We recently published a list of 10 High Growth IT Stocks To Invest In Now. In this article, we are going to take a look at where Clarivate Plc (NYSE:CLVT) stands against other high growth IT stocks to invest in now.
The global IT services market is experiencing significant growth and is on track to grow at a compound annual growth rate of 9.5% from 2024 to 2030, as estimated by Grand View Research. This expansion is particularly pronounced in developing economies such as India and China, driven by the increasing adoption of cloud computing and advanced digital technologies.
Growth in this industry is driven by several factors, including increasingly stringent data privacy regulations and heightened concerns over cybersecurity, compelling enterprises to invest heavily in robust IT solutions. The widespread adoption of advanced technologies such as artificial intelligence, machine learning, and the Internet of Things has further fueled market demand. As businesses across various industries embrace digital transformation, they are turning to IT service providers to meet their evolving needs. The shift towards remote and hybrid work models has necessitated robust IT infrastructure to ensure seamless operations, especially for large enterprises. Cloud computing has emerged as a key driver of market growth, enabling businesses to migrate their critical operations to the cloud and leverage IT services to securely manage these environments. Additionally, the increasing adoption of software-as-a-service models has led to a surge in IT expenditures, as organizations seek to streamline their business processes and focus on core competencies.
Is The Tech Sector Still Booming?
On November 13, Keith Lerner, Co-Chief Investment Officer at Truist Wealth, and Mark Malek, Chief Investment Officer at Siebert Financial, appeared on CNBC and highlighted their outlook for the tech sector outlook.
Lerner expressed a continued preference for technology stocks, particularly those involved in software development. He noted that software companies are increasingly automating processes and driving efficiency across various sectors. This trend positions them well for future growth, even if there are short-term fluctuations in the market. Lerner highlighted that despite any potential pullback due to rising yields or inflation concerns, he views software stocks as having strong leadership potential.
Malek concurred with Lerner’s positive outlook on technology but emphasized a selective investment approach within this sector. He pointed out that ongoing supply chain issues are affecting the chip industry, which could impact performance in certain areas of technology. However, he maintained that significant opportunities exist within the AI ecosystem and other technology-related fields.
As the global IT services market continues to expand at an impressive pace, driven by technological advancements and increasing digital adoption, information technology stocks may be well-positioned to go higher. Given this context, we’re here with a list of 10 high growth IT stocks to invest in now.
Our Methodology
We used Finviz to compile an initial list of IT stocks with high 5-year compound annual growth rates. From that list, we narrowed our choices to 10 high-growth IT stocks that analysts were the most bullish on. The stocks are ranked in ascending order of analysts’ upside potential.
Why are we interested in the stocks that hedge funds pile into? 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).
A state-of-the-art computer lab filled with engineers working on new analytics technologies.
Clarivate Plc (NYSE:CLVT)
5 Year Revenue CAGR: 21.72%
Average Upside Potential as of November 14: 45.58%
Clarivate Plc (NYSE:CLVT) is a leading global provider of transformative intelligence. It offers a range of solutions across 3 segments: Academia & Government, Life Sciences & Healthcare, and Intellectual Property. Its products support academic research, intellectual property management, drug discovery, and regulatory compliance. It serves a diverse client base, including corporations, universities, law firms, government agencies, and other professional services organizations.
The company recently announced disappointing financial results for the third quarter of 2024. The company’s revenue declined by 3.86% to $622.20 million, primarily due to a significant decrease in transactional and other revenue. This reliance on transactional revenue has proven to be a major weakness, as it is highly susceptible to market fluctuations and economic downturns.
To address this issue, the company has outlined a comprehensive value-creation plan. This plan focuses on several key areas, such as shifting the focus to recurring revenue and prioritizing subscription-based models, which provide more predictable and stable revenue streams and reduce the reliance on volatile transactional revenue.
Additionally, the company will invest in its sales team and improve sales strategies to boost sales and customer retention. This includes better territory alignment, improved incentive plans, and enhanced customer engagement. Clarivate (NYSE:CLVT) will also be accelerating product innovation to introduce products and services that meet evolving customer needs.
As the company aims to improve its financial performance, increase revenue, and enhance profitability, it’s confident that these initiatives will position it for long-term success.
Cove Street Capital Small Cap Value Fund stated the following regarding Clarivate Plc (NYSE:CLVT) in its Q2 2024 investor letter:
“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.”
Overall, CLVT ranks 3rd on our list of high growth IT stocks to invest in now. As we acknowledge the growth potential of CLVT, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CLVT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
