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.
Aerial view of a large gold mine in South Africa with many excavators and trucks working.
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.
7. Turkcell (NYSE:TKC)
Upside Potential: 35.33%
Market Cap: $6.18 Billion
Turkcell (NYSE:TKC) is a Turkish telecommunications and technology services provider. As of 2023, Turkcell (NYSE:TKC) operates in four countries and offers mobile, fixed, and broadband services. The company has been investing heavily in 5G and other advanced technologies, positioning itself as a key player in the Turkish and regional markets.
Turkcell (NYSE:TKC) serves over 38.2 million mobile subscribers and more than 3 million fiber broadband subscribers. The company’s extensive infrastructure and broad customer base provide it with a significant competitive advantage, enabling it to capitalize on the growing demand for high-quality telecommunications services in Turkey. As the country continues to develop its digital economy, Turkcell (NYSE:TKC) is well-positioned to capture a larger share of this expanding market.
On February 29, Turkcell (NYSE:TKC) entered into several Memorandums of Understanding (MOUs) with Huawei, to advance their collaboration in three key areas. The two companies will jointly work on developing 5.5G technologies, such as Ambient IoT (Passive IoT) and RedCap (Reduced Capability), and on the creation of next-generation 5.5G networks. Their efforts will also focus on green technologies, aiming to reduce carbon footprints through energy-efficient solutions in GPON networks, the use of solar and green energy, and improvements in energy efficiency for WDM networks. Additionally, both companies will pursue innovations in artificial intelligence to develop user-centric, self-optimizing networks.
One of the core strengths of Turkcell (NYSE:TKC) lies in its ability to raise prices faster than the inflation rate, a key factor driving the company’s margin expansion. In Q1 2024, Turkcell’s mobile average revenue per user surged by 95.3% year-over-year, while fiber average revenue per user increased by 89.7%, both well ahead of Turkey’s CPI inflation rate of 66.8%. This pricing power has allowed Turkcell (NYSE:TKC) to significantly improve its EBITDA margins, which reached 41.4%, one of the highest levels in recent years. In Q1 2024, the company reported an 11.8% year-over-year increase in revenues and a 23.2% surge in EBITDA. Turkcell (NYSE:TKC) raised its full-year guidance to a low double-digit revenue growth rate, indicating confidence in its ability to continue outperforming in the coming quarters.
Turkcell (NYSE:TKC) presents a compelling investment opportunity, driven by its market leadership, pricing power, and effective management in a challenging macroeconomic environment. As the company continues to execute its margin expansion strategy, it is poised to deliver sustained earnings growth, making it an attractive buy for investors. With its ability to outperform inflation and navigate currency risks. While the Turkish Lira’s depreciation poses a risk, Turkcell (NYSE:TKC) has shown resilience through effective hedging strategies. The company has significant US dollar-denominated debt, with over $1 billion maturing in 2025. However, Turkcell’s (NYSE:TKC) proactive management of foreign exchange (FX) exposure has mitigated the impact of currency fluctuations on its balance sheet. The company remains well-positioned to navigate these challenges, and its robust cash flow generation will support debt servicing efforts.
In the second quarter, Turkcell’s (NYSE:TKC) stock was held by 5 hedge funds with stakes worth $3.15 million. Schonfeld Strategic Advisors is the largest shareholder in the company with a stake worth $2.36 million as of June 30. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $9.50, which represents a 35.33% upside potential from its current level.
6. Yalla (NYSE:YALA)
Upside Potential: 42.86%
Market Cap: $638.14 Million
Yalla (NYSE:YALA) is based in the UAE and operates a social media and gaming platform that caters primarily to users in the Middle East and North Africa (MENA) region. The company’s platform, Yalla, allows users to engage in voice chat rooms and participate in online games, making it a popular choice among young users in the region. Yalla (NYSE:YALA) has grown rapidly and positioned itself as a key player in the region’s digital landscape. Yalla (NYSE:YALA) has reported impressive growth since its inception in 2018, with revenue increasing to approximately $319 million by the end of 2023, reflecting a compound annual growth rate (CAGR) of about 50%. The company has maintained strong operating profit margins, averaging 25% over five years, and has built a net cash position of over $500 million.
