As I write this early in Tuesday trading there are a whopping 70 stocks in Barchart.com's top 100 Stocks to Buy that are new entrants on the list. Normally, there aren’t nearly this many to choose from.
Examining the 70 stocks, I see two new entries whose weighted Alphas are higher than their 52-week percentage change in price. While both have interesting businesses, one is a better buy than the other.
The first is Zeta Global Holdings (ZETA) in 34th spot. Its weighted Alpha is 103.49, while its 52-week change is 93.55%. The second is NuScale Power (SMR) in 37th spot with a weighted Alpha of 100.75 and a 52-week change of 37.41%.
I’ll discuss each stock and then finish with my better buy. I’ll also consider what options plays are available as a bonus.
Here’s my two cents.
Zeta Global Holdings
The company’s omnichannel marketing platform uses AI and data analytics to help its customers acquire, grow, and retain customers. It finished Q1 2024 with 460 scaled customers -- those who spent $100,000 over the previous 12 months -- and 144 super-scaled customers who spent $1 million or more. Together, they generated quarterly revenue of $195 million, 24% higher than Q1 2023.
In 2023, its scaled customer ARPU (average revenue per user) was $1.57 million, up 10% from $1.43 million a year earlier. In Q1 2024 it was $416,000, 11% higher than a year earlier. Its super-scaled customer ARPU was $1.12 million, a decrease of 3% year-over-year.
What this tells me is that it has no problem getting customers to spend more $100,000. However, the job convincing them to spend over $1 million is much harder. If it can’t crack that nut, profits could start flowing.
On a GAAP basis, it lost just over $187 million in 2023, down from $279 million a year earlier. However, on a non-GAAP basis, its adjusted EBITDA was $92 million in 2022, $129 million last year, and is expected to be $171 million in 2024, 33% higher than in 2023.
Of the 11 analysts covering ZETA stock, all 11 rate it a Buy, with a $201.15 target price, 24% higher than where it’s currently trading.
It’s got a real shot to become a large cap.
NuScale Power
I only know about NuScale because of the little writing I’ve done in the past year about Cameco (CCJ), the world’s largest uranium producer, and an important cog in the nuclear power wheel.
Like Zeta, the provider of SMR (small modular reactor) technology spills a lot of red ink -- it lost $58.4 million in 2023 on revenue of $22.8 million and a $48.1 million loss in Q1 2024 on revenue of $1.4 million -- but its products will provide the world with a much-needed renewable energy source beyond wind and solar.
On June 17, the U.S. Department of Energy announced $900 million in funding to accelerate the deployment of next-generation light-water SMRs. That's right in NuScale’s wheelhouse.
“Nuclear power is our single largest source of carbon free electricity, directly employing nearly 60,000 jobs across the country and hundreds of thousands more indirectly. The Biden-Harris Administration’s actions to grow the nuclear energy sector represent the largest sustained push to support civil nuclear deployment in the United States in nearly five decades,” stated the DOE’s press release.
The DOE went on to say that the country will require as much as 900 GW (gigawatts) of clean energy capacity if it wants to reach its goal of zero emissions by 2050.
I don’t think there’s any question that the U.S. will not meet its 2025 goal without safer, cleaner energy, which SMRs provide. “The company’s groundbreaking SMR technology is powered by the NuScale Power Module™, a small, safe, pressurized water reactor that can each generate 77 megawatts of electricity (MWe) or 250 megawatts thermal (gross), and can be scaled to meet customer needs through an array of flexible configurations up to 924 MWe (12 modules) of output,” states NuScale’s Q1 2024 press release.
They say excellent execution is more important than a great strategy. NuScale appears to have both.
The Best Buy
I didn’t think it would be this tough a choice.
One company improves omnichannel retailers, while the other could be part of the solution to save the planet. Further, Zeta has an accumulated deficit of nearly $1 billion, about 5x NuScale.
Meanwhile, Zeta’s pathway to profitability is much closer to reality than NuScale. In 2023, NuScale's nearly $276 million operating loss was 12x its revenue. Zeta’s $168 million operating loss was one-quarter its annual revenue last year.
What a tough choice.
While I like both businesses, if you’re a risk-taker, NuScale has the greater potential for a homerun investment in 5-10 years.
A quick look at the unusual options activity for NuScale on Tuesday suggests the Aug. 16 $15 call with 52 days to expiration and a 3.3% down payment is attractive. As for a put for income, you might sell the July 19 $8 put, which provides an annualized return of 21% based on its current price of $10.97.
Given its momentum, I like both plays, and it will only cost you $35. If the share price falls to $8 in the next 8-9 weeks, you would have to buy the shares.
If it is the real deal, that wouldn’t be the worst entry point to buy NuScale stock.
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
