Stocks ticked higher this morning after snapping a multi-day losing streak yesterday. The rebound came after Fed Chairman Jerome Powell reaffirmed the central bank’s commitment to keeping inflation in check. The market seemed ready to add to yesterday’s gains in early trading this morning.
Technology and high-growth shares have taken a hit in the new year since the Federal Reserve signaled a faster-than-expected tightening schedule. Many now believe that the first interest-rate hike is coming in March. As the market assimilates the central bank’s plan for the upcoming rate-hike cycle, it could be time to start looking for gems among the beaten-down growth names.
Today we’re featuring a recent IPO that was caught up in the tech sell-off before it even got a chance to spread its wings. Despite a solid balance sheet and a phenomenal growth trend, this name has suffered a substantial loss over the past few months, creating a buying opportunity for investors looking for a high growth name at a bargain price.
TaskUs Inc. (TASK) is an outsourcing company that handles content moderation for major names like Facebook (FB) and Uber (UBER). The company’s principal operations are in the Philippines, with about 19,000 employees located there and about 4,000 located in the United States.
In essence, TaskUs enables and supports the expansion of other high-growth businesses. According to CEO Bryce Maddock, the company most commonly serves companies that “realize their growth is going to be so aggressive that they can no longer do it all themselves.” TASK’s customers include Doordash (DASH), Coinbase (COIN), Netflix (NFLX), Zoom (ZM), and Autodesk (ADSK). Due to its competitive business model, TASK is well-positioned for exposure to the growing digital economy.
Despite solid performance following their June IPO, TASK’s share price has suffered due to the recent broader market rotation out of growth names. TASK saw year-over-year organic revenue growth of over 64% in the third quarter, accelerating from 57% last quarter. Plus, adjusted EBITDA margins were consistent with last quarter at around 24%. Management also increased its full-year 2021 revenue forecast from $705 – $709 million to $747 – $751 million, representing a year-over-year growth rate of around 57%. Nevertheless, TASK’s price is down 46% since hitting its September 23rd high of $85.49, creating a possible buying opportunity for those looking for growth potential at a bargain price.
The stock is beginning to get attention from the analyst community. All eight analysts offering recommendations currently rate the stock a Buy, with more joining the camp as TASK’s story unfolds. Most recently, Goldman Sachs’ Brian Essex initiated coverage with a Buy rating and a $77 price target, stating that he expects strong growth and margins for TaskUs this year.
If TaskUs management keeps the business on its well-established course, investors could see nice rewards in the not too distant future. The pros on Wall Street see TASK making its way back to the $70s before the year’s end. The 7 analysts offering a 12-month price forecast for the stock have a median target of $71, representing a 48% increase from the last price.
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