Will the Silicon Valley Bank collapse prompt policymakers to take a more lenient stance on their rate hike efforts?
Word on the street is that it’s possible, but David Rubenstein isn’t so sure – the billionaire investor believes the Fed will find a middle ground in its continued efforts to curb inflation.
“I suspect 25 basis points is the most likely split-the-baby decision,” Rubenstein said ahead of next week’s Federal Reserve meeting.
Whether Rubenstein is right or not, the impact of rising interest rates amid skyrocketing inflation over the past year has caused dozens of stocks to lose large chunks of their value. And it looks like Rubenstein — co-founder of the Carlyle Group, a private equity firm with nearly $400 billion in assets under management — has taken advantage of some market discounts.
During Q4 ’22, Rubenstein charged two names who faced a proper caning in the past year. Do The Street’s equity experts think these are worth buying now too? It looks like; both are rated strong buys by the analyst consensus. Let’s check the details.
Getty Images stocks (GETY)
There’s a good chance you’re scrolling past the work of the first Rubenstein-backed stock, which we’ll be looking at most days.
Getty Images is a visual content provider and since the mid-1990s has built a library of nearly 500 million assets spanning stock images, video, photography and music. Through its platform, content is distributed globally with over 516,000 contributors and more than 310 content partners collaborating with the company. Each year, over 160,000 news, sports and entertainment events are covered by Getty, while the company has amassed a vast archive of images dating back to the dawn of photography.
However, Getty Images is relatively new to the public markets, having gone public via a SPAC merger last July. It’s been a tough debut year, with shares down 48% since its IPO on July 25.
Performance was not helped by a disappointing Q4 report released recently. Revenue declined 3.2% year over year to $231.47 million, while falling $10.2 million behind the consensus estimate. Earnings per share of -$0.06 missed guidance of $0.03. The company said it was impacted by exchange rates during the quarter and expects to see more currency issues in the first half of 2023.
Still, Rubenstein must obviously feel that the deal has a lot to offer; in the fourth quarter he opened a new position by purchasing 11,902,817 shares. At the current price, these are now worth over $58 million.
That optimistic sentiment is echoed by Wedbush analyst Michael Pachter, who thinks the company has a “unique product offering with huge barriers to entry.”
“Getty has only just begun to scratch the surface of its eventual addressable market. As the internet evolves, we anticipate a massive increase in user-generated content, which will most likely benefit from Getty’s unique approach to high-quality professional content… We see opportunities for Getty Images to gain market share within agency, corporate and media budgets given the comprehensive nature of the content library and the customization possibilities inherent in their subscriptions,” Pachter wrote.
To that end, Pachter rates GETY stock as an Outperform (i.e., Buy), while its $6 price target suggests the stock will climb 23% in the coming months. (To see Pachter’s track record, Click here)
Most other analysts agree with Pachter’s opinion. 3 buys and 1 hold add up to a consensus rating of Strong Buy. With an average price target of $6.75, the upside potential is ~39%. (See GETY stock forecast)
GDS holdings (GDS)
The next stock Rubenstein is interested in is GDS Holdings, a developer and operator of Chinese high-performance data centers.
GDS facilities are strategically located in China’s major economic hubs, where demand for high-performance data center services is concentrated. The Company also operates data centers in lower tier locations chosen by its customers. Most of the customer base consists of large domestic private companies and global organizations, financial institutions, large internet companies, telecom providers, IT service providers and hyperscale cloud service providers.
Given the combined impact of China’s “zero-COVID” and the government’s crackdown on the tech sector, stocks have severely underperformed over the past year, falling ~57% over the past 12 months.
However, those headwinds have eased and the company has put in a solid performance in its just-released Q4 report. Net sales rose 9.9% from the same period last year to $348.6 million, ahead of Street’s call by $4.62 million. Adjusted EBITDA increased 4.3% to $155.3 million and the company posted a loss per ADS of ($0.15) — significantly beating the consensus estimate of ($0.35). Looking ahead, GDS anticipates full-year 2023 revenue growth in the range of approximately 6.6% to 10.7%.
As for Rubenstein’s exposure, he opened a new position during the quarter by purchasing 3,777,424 GDS shares. These are now worth around $60 million.
Truist analyst Greg Miller echoes Rubenstein’s optimism and expects the reversal of China’s tightening policy to boost this troubled stock.
“We continue to believe that GDS is well positioned to benefit from the secular tailwinds in China and its strategic expansion into the South East Asian markets,” stated the analyst. “With the reopening in China, we expect the company to see customer deployments at an accelerated pace throughout 2023 and a rebound in stock performance should be inevitable.”
Based on these comments, Miller has a Buy rating on GDS stock and backs it with a price target of $50. The number makes way for annual growth of a whopping 219%. (To see Miller’s track record, Click here)
The rest of the Street’s expectations may not be quite as high, although the median target of $34.09 still implies a robust 117% stock gain over 12 months. With 5 unanimous buys, the stock naturally receives a Strong Buy Consensus Rating. (See GDS Stock Forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is for informational purposes only. It is very important that you do your own analysis before making any investment.
Source : finance.yahoo.com