The allure of undiscovered treasures persists in the cacophony of stock markets dominated by familiar names. The sentiment was echoed by three overlooked stocks harboring the potential for a spectacular surge. As the article explores these investments, it becomes evident that sometimes the most promising opportunities lie beyond the obvious. Like hidden gems, these companies have silently crafted their narratives, poised to rewrite the script of financial success.
In the tech-driven landscape of the first one, where identity and access management solutions meet a burgeoning international demand, we find the first glimmer of promise. Navigate through the realm of GaN technology with the second one, a story of technological triumph that stretches from mobile markets to solar and electric vehicles (EVs). Meanwhile, the third sets its sights on the future, intricately balancing growth and profitability with a Rule of 40 strategy that promises sustained success.
What ties these seemingly disparate entities together? A common thread of technological prowess. In a world where potential often masquerades as obscurity, these three companies stand as a plinth to the hidden opportunities awaiting those willing to venture beyond the confines of conventional wisdom.
Okta (OKTA)
One key metric supporting Okta’s (NASDAQ:OKTA) value potential is the growth rate of customers with an annual contract value (ACV) of $1 million or more. A growth rate of over 40% for this cohort (Q3 fiscal 2024) demonstrates Okta’s capability to attract and retain large numbers of customers. Hence, This indicates high customer satisfaction and confidence in Okta’s identity and access management solutions.
Fundamentally, the large customer segment is vital for Okta’s growth strategy. These customers support the company’s top-line growth. In this context, Okta delivered top-line growth of 21% in Q3. A vital aspect is the composition of this revenue, with subscription revenue representing 97% of the total. This high percentage of subscription revenue signifies the recurring nature of Okta’s business model since the subscription-based model leads to revenue predictability and stability.
In detail, international revenue growth at 20% is another notable financial metric. Although international revenue represents 21% of the total, the growth rate suggests a global appeal and successful expansion of Okta’s solutions beyond the domestic market. That diversification remains a strategic strength, reducing dependency on a specific geographic region.
The remaining performance obligations (RPO) or subscription backlog grew by 8%. While there is a general shortening of contract term lengths, the current RPO, representing the subscription backlog expected to be recognized as revenue over the next 12 months, grew by 16%.
Finally, gross retention rates remained strong in the mid-90% range, indicating Okta’s ability to retain customers over time. The dollar-based net retention rate for the trailing 12-month period was 115%, highlighting the growth generated from existing customers through upsell and cross-selling activities. Therefore, this growth, driven by upsell and cross-sell, highlights Okta’s capability to expand its footprint within existing customer accounts.
Navitas (NVTS)
Navitas (NASDAQ:NVTS) strategically operates in multiple target markets. The company’s growth is driven by its ability to navigate diverse industries. Navitas has attained significant strength in the mobile market, particularly in China, with major original equipment manufacturers (OEMs) such as Xiaomi (OTCMKTS:XIACY) and OPPO rapidly expanding their use of GaN in a broader range of mobile chargers. There is anticipation that around 30% of major OEMs’ total mobile charger shipments in 2024 will utilize GaN. That reflects GaN’s transition from a niche technology to mainstream adoption.
Additionally, there is a successful adoption of Navitas’ technology in Samsung’s latest Galaxy S-23, among other models. That adoption further solidifies the company’s position in the mobile sector. The Gen-4 GaN, specifically designed for higher power ranges, is expected to contribute over $10 million annually in revenue, signifying a solid market demand for advanced charging solutions.
Furthermore, the displacement technology aspect of GaN and silicon carbide, compared to legacy silicon MOSFET and IGBT, positions Navitas for growth in its customer pipeline. Despite the short-term challenges, Navitas expects its revenue growth in the solar market to surpass industry growth rates in 2024 and beyond.
In the electric vehicle (EV) market, Navitas experiences significant increases in its customer pipeline, both in onboard and roadside chargers. Completing the 6.6-kilowatt, 800-volt onboard charger platform and setting new industry benchmarks in efficiency, density and cost highlight Navitas’ focus on driving innovation in the EV space.
Lastly, there is a rapid integration of Gen-3 Fast silicon carbide devices and the new GaNSafe IC. Hence, this further demonstrates Navitas’ focus on creating high-performance solutions to capitalize on the surging demand of the EV market.
Block (SQ)
Block’s (NYSE:SQ) path to attain the Rule of 40 in 2026 may boost its market valuation. That involves balancing growth and profitability, emphasizing efficiency and disciplined expense management. To begin with, Block focuses on a long runway for continued growth. The company aims to significantly increase its market presence by launching new products, having penetrated less than 5% of its $200 billion total addressable market.
In detail, there are key initiatives for targeted efficiency. First, the implementation of an absolute cap on the number of employees, aiming to have a smaller team by the end of 2024. That constraint is expected to drive focus and efficiency across the organization. Second, implementing broad-based efforts to reduce spending across corporate overhead areas, including real estate, process improvements and discretionary spending. That reflects a commitment to cost discipline and resource optimization. The third is ongoing efforts to improve ecosystem cost structures, optimizing unit economics and partnerships by leveraging scale. Also, this involves strategic decisions to enhance the efficiency of various business units.
Looking forward, Block provides long-term targets that reflect its focus on achieving the Rule of 40 by 2026. These targets include at least mid-teen gross profit growth and an approximately mid-20% adjusted operating income margin. For reference, the midpoint of the guidance implies gross profit growth of 24% for 2023, which may result in adjusted operating income margins reaching 3%. As a result, this led to attaining a Rule of 27, suggesting a substantial margin expansion compared to 2022.
On the date of publication, Yiannis Zourmpanos did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