In Q2, Yalla (NYSE:YALA) reported a revenue of $81.2 million, a 2.5% increase from the previous year, driven by an expanding user base and improved monetization strategies. The company saw a significant rise in Average Revenue Per User (ARPU), which climbed from $5.8 to $6.6 year-over-year. Yalla (NYSE:YALA) effectively managed its costs and expenses, which decreased by 6.8% to $51.6 million, while maintaining the stable cost of revenues at 35.7%. Selling and marketing expenses dropped by 31.4% due to a more disciplined approach to advertising, and general and administrative expenses fell by 5.5%. Operating income increased by 23.8% to $29.6 million. Additionally, the company benefited from higher interest income, which rose to $7.1 million due to increased interest rates on bank deposits. Despite a significant rise in income tax expenses, owing to the implementation of the UAE’s Corporate Tax Law, Yalla’s (NYSE:YALA) net income improved by 10.9% to $31.4 million. Overall, Yalla (NYSE:YALA) demonstrated robust financial performance, highlighting its strong revenue growth, cost efficiency, and enhanced profitability.
Yalla’s (NYSE:YALA) management expressed confidence in the company’s future outlook during the Q2 2024 earnings call. They highlighted the strong and stable performance of their flagship applications, Yalla and Yalla Ludo, in Q3 2024, with expectations that Q3 could outperform Q2. The company is focused on improving operating efficiency, as evidenced by the Yalla Ludo team’s efforts to organize offline tournaments across different cities in the MENA region, enhancing brand impact and market penetration. For the remainder of 2024, Yalla (NYSE:YALA) expects to maintain its solid performance with continued improvements in efficiency. In terms of new product development, the company is dedicating more resources to self-developed mid-core games, with three such games currently in the pipeline. Testing is expected to begin by the end of the year, with further iterations based on user feedback before large-scale promotions are initiated.
The MENA social media market is projected to grow from $41 billion in 2024 to $59 billion by 2029. Despite this promising outlook, challenges such as competition from global giants such as Meta, TikTok, Snapchat, and LinkedIn, add pressure to its growth prospects. Yalla (NYSE:YALA) is actively exploring new monetization strategies, including premium membership models and advertising. The company’s ability to introduce innovative features and services that resonate with its users will further enhance its revenue-generating capabilities. Additionally, Yalla’s large and growing user base presents an attractive opportunity for advertisers looking to target the MENA region. Yalla (NYSE:YALA) is also exploring opportunities outside the Middle East, with a focus on markets like South America, though the Middle East remains their primary market due to their strong competitive advantages there. Additionally, the company is committed to repurchasing shares and is open to exploring new initiatives that align with its core businesses and the MENA culture.
Yalla (NYSE:YALA) has the potential to form strategic partnerships with telecom operators, media companies, and other digital platforms in the MENA region. Such alliances could enhance its distribution network, improve user acquisition, and lead to co-branded offerings. Yalla (NYSE:YALA) deep understanding of the cultural and linguistic nuances of the MENA region gives it a competitive edge. The company tailors its platforms to suit local preferences, making them more appealing to the target audience. Yalla (NYSE:YALA) is well-positioned to continue its growth trajectory, driven by its leadership in the MENA region, strong financial performance, diversified product offerings, and strategic focus on cultural adaptation. With expanding monetization opportunities and the potential for strategic partnerships, Yalla presents a compelling investment opportunity for those looking to tap into the digital transformation of the MENA region.
Yalla (NYSE:YALA) is trading 5.56 times its earnings, which is a 58.40% discount compared to the sector median of 13.37. In the second quarter, Yalla’s (NYSE:YALA) stock was held by 4 hedge funds with stakes worth $4.12 million. Renaissance Technologies is the largest shareholder in the company with a stake worth $2.16 million as of June 30. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $5.70, which represents a 42.86% upside potential from its current level.
