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 NICE (NASDAQ:NICE) 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).
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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.
Overall NICE ranks 5th on our list of the best Middle East and Africa stocks to buy according to analysts. While we acknowledge the potential of NICE 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 NICE 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.
