Trading was muted this morning after rallying yesterday after news of cooling geopolitical tensions eased concerns. More broadly, markets have been driven by the prospect that the Federal Reserve is about to begin a rate-hiking campaign to combat astronomical inflation.
Technology and high-growth shares have been hit the hardest in the new year since the Federal Reserve signaled a faster-than-expected tightening schedule. As the market assimilates the central bank’s plan for the upcoming rate-hike cycle, it could be time to start looking for gems among the beaten-down growth names.
Today we’re featuring a recent IPO that was caught up in the tech sell-off before it even got a chance to spread its wings. Despite a solid balance sheet and a phenomenal growth trend, this name has suffered a substantial loss over the past few months, creating a buying opportunity for investors looking for a high growth name at a bargain price.
Despite a solid balance sheet and a phenomenal growth trend, TaskUs Inc. (TASK) has suffered substantial losses over the past few months, creating a buying opportunity for investors looking to add high growth names.
TaskUs is an outsourcing company that handles content moderation for major names like Facebook (META) and Uber (UBER). The company’s principal operations are in the Philippines, with about 19,000 employees located there and about 4,000 located in the United States.
In essence, TaskUs enables and supports the expansion of other high-growth businesses. According to CEO Bryce Maddock, the company most commonly serves companies that “realize their growth is going to be so aggressive that they can no longer do it all themselves.” TASK’s customers include Doordash (DASH), Coinbase (COIN), Netflix (NFLX), Zoom (ZM), and Autodesk (ADSK). Due to its competitive business model, TASK is well-positioned for exposure to the growing digital economy.
Despite solid performance following their June IPO, TASK’s share price has suffered due to the recent broader market rotation out of growth names. TASK saw year-over-year organic revenue growth of over 64% in the third quarter, accelerating from 57% last quarter. Plus, adjusted EBITDA margins were consistent with the previous quarter at around 24%. Management also increased its full-year 2021 revenue forecast from $705 – $709 million to $747 – $751 million, representing a year-over-year growth rate of around 57%. Nevertheless, TASK’s price is down 62% since hitting its September 23rd high of $85.49, creating a possible buying opportunity for those looking for growth potential at a bargain price.
The stock is beginning to get attention from the analyst community. All eight analysts offering recommendations currently rate the stock a Buy, with more joining the camp as TASK’s story unfolds. Most recently, Goldman Sachs’ Brian Essex initiated coverage with a Buy rating and a $77 price target, stating that he expects strong growth and margins for TaskUs this year.
If TaskUs management keeps the business on its well-established course, investors could see excellent rewards in the not too distant future. The pros on Wall Street see TASK making its way back to the $60’s before the year’s end. The 6 analysts offering a 12-month price forecast for the stock have a median target of $64, representing a 91% increase from where the stock closed on Tuesday.
Investors will be looking out for the fourth quarter and year-end results from TaskUs, slated for February 28th.
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