5. NICE (NASDAQ:NICE)
Upside Potential: 45.90%
Market Cap: $11.47 Billion
NICE (NASDAQ:NICE) is a global enterprise software company headquartered in Israel. The company specializes in cloud-based analytics, artificial intelligence (AI), and customer engagement solutions. The company focuses on two main areas: Customer Engagement and Financial Crime and Compliance. In the Customer Engagement segment, NNICE (NASDAQ:NICE) offers a wide range of products that enhance customer experience through advanced analytics, AI, and automation, serving industries such as telecommunications, finance, healthcare, and retail. In the Financial Crime and Compliance sector, NICE (NASDAQ:NICE) provides tools and software that help organizations detect and prevent financial crimes, such as fraud and money laundering. NICE (NASDAQ:NICE) is recognized as a market leader in both areas and has a strong global presence, serving customers in over 150 countries.
NICE’s (NASDAQ:NICE) has a robust financial position and has consistently grown its revenue and expanded its gross margins, particularly in its cloud segment, which accounts for 71% of total revenue. In Q1, NICE’s (NASDAQ:NICE) revenue increased 15% year-on-year to $659.3 million. Cloud revenue saw an impressive growth of 27%, reaching $468.4 million. Operating income for the quarter was $199.8 million, marking a 22% increase from the previous year, while the operating margin improved to 30.3% from 28.6% last year. For Q2, NICE (NASDAQ:NICE) anticipates total revenues to range between $657 million and $667 million, which would represent a 14% year-over-year growth at the midpoint. For the full year 2024, NICE forecasts total revenues between $2.71 to $2.73 bllion, reflecting a 15% growth at the midpoint compared to 2023. Additionally, the company has raised its full-year EPS guidance to a range of $10.53 to $10.73, projecting a 21% year-over-year growth at the midpoint, however, the company does not currently pay a dividend.
NICE’s (NASDAQ:NICE) CXone platform is emerging as a powerhouse in the customer engagement industry. CXone offers a comprehensive suite of AI-driven solutions that enhance employee performance and deliver personalized customer experiences. CXone has ability to manage 100 million customer interactions per month, its scale, and data advantage are a significant barrier to entry for competitors.
Vulcan Value Partners stated the following regarding NICE Ltd. (NASDAQ:NICE) in its Q2 2024 investor letter:
“There was one material detractor: NICE Ltd. (NASDAQ:NICE). NICE is a global enterprise software company that provides mission-critical contact center software. NICE was a material contributor last quarter. As we said last quarter, the company continues to perform well, and fundamentals are strong. Cloud revenue has grown in line with our expectations. We believe that generative AI will continue to drive cloud adoption and that AI is an opportunity rather than a threat to NICE’s business. As the leading platform in the space, the company has many competitive advantages that position them well to win. Cloud penetration is in the low 20% range today and AI will likely accelerate cloud adoption, which should benefit NICE. We believe that this growth will more than offset any seat count attrition due to automation. Furthermore, data and customer examples show AI is driving higher levels of revenue per customer and that AI specific product adoption is increasing rapidly. We followed our discipline and added to our position during the quarter.”
Parnassus Value Equity Fund stated the following regarding NICE Ltd. (NASDAQ:NICE) in its first quarter 2024 investor letter:
“During the quarter, we added new positions in Pfizer, NICE Ltd. (NASDAQ:NICE) and Charter Communications. NICE is a leading cloud contact center software company. We believe its customers will increasingly adopt AI-enabled customer experience software, driving double-digit revenue growth. NICE has a strong moat with leadership in contact center software. Its stock was significantly down from its 2021 peak due to softening demand post-pandemic. However, the stock has sizable upside potential as enterprises continue to embrace AI and cloud-based solutions.”
NICE (NASDAQ:NICE) is poised for continued success as it leverages its leadership in AI and cloud technologies to dominate the CX and financial crime compliance markets. With an estimated 80% of the CX market yet to migrate to the cloud, the company’s growth trajectory makes it a compelling investment opportunity for those seeking exposure to the future of customer engagement and compliance solutions.
NICE (NASDAQ:NICE) is trading 16.28 times its earnings, which is a 30% discount compared to the sector median of 23.47. The company’s earnings are expected to grow by 20% this year. In the second quarter, NICE’s (NASDAQ:NICE) stock was held by 29 hedge funds with stakes worth $742.72 million. RGM Capital is the largest shareholder in the company with a stake worth $180.75 million as of June 30. The stock is trading at $181.58 as of August 28. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $264.93, which represents a 45.90% upside potential from its current level.
