One key to market success is learning to recognize trends, overall directions that stocks are taking, and then riding those trends towards profitable returns. Sometimes, that task is easy; for instance, the five years from 2017 through the end of 2021 saw a prolonged run on generally increasing values. Sometimes, it’s more difficult; take a look at the charts for 2022 year-to-date and you’ll quickly see that there is no long-term direction of movement here.
CNBC’s Jim Cramer, however, believes that this year’s volatility will ease, and markets will move back toward a secular growth trend. This won’t necessarily affect all stocks – some will remain highly cyclical, and Cramer recommends avoiding those.
Cramer recommends to focus on stocks showing signs of a long-term overarching bullish trend. These are the secular growth stories, stocks that are relatively immune to economic cycles, and will likely not be impeded as the Fed move onward with interest rates hikes.
Cramer’s not alone in his conviction on secular growth. Wall Street’s analysts have picked out a number of equities that are poised to benefit from a secular shift into growth. Using the data tools at TipRanks, we’ve pulled up the details on two of these picks – each gets a Strong Buy from the Street’s analysts, and shows a hefty potential upside. Let’s take a closer look.
AvidXchange Holdings (AVDX)
We’ll start with AvidXchange. This company offers AI-automated accounts payable software and payment solutions to mid-market enterprise customers. AvidXchange boasts over 8,000 such customers, who have used the platform to transfer payments to more than 825,000 suppliers. In 2021, the company processed over 62.5 million transactions, totaling more than $180 billion.
These are remarkable totals for the Charlotte-based company. AvidXchange got its start back in 2000, and has grown steadily since then. It went public in 2021, with an IPO that saw 26.5 million shares made available to the public. The opening price, $25 per share, was above the originally expected $21 to $23, and the total shares sold was 4.5 million higher than had been forecast. In all, the IPO raised $660 million in gross proceeds.
Since going public, the company has released two sets of quarterly financial results, for Q3 and Q4 of 2021. In that time, the company recorded a revenue increase from $65.2 million to $69.3 million. Year-over-year, the Q4 number was reported to be 31% higher than 4Q20. For all of 2021, the company showed total revenues of $248.4 million, up 33% from 2020.
These revenue gains were fueled by increases in several important metrics. In Q4, the total transactions processed grew 15% year-over-year, while the payment volume grew 37%. The company registered 62.5 million transactions in 2021, up 18% from 2020, and showed an annual total payment volume of $52.1 billion, up 37% y/y.
Covering AvidXchange for equity research firm Wolfe Research, 5-star analyst Darrin Peller sees this company poised to take advantage of a business sector that has plenty of room for expansion – in short, AvidXchange is ready for a secular growth run.
“Considering commercial checks still comprise approximately 40%-50% of B2B payments among mid-market businesses, we believe AVDX is optimally positioned to participate in the long-term secular growth theme of B2B payment digitization. Substantial opportunity remains to capture incremental volume within its existing customer base, add new customers and payment rails, and expand its proprietary AvidPay network (8,000+ buyers/825,000suppliers). Despite industry high digital payment adoption rates across its supplier network, we argue there are several misunderstood nuances, leading us to believe that monetization rates and TPV captured from existing buyers are well below their potential,” Peller opined.
This, in addition to a founder-led team comprised of B2B payment and SaaS veterans, gives us conviction that AVDX will remain a LT leader in its mid-market niche,” the analyst summed up.
In line with these bullish comments, Peller rates AVDX an Outperform (i.e. Buy), and his $14 price target suggests it has room for ~76% growth in the coming year. (To watch Peller’s track record, click here)
Overall, all 8 of AVDX’s recent analyst reviews are positive, giving this stock a unanimous Strong Buy consensus rating. The stock is selling for $7.94, and its $14.25 average price target implies it has ~79% upside ahead of it. (See ADVX stock forecast on TipRanks)
The second secular growth stock we’ll look at here, Doximity, provides a physician-oriented professional networking platform and tools in the healthcare industry. Users can connect and network with their colleagues, catch up on medical news, send message via a HIPAA-secure app, and even accept video phone calls from patients. The platform works through a smartphone app, and Doximity boasts that 80% of US physicians are on the network, along with 50% of nurse practitioners and physician assistants.
Doximity went public last year in a blockbuster IPO. On June 24, the company put 23.3 million shares on the market, at $26 each, and saw its share value pop up 58% in the first day’s trading, to close at $53. The event brought in approximately $606 million in gross capital for Doximity.
Early in February, Doximity released financial results for its Q3 of fiscal year 2022 – the quarter ending this past December 31. For the quarter, the company reported net revenue retention of 171%, which supported total quarterly revenue growth of 67% year-over-year. The top line reached $97.9 million. Doximity’s non-GAAP diluted EPS came in at 29 cents per share, up from 19 cents in fiscal Q2 – which in its turn was up from 11 cents in fiscal Q1. In its first three quarterly reports as a public entity, Doximity has seen EPS grow 163%.
Leerink analyst Stephanie Davis, who recently spoke with company management on Doximity’s path forward, writes: “DOCS outlined a sustainable, multi-year shift towards digital ad spend that is fueling the company’s secular story. While the digitization of the pharma ad wallet has been many years in the making, the pandemic served as a much-needed push for the industry, with no turning back—DOCS believes the market will double in the coming decade… DOCS remains one of our top picks for the year due to this dependable growth trajectory…”
Davis uses these comments to support her Outperform (i.e. Buy) rating on the stock, while her $72 price target implies that DOCS has room to run ~39% in the next 12 months. (To watch Davis’ track record, click here)
Davis in no outlier on this stock. The Street’s analysts have put 9 reviews of DOCS on record, and those include 8 Buy against just 1 Hold – giving this tech firm its Strong Buy consensus rating. Share are priced at $51.93, and their $69 average price target suggests a one-year upside of 33%. (See DOCS stock forecast on TipRanks)
To find good ideas for secular growth stocks, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.