Three Stocks to Watch for the Week of September 20th

Stocks ended last week lower on mixed economic data and weakness in consumer sentiment for September.  Rising prices and concerns about increasing inflation drove consumers’ pessimism.

This week we’ll hear from the Federal Reserve Open Markets Committee when it announces interest rates and monetary policy decisions on Wednesday.  Investors will be looking for clues on where the Fed thinks inflation is headed when it releases its economic projections for the year.  Additionally, a plethora of U.S. Housing data will be released throughout the week, starting with U.S. building permits and housing stats on Tuesday. 

The market may be vulnerable to some near-term setbacks to finish the month, which may bring opportunities.  Our team has a few recommendations of stocks to add to your watchlist with current conditions in mind.   

Since 2016, cloud-based education software provider PowerSchool’s (PWSC) has been helping K-12 schools and universities operate, manage and track everything from admissions, attendance, and homework and to offer online platforms, student counseling, career counseling, and teacher support.

PWSC stock has seen considerable gains since its July 28th IPO.  The company’s initial public offering raised $809 million.  After less than two months on the NYSE, PowerSchool closed Friday with a market capitalization of $6.09 billion.  PWSC shares began trading at $18, peaked as high as $35.88 (after positive feedback from the analyst community), and has since dropped to around $30.50.

The company recently reported Q2 earnings that were generally in line with consensus estimates, but its revenues indicate strong demand that is expected to continue as schools reopen, and students return to the classroom.  Revenue was up 41% year-over-year.

“The demand for our unified solutions that help accelerate learning outcomes and improve school operations is demonstrated by continued business momentum driving strong and balanced results in the second quarter,” said Hardeep Gulati, PowerSchool CEO. “We believe our unified solutions are filling that need for our customers and are helping to drive real impact within their communities. The funding environment for K-12 education remains robust. It has resulted in continued investments in technology from our school and district customers. The momentum we are seeing gives us confidence in our ability to deliver on our 2021 and 2022 plans.”

The company’s subscription revenues were up 37.5% year-over-year, showing that existing customers are sticking around and upgrading their purchase packages.  Net loss was $2.5 million compared to $12.4 million in the prior-year period, improving 79.5%.  

The software firm recently closed a high-profile deal with Miami-Dade County in Florida, underlining its value to major metropolitan school systems.  Plus, with 1.3 billion potential students to reach in international markets, the long-term prospects seem solid.

PWSC’s market-leading suite of K-12 software applications position it as a true education platform.  Although the stock has seen considerable gains since its IPO, the share price remains at an attractive level.

China’s crackdown on Bitcoin has given miners outside of China a tremendous opportunity to expand their operations by making it easier for global miners to source miners competitively and reduce the cost of producing Bitcoin.  Hut 8 Mining Corp. (HUT) has been reaping the benefits of the crackdown, as is apparent in their earnings report, which shows an increase in Bitcoin production and revenue.  

Hut 8 is one of North America’s largest innovation-focused digital asset miners, supporting open and decentralized systems since 2018.  Located in energy-rich Alberta, Canada, Hut 8 has one of the highest installed capacity rates in the industry and holds more self-mined Bitcoin than any crypto miner or publicly-traded company globally.  Hut 8 is executing its commitment to mining and holding Bitcoin and has a diversified business and revenue strategy to grow and protect shareholder value regardless of Bitcoin’s market direction. 

The Company’s multi-pronged business strategy includes profitable digital asset mining, white-label high-performance compute hosting, as well as yield & income programs leveraging its Bitcoin held in reserve.  Having demonstrated rapid growth and a stellar balance sheet, Hut 8 was the first publicly traded miner on the TSX and the first Canadian miner listed on The Nasdaq Global Select Market.

Currently, the company mines about 10.5 Bitcoin per day and has a total hash rate of 1.37 exahash per second, about 1% of the entire network’s power.  During the second quarter of 2021, Hut 8 realized yet another quarter of increased revenues, with revenues hitting a new high of 33.55 million Canadian dollars ($26.51 million) in total revenue and CA$19.14 million in mining profit.  Both are significant increases over the CA$9.23 million in revenue and CA$0.7 million in mining profit it generated in Q2 2020.   The company mined 553 bitcoin in Q2 2021, bringing its total bitcoin balance to 1,824 as of June 30, 2021.  Hut 8 also enjoyed increased bitcoin production at a lower cost thanks to China’s crackdown on bitcoin.

 Hut 8 Mining is still a top cryptocurrency stock to buy, despite a pretty hefty dilution that has caused the share price to drop more than 14% over the past two weeks. 

Casino REIT, Vici Properties (VICI) currently owns 48 million-plus square feet of real estate across 28 properties (casinos, hotels, and golf courses) in 17 markets throughout the United States, including the world-famous Caesars Palace and Harrah’s Las Vegas.

The gaming REIT boasts an industry-leading weighted average lease term of 34.2 years, more than doubling that of the next triple-net lease REIT, Essential Properties Realty Trust (EPRT), which has a weighted average lease term of 14.3 years.  This gives Vici Properties a tremendous amount of earnings stability.  And if that wasn’t enough, Vici Properties possesses a flawless 100% occupancy rate.

Vici Properties’ adjusted funds from operations (AFFO) per share surged 10.8% from $1.48 in 2019 to $1.64 in 2020.  This is during a time when many REITs saw their AFFO barely grow or even somewhat decline, which is a testament to the business models of Vici Properties and its tenants.

As the economy continues to recover from the pandemic and Vici Properties’ continues to expand its holdings, management said it believes that AFFO per share growth will ramp up even more in 2021.  Vici Properties’ recent forecast of $1.82 to $1.87 in AFFO per share for this year would equate to a blistering 11% to 14% year-over-year growth rate compared to 2020. Vici Properties recently hiked its dividend by 9.1% when it announced its acquisition of MGM Growth Properties (MGP) in a $17.2 billion deal.  With an AFFO payout ratio that will fall in the low to mid 70% range this year, investors can rely on Vici Properties’ 4.8% dividend yield. 

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