We recently compiled a list of the 10 Best Middle East and Africa Stocks To Buy According to Analysts. In this article, we are going to take a look at where D-Market Electronic (NASDAQ:HEPS) stands against the other Middle East and Africa stocks.

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.

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).

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.

Overall HEPS ranks 8th on our list of the best Middle East and Africa stocks to buy according to analysts. While we acknowledge the potential of HEPS as an investment, 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 HEPS 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.