electronic’s (NASDAQ:HEPS) innovative wallet, Hepsipay is rapidly gaining traction and has a user base of 15.7 million. Hepsipay is well-positioned to become Turkey’s leading digital wallet. This platform not only enhances customer retention but also opens up new revenue streams through financial services.
On July 23, D-Market Electronic (NASDAQ:HEPS) announced a collaboration with Warner Bros. Discovery. As part of the collaboration, Hepsiburada.com’s Premium members will receive a subscription to BluTV, a Turkish video-on-demand service recently acquired by Warner Bros. Discovery. This partnership aims to enhance the value of Hepsiburada Premium by offering exclusive access to BluTV’s Turkish content and Warner Bros. Discovery’s international series. As of May 31, 2024, Hepsiburada Premium has 2.6 million subscribers and offers additional perks such as free delivery, cashback, discounted assembly services, and the BluTV subscription.
Turkey’s e-commerce sector is still in its early stages of digital adoption and presents a significant growth potential. D-Market Electronic’s (NASDAQ:HEPS) earnings are expected to grow by 176.65% this year. The company’s strong revenue growth, path to profitability, robust financial position, and strategic market positioning make it a standout player. While risks related to Turkey’s economic and political environment persist, the potential rewards far outweigh these challenges. In the second quarter, D-Market Electronic’s (NASDAQ:HEPS) stock was held by 7 hedge funds with stakes worth $14.50 million. Hosking Partners is the largest shareholder in the company with a stake worth $4.8 million as of June 30. The stock is trading at $2.70 as of August 28, Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $2.70, which represents a 34.07% upside potential from its current levels.
