Daily Stock Pick: March 3rd, 2022

Trading was muted this morning after markets largely shrugged off escalating tensions between Russia and Ukraine to finish the previous session green.  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. 

“We’re going to avoid adding uncertainty to what is already an extraordinarily challenging and uncertain moment,” said Fed Chairman Jerome Powell during his Capitol Hill testimony yesterday.  “To the extent that inflation comes in higher or is more persistently high than that, we would be prepared to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings,” he added.   

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 technology and high-growth shares that have been hit hard during the market rout. 

Today we’re featuring a name caught up in the recent tech sell-off.  Despite a solid balance sheet and a phenomenal growth trend, this stock 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. 

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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 Co-Founder and 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. The company recently reported full-year 2021 total revenue of $760.7 million, representing 59.1% year-over-year growth.  TASK saw year-over-year organic revenue growth of over 63% in the fourth quarter, consistent with last quarter.  Plus, adjusted EBITDA margins were consistent with the previous quarter at around 25%.   

“2021 was an incredible year for TaskUs. We reached a number of key milestones this year – we successfully completed our IPO, grew to over 40,000 teammates throughout the world, and achieved results that were well above our plan,” said Maddock.

Management said that it sees 2022 revenue at around $980 million and $1 billion, representing 30% growth and an Adjusted EBITDA margin of approximately 25%.  Nevertheless, TASK’s price is down 58% 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 nice 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. 

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. 

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