Will the collapse of Silicon Valley Bank influence policy makers to take a more lenient stance regarding its interest rate hike efforts?
Word on the Street is that it’s a possibility, but David Rubenstein isn’t so sure — the billionaire investor thinks the Fed will find a middle ground in its continued efforts to rein in inflation.
“I suspect 25 basis points is a decision to split the baby,” Rubenstein said ahead of the Federal Reserve’s meeting next week.
Whether Rubenstein is right or not, stocks have lost a great deal of value over the past year due to the effects of rising interest rates amid rising inflation. And it looks like Rubenstein — co-founder of The Carlyle Group, a private equity firm with roughly $400 billion in assets — is taking advantage of some of the market discount.
During 4Q22, Rubenstein loaded up on two names that have been subject to soundbites over the past year. Does the Street’s cadre of stock experts think they’re still worth the while? it looks like it; Both are rated as Strong Buy by analyst consensus. Let’s see the details.
Getty Images Holdings (Getty,
There’s a good chance you scroll past the first Rubenstein-backed stock deed we’ll see most days.
Getty Images is a visual content provider and has built a library of nearly 500 million assets spanning stock images, video, photography and music since the mid-90s. Through its platform, content is distributed worldwide with over 516,000 contributors and over 310 content partners working with the company. Each year, more than 160,000 news, sports and entertainment events are covered by Getty, while the company has amassed a vast archive of images from the early days of photography.
Getty Images, however, is relatively new to the public markets, having IPOd last July via a SPAC merger. It’s had a rough start to the year, with shares down 48% since going public on July 25.
Performance hasn’t been helped by its recently released disappointing fourth-quarter report. Revenue fell 3.2% year-over-year to $231.47 million, falling short of consensus estimates by $10.2 million. EPS of -0.06 missed forecasts by $0.03. The company said it was impacted by foreign exchange rates in the quarter and further currency headwinds will continue in the first half of 2023.
Still, Rubenstein must have clearly realized that the business has much to offer; During Q4, he opened a new position with the purchase of 11,902,817 shares. At the current price, these are now worth over $58 million.
That bullish 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 begun to scratch the surface of its ultimate addressable market. As the Internet evolves, we expect a huge increase in user-generated content, which will reflect Getty’s unique approach to high-quality professional content.” Access has enormous potential to benefit … We see opportunities for Getty Images to gain market share within agency, corporate and media budgets given the broad nature of the content library and the customization inherent in its membership,” Pachter wrote.
To that end, Patcher rates GETY as an Outperform (i.e., Buy), while his $6 price target suggests the stock will soar 23% more in the coming months. (To see Pacher’s track record, Click here,
Most other analysts echoed Pachter’s sentiment. 3 Buys and 1 Hold add up to a Strong Buy consensus rating. With an average price target of $6.75, the upside potential comes in at ~39%. ,Getty View Stock Forecast,
GDS Holdings (GDS,
The next stock Rubenstein took a shine to is GDS Holdings, a developer and operator of Chinese high-performance data centers.
GDS’s facilities are strategically located in major economic centers in China, where there is a concentration of demand for high-performance data center services. The company also runs data centers at downscale locations selected by its customers. Large domestic private sector and global organizations, financial institutions, large Internet firms, telecommunication carriers, IT service providers and hyperscale cloud service providers make up most of the customer base.
Given the combined effects of China’s “Zero-COVID” and government crackdown on the tech sector, shares have severely underperformed over the past year and are down ~57% over the past 12 months.
That said, those headwinds have been ironed out and the company posted solid performance in its recently released Q4 report. Net revenue increased 9.9% from the same period a year ago to $348.6 million, ahead of Street Call’s $4.62 million. Adjusted EBITDA grew 4.3% to $155.3 million and the company reported a loss per ADS of $(0.15) – beating consensus estimates of $(0.35). Looking ahead, for the full year of 2023, GDS estimates revenue to grow between approximately 6.6% and 10.7%.
As for Rubenstein’s participation, he opened a new position by buying 3,777,424 GDS shares during the quarter. These are now worth about $60 million.
Echoing Rubenstein’s belief, Truist analyst Greg Miller expects a reversal of restrictive policies in China to boost this battered stock.
“We believe GDS is well-positioned to benefit from secular tailwinds in China and its strategic expansion into Southeast Asian markets,” explained the analyst. “With China now reopening, we expect the company to see customer deployments at an accelerated pace as the year progresses in 2023 and a return to stock performance should be inevitable.”
Based on these comments, Miller rates the stock a Buy on GDS, and supports it with a price target of $50. This figure makes room for a one year increase of 219%. (To see Miller’s track record, Click here,
The rest of the Street’s expectations may not be as high, though the $34.09 average target still reflects the stock’s strong 12-month appreciation of 117%. With a consensus 5 Buy, the stock naturally enjoys a Strong Buy consensus rating. (Look GDS Stock Forecast,
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Disclaimer: The views expressed in this article are those of select analysts only. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.