4. Taboola.com (NASDAQ:TBLA)
Upside Potential: 57.37%
Market Cap: $1.17 Billion
Taboola.com (NASDAQ:TBLA) was founded in Israel and is a global leader in content discovery and native advertising. The company’s platform connects advertisers with a vast audience through personalized content recommendations on top publisher websites. Taboola.com (NASDAQ:TBLA) has 600 million daily active users and strategic long-term contracts with tech giants such as Apple and Yahoo.
Taboola.com (NASDAQ:TBLA) operates an AI-driven recommendation engine that powers personalized content recommendations across the open web, outside major platforms like Meta and Google. This model has proven successful in driving user engagement and monetization, making Taboola.com (NASDAQ:TBLA) a critical player in the digital advertising sector. The company’s revenue is primarily derived from advertisers who pay for user engagement, such as clicks or conversions, on ads placed through Taboola.com’s (NASDAQ:TBLA) platform.
On July 16, Taboola.com (NASDAQ:TBLA) entered an exclusive agreement with Apple, to integrate native advertising into Apple News and Apple Stocks apps. This agreement has strengthened Taboola.com’s (NASDAQ:TBLA) standing in the digital advertising space and has positioned the company as an authorized advertising reseller for Apple. Native advertising, which involves creating ads that seamlessly blend with the content on the platform, will now be featured within the feeds and articles of select publishers on these Apple apps.
Earlier in 2023, Taboola.com (NASDAQ:TBLA) scored a 30-year agreement with Yahoo, which helped the company to access Yahoo’s vast digital properties, which collectively attract nearly 900 million monthly active users across various platforms, including Yahoo Mail, Sports, Finance, and News. This deal allows Taboola.com (NASDAQ:TBLA) to leverage its extensive network of over 9,000 publisher partners and 500 million active users daily to offer brands unparalleled scale in reaching consumers within Yahoo’s trusted editorial environments.
The 30-year partnership with Yahoo could support Taboola.com (NASDAQ:TBLA) to generate over $1 billion in annual revenue. The company’s expansion into premium digital assets through Taboola Select, including platforms like Apple News and Microsoft properties, further strengthens its market position. These partnerships not only diversify Taboola’s revenue streams but also enhance its ability to attract high-profile advertisers looking to reach premium audiences. Despite its strong business model and strategic partnerships, Taboola.com’s (NASDAQ:TBLA) stock is currently undervalued, trading 10.40 times its earnings, which is a 22% discount compared to the sector median of 13.37.
In the year 2023, Taboola.com (TBLA) generated a revenue of $1.43 billion up 13% from the previous year, and EBITDA stood at $98.7 million. The company’s forecast for 2024 includes revenue growth of 33%, with an expected Adjusted EBITDA of over $200 million. This outlook suggests a significant upside potential, especially as the company integrates its new partnerships and expands its reach. In the second quarter,Taboola.com’s (TBLA) stock was held by 31 hedge funds with stakes worth $41.29 million. Lakewood Capital Management is the largest shareholder in the company with a stake worth $4.9 million as of June 30. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $5.50, which represents a 57.37% upside potential from its current level.
3. Mobileye Global (NASDAQ:MBLY)
Upside Potential: 75.90%
Market Cap: $1.38 Billion
Mobileye Global (NASDAQ:MBLY) is headquartered in Israel and specializes in advanced driver-assistance systems (ADAS) and autonomous driving technologies. Mobileye Global (NASDAQ:MBLY) is majority-owned by Intel. Mobileye Global’s (NASDAQ:MBLY) vision-based systems are integrated into millions of vehicles by more than 50 automotive manufacturers such as Ford Motor, General Motors, Honda, Nissan, BMW, Audi, and Volkswagen which enhance safety and driving efficiency.
