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 Oddity Tech (NASDAQ:ODD) 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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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.
Overall ODD ranks 9th on our list of the best Middle East and Africa stocks to buy according to analysts. While we acknowledge the potential of ODD 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 ODD 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.
