For my entry into InvestorPlace’s Best Stocks for 2021 contest, I submitted a “sleeper” pick back in late December that shocked a lot of my colleagues: micro-cap influencer marketing software provider IZEA (NASDAQ:IZEA). But this sleeper pick has turned into one of the contest’s biggest winners so far. At this moment, IZEA stock currently holds the No. 2 spot in the Best Stocks for 2021 contest, with a jaw-dropping year-to-date gain of 109% (it’s only been three months).
So, what’s behind the huge surge in IZEA in 2021?
Accelerating business volume, sparked by a rapid shift among enterprises toward digitally native influencer marketing in a world where consumers are becoming increasingly distrustful of ads.
More importantly, though, will this huge surge in IZEA Worldwide continue for the rest of the year?
In short: Yes.
The company’s underlying business volume will continue to accelerate. More importantly, the best part of the company’s growth narrative — its newly launched Shake marketplace for influencers — has yet to show up to the party.
Once that new platform gains serious traction in the back half of 2021, IZEA’s stock could see a turbo-charged rally.
With all of that in mind, let’s dive in and take a closer look at IZEA.
IZEA Stock Is in for Huge Gains in 2021
As I said before, shares of IZEA Worldwide are up 109% YTD. That’s a huge gain. For reference, the index that IZEA belongs to — the Nasdaq — is up just 4.5% over the same period.
What’s behind the huge rally? Huge growth.
Over the past three months, the company has signed multiple new contracts and contract extensions in its Managed Services business — where IZEA runs influencer marketing campaigns for customers. These contract wins are not small. In one of them, the U.S. military essentially doubled the size of its first contract with IZEA from back in November 2020.
All this new business is driving huge growth. In the fourth quarter of 2020, IZEA reported a 47% increase year-over-year in Managed Services bookings. In the first quarter of 2021, that growth rate surged to over 100%.
So, in effect, IZEA’s business is doubling YOY now — and its growth trajectory is accelerating.
That’s impressive. It speaks to the reality that companies of all shapes and sizes are more seriously pursuing influencer marketing campaigns as consumer trust models increasingly shift from “I trust what this ad is saying” to “I trust what this person is saying”. It also speaks to the reality that most companies have no idea what they’re doing in the influencer marketing world, and therefore, need a third-party like IZEA to effectively run their influencer marketing campaigns.
More To Come for IZEA
The aforementioned consumer trust model shift from ads to people is a secular trend with a multi-year runway. As such, over the next several years, more and more companies will increase their influencer marketing spend, while spend on IZEA’s Managed Services business will continue to surge.
Of course, throughout the balance of 2021, IZEA’s Managed Services business will also benefit from a rebound in ad spending as the economy normalizes and consumer spending and activity rebound.
All of that durable growth should sustain the currently rally in IZEA’s stock.
However, the big upside will come from Shake. IZEA launched Shake in late 2020 as a marketplace for influencers. In short, influencers list their “talents” on Shake, and brands browse through the marketplace to contract influencers for their campaigns.
Sure, Shake has yet to turn into a meaningful part of IZEA’s business. But the potential upside therein is enormous. Indeed, the key to IZEA Worldwide’s stock soaring from below $5, to $10 or higher, relies squarely on the shoulders of Shake.
Management is just now starting to implement initiatives to grow Shake’s platform awareness. Over the past month, Shake has added both Clubhouse support and Twitter Spaces support, while also rolling out a 45-day campaign called the Parade of Stars, wherein IZEA will be unveiling a new influencer on Shake each business day through the end of April in order to bolster and highlight the talent on Shake.
I suspect these initiatives will result in meaningful Shake adoption by the midway point of 2021, and that this platform will start to turn into a “big deal” by the second half of year. When it does, that could be the catalyst which sparks an even bigger rally in IZEA. A double-digit stock price is not out of the question by year end.
Bottom Line on IZEA Stock
IZEA Worldwide remains my top small-cap stock pick for 2021. It’s already up 109% YTD, and one of the best performing stock in the Best Stocks for 2021 contest. But, with Shake catalysts on the horizon, I think IZEA stock’s big 2021 rally is just getting started.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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