In Q2, Mobileye Global’s (NASDAQ:MBLY) revenue increased 84% quarter-over-quarter to $439 million. However, the company faced pressure due to a lowered full-year outlook, now expected to be under $1.7 billion versus previous consensus estimates of $1.83 billion. This revision is largely attributed to market softness in China, rather than company-specific issues. The company’s outlook for 2025 and beyond remains robust, with expectations of substantial volume growth from Western and Chinese OEMs, particularly with the rollout of its SuperVision and other advanced systems.
The shift towards more advanced systems will support Mobileye Global (NASDAQ:MBLY) to sell higher-priced systems. The company has identified key drivers for long-term growth in the ADAS market, and the increased adoption of its newer systems such as EyeQ6, a custom hardware and software solution specifically designed for ADAS and self-driving systems is expected to drive significant growth in average selling price, as the company fulfills its high-volume sales. Mobileye Global’s (NASDAQ:MBLY) REM (Road Experience Management) system provides real-time road information and enhances the safety and effectiveness of autonomous driving. Additionally, its RSS (Responsibility Sensitive Safety) model and True Redundancy approach provide reliable autonomous systems. While competitors focus on cost-effective, camera-only solutions Mobileye Global’s (NASDAQ:MBLY) uses radar and lidar systems which are more accurate. Despite increased competition, Mobileye Global’s (NASDAQ:MBLY) focus on higher-value solutions positions it well to capitalize on the ongoing industry trend towards more autonomous driving systems.
According to a report by Markets and Markets, the global market for Advanced Driver Assistance Systems is projected to expand from 334 million units in 2024 to 655 million units by 2030, growing at a CAGR of 11.9%. The company’s emphasis on advanced systems, combined with its growing customer base and strong market position, suggests significant upside potential.
In its first quarter investor letter Baron Fifth Avenue Growth Fund stated the following regarding Mobileye Global (NASDAQ:MBLY):
“We also modestly increased our positions in The Trade Desk and Mobileye Global Inc. (NASDAQ:MBLY). The assisted and autonomous driving solution provider, Mobileye, experienced significant stock price volatility as a result of reporting weak quarterly results on the back of an inventory build-up, which led the company to reduce near-term shipments materially, resetting expectations for 2024. Despite the near-term cyclical correction, we don’t believe the issues are structural, and we are more focused on the continued adoption of Mobileye’s advanced programs such as Supervision, which would increasingly become the key growth driver for the business.”
In the second quarter, Mobileye Global’s (NASDAQ:MBLY) stock was held by 28 hedge funds with stakes worth $455.40 million. The stock is trading at $13.90 as of August 28. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $24.45, which represents a 75.90% upside potential from its current level.
2. DRDGOLD (NYSE:DRD)
Upside Potential: 82.14%
Market Cap: $731.87 Million
DRDGOLD (NYSE:DRD) is a prominent gold mining company headquartered in Johannesburg, South Africa. The company specializes in the extraction of gold from surface tailings within the Witwatersrand Basin in Gauteng, South Africa. DRDGOLD’s (NYSE:DRD) operations are divided into two main segments: the Ergo segment, which is responsible for approximately 60% of the company’s total mineral reserves and 75% of its total mineral resources, and the Far West Gold Recoveries (FWGR) segment. DRDGOLD (NYSE:DRD) holds approximately 5.8 million ounces of gold in mineral reserves and about 9.6 million ounces in mineral resources.
In the first half of 2024, DRDGOLD (NYSE:DRD) gold production declined by 6.3% year-over-year, totaling 81,888 ounces, which contributed to a 10% rise in all-in costs, reaching $1,575 per ounce, which is considered high for the sector. However, strong gold prices helped improve the company’s operating margin to 30.2%, and earnings increased by 10.1% to $30.8 million.
The lower production was mainly due to delays in commissioning two high-volume sites, which were expected to replace recently depleted ones. These delays were caused by community issues and slow regulatory approvals, but the problems were resolved in January. As a result, there is optimism that gold production in the second half of FY24 could reach around 90,000 ounces, with all-in costs likely decreasing below $1,500 per ounce due to economies of scale and reduced energy costs from the solar plant. Despite challenges, DRDGOLD (NYSE:DRD) has a good chance of meeting the lower end of its FY24 production guidance of 165,000 to 175,000 ounces.
