7) Clarivate Plc (NYSE:CLVT)
Number of Hedge Fund Holders: 27
Share Price As On September 19: $6.97
Clarivate Plc (NYSE:CLVT) is an information service and analytics company, which serves the scientific research, intellectual property, and life sciences end-markets. The company’s Data Science team has implemented AI across the portfolio to enhance their tools and solutions. It recently announced an agreement to acquire the substantial majority of assets of MotionHall, which is a Silicon Valley tech start-up catering to the life sciences with industry-vertical AI solutions.
Clarivate Plc (NYSE:CLVT)’s shares have earlier struggled mainly because of high levels of debt as a result of M&A activity over the past couple of years. Also, the lack of sales growth together with pressures on the margins continue to make its outlook uncertain. The company’s operations were impacted mainly by leverage and capital allocation decisions. Moreover, due to macroeconomic factors and product challenges, Clarivate Plc (NYSE:CLVT)’s subscription growth in life sciences and IP segments is expected to be impacted. Apart from increased operating expenses (which might result in lower profit dollars and margin), the impact of divestitures and acquisitions (like Valipat) might weigh over its revenues and profits.
On the other hand, Wall Street believes that Clarivate Plc (NYSE:CLVT) should be aided by a positive turnaround at Derwent with expanded search capabilities. The market is quite optimistic about the launch of new products such as the Epidemiology Intelligence platform. Also, growth in annual contract value (ACV) is expected to be visible next year due to new product releases.
Clarivate Plc (NYSE:CLVT)’s focus is now on a balanced approach to capital allocation, consisting of share repurchases and M&A to drive growth. The expectations of driving profitable growth coupled with its strong ability to control costs relative to its revenue should continue to act as tailwinds for the company. The company’s customers are responding positively to its operational and product improvements, leading to improved renewal rates and new customer wins. This should result in organic growth in 2H 2024. The company is in the portfolios 27 hedge funds, as per Insider Monkey’s 2Q 2024 database.
Investment management company Cove Street Capital recently released its second quarter 2024 investor letter. Here is what the fund said:
“We also added a position in Clarivate Plc (NYSE:CLVT), a data services provider that operates across academic research, intellectual property, and life sciences. We came to the investment from cross-work in another holding, Research Solutions (ticker: RSSS). Ultimately this company sucks in data from participants in the industry, aggregates it, and provides value added services and tools back to those industry participants. The power is in providing customers access to the aggregate. This was a private equity roll-up of a bunch of different data assets that paid too little attention to product innovation, leading to a period of stagnating growth and repeatedly missing guidance. The business of selling many tools and services on a pile of fixed cost assets (data) remains tremendous as can be seen by Clarivate’s mid-to-high 30% EBITDA margins and strong returns on invested capital. With new management and board members in place and 18 months of an “investment cycle” under their belt, we view the risk/reward of CLVT to be favorable at these levels, with a strong upside case if they can reinvigorate growth to their target levels.”