DRDGOLD (NYSE:DRD) remains debt-free, but cash and cash equivalents decreased to $80 million by the end of December 2023. This decline was primarily due to a 177.5% increase in capital expenditures to $56.2 million and a rise in trade and other receivables by $22.9 million. Looking ahead, DRDGOLD (NYSE:DRD) is expected to continue benefiting from the favorable gold price environment, which is anticipated to remain elevated, with projections from Citi and Goldman Sachs suggesting potential peaks of $3,000/oz and $2,600/oz, respectively, in the coming months.
DRDGOLD (NYSE:DRD) is implementing strategic expansions at its Ergo and Far West Gold Recoveries (FWGR) segments. The commissioning of new feeders at the Ergo plant has already set the stage for improved production, while ongoing projects, such as the construction of a 60 MW solar project and the expansion of processing capacity at Driefontein Plant, further strengthen DRDGOLD’s (NYSE:DRD) growth prospects.
DRDGOLD’s (NYSE:DRD) commitment to reinvest in capital infrastructure with approximately $193.2 million underscores its focus on long-term sustainability and growth. DRDGOLD (NYSE:DRD) is well-positioned to navigate any operational challenges while continuing to capitalize on the robust gold market. This combination of strategic investments, operational efficiency, and favorable gold prices makes DRDGOLD (NYSE:DRD) a compelling investment opportunity for those seeking exposure to the gold sector.
DRDGOLD (NYSE:DRD) is trading 11.01 times its earnings, which is a 30% discount compared to the sector median of 15.85. In the second quarter, DRDGOLD (NYSE:DRD) stock was held by 7 hedge funds with stakes worth $10.55 million. Renaissance Technologies is the largest shareholder in the company with a stake worth $6.90 million as of June 30. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $15.50, which represents an 82.14% upside potential from its current level.
1. Harmony Gold Mining (NYSE:HMY)
Upside Potential: 92.52%
Market Cap: $6.33 Billion
Harmony Gold Mining (NYSE:HMY) is one of the largest gold mining companies in South Africa by production. Almost all of its gold mine assets are located in South Africa, which contributes to 90% of its total gold output. However, the company also has gold and copper assets in Papua New Guinea, and Australia. The company focuses on assets where it believes it can acquire the highest mineral grades to maintain strong operating margins.
Harmony Gold Mining’s (NYSE:HMY) gold production has shown impressive stability over the past three years. At the start of the financial year 2024, the management had projected that its production would remain stable as compared to the previous year. However, the company significantly exceeded expectations, as the gold production increased by 12% year-over-year in the first half of FY24, reaching 832,000 ounces. This remarkable performance was driven by an 11% increase in recovered grades from its underground gold mines. The strong production momentum continued into the third quarter and the management raised its full-year production target to 1.55 million ounces, surpassing the initial expectation of 1.38 million to 1.47 million ounces. In the latest operational update released on August 26, Harmony Gold announced that it will achieve a full-year production volume of 1.56 million ounces, marking a 6% increase year-over-year, with recovered grades also up 6% to 6.11 g/t.
Gold prices reached an all-time high of $2,531.70 per ounce on August 27, driven by strong demand and favorable market conditions. J.P. Morgan Research forecasts that gold will maintain a stable price of $2,500 per ounce by the end of 2024 and rise to $2,600 per ounce in the first half of 2025. Harmony Gold is exceptionally well-positioned to capitalize on the upward trend in gold prices. This leverage, combined with stronger-than-expected production growth from its core underground assets, sets Harmony Gold apart from its competitors.
Harmony Gold Mining (NYSE:HMY) is trading 11.11 times its earnings, which is a 31% discount compared to the sector median of 16.10. The company’s earnings are expected to grow by 68.61% this year. In the second quarter, Harmony Gold Mining’s (NYSE:HMY) stock was held by 17 hedge funds with stakes worth $171.88 million. Kopernik Global Investors is the largest shareholder in the company with a stake worth $26.90 million as of June 30. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $10.30, which represents a 92.52% upside potential from its current level.
While we acknowledge the potential of Harmony Gold Mining (NYSE:HMY) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than the stocks on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure. None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and investors. Please subscribe to our daily free newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
