Stock Picks
April is no time to cry over lost gains and a downward swing in your portfolio as geopolitical tension affects multiple industries and sectors. Luckily this week 2 of our favorite stock pickers have identified 2 companies across growth and value investing with 1 goal in mind, long-term portfolio growth.
2 Stock Picks across in the EasyUSD Wallet:
DigitalOcean Holdings Inc (DOCN)
-Sihle Ndhlala
DigitalOcean is a DevOps, software hosting, and application development infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) provider born in the cloud.
It's seeking to carve out a niche by focusing on open-source technologies, and it's following in the footsteps of GitHub and Atlassian by emphasizing community as a key feature. Every website is, in general, housed in the cloud, and cloud companies are well-positioned to prosper as the internet expands.
Unlike cloud behemoths like Amazon Web Services and Google, DigitalOcean focuses on cloud services for start-ups and small-to-medium-sized businesses. The company's yearly addressable market is currently worth $72 billion and is predicted to grow to $145 billion by 2025.
Fundamentals
It released an excellent fourth-quarter results report for 2021, with revenue growing 37 percent year over year (YoY) to $119.7 million. The company had a solid adjusted EBITDA margin of 31.7 percent for the full year. The company also grew its total clients to 609,000, with an average revenue per user (ARPU) of $65.87, up 29% year over year.
DigitalOcean expects sales of $126–$126.5 million in the first quarter of 2022, with a full-year forecast of $564–$568 million. DigitalOcean, on the other hand, is barely profitable. The company's most recent adjusted earnings per share (EPS) was $0.10. However, this cloud platform company is expected to start making a profit in the near future, with EPS for the whole year expected to fall between $0.70 and $0.71 per share.
The company is producing outstanding achievements despite its small size. The company's free cash flow was about $30 million, up from $52.4 million in 2020. This puts the company on track to meet its 20 percent free cash flow margin target by 2024.
The big news was DOCN's authorization of a $300 million share repurchase program to offset ongoing dilution. Given that the company is cash-flowing and growing at a healthy rate, the share repurchase program makes sense.
Technical
Even though the price action on DigitalOcean is lower by 53% from its all-time high, considering the fundamental outlook, we might see higher levels targeted soon. The current sideways price consolidation could indicate a breakout from its $ 63.97 resistance and target the $ 76.78 price level before pressing higher. Short interest is at 5.47% and lower since January, while the Put-Call ratio is still at 0.78 and will be watched closely as behavior shifts occur.
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Bunge Limited (BG)
-Barry Dumas
The agriculture industry has seen an influx of investment opportunities of late, and one global agribusiness that’s on everyone’s lips is none other than Bunge Limited.
Bunge operates as an agribusiness and food company across the globe through four segments: Agribusiness, Refined, and Specialty Oils, Milling, and Sugar and Bioenergy. Its primary purpose is to connect farmers to consumers and deliver essential food, feed, and fuel to the world.
The Agribusiness segment purchases, stores, transports, processes, and sells agricultural commodities and commodity products, including oilseeds, primarily soybeans, rapeseed, canola, sunflower seeds, and grains, mainly wheat and corn, and processes oilseeds into vegetable oils and protein meals.
Bunge Limited is also part of the “big four commodity traders” known as the ABCD companies, who control around 90% of all grain trade globally and are central to the modern agri-food system. The ABCD companies are Archer Daniels Midland (ADM), Bunge, Cargill and Louis Dreyfus.
Fundamentals
Bunge released a more robust than expected fourth quarter (Q4) and full-year earnings report for 2021, beating expectations. The earnings report showed strong execution throughout the agribusiness value chain and record Q4 and full-year results across the refined and specialty oils segments.
Full-year 2021 GAAP earnings per share (EPS) of $13.64 compared to $7.71 in the prior year impressed as revenue of $16.68 billion jumped 32.3% year-over-year. The adjusted EPS was $3.49 in the fourth quarter compared to $3.05 in the prior year, and the adjusted full-year EPS was $12.93 compared to $8.30 for the previous year.
Bunge Limited’s forward guidance for the full year 2022 (FY2022) is positive and expects favorable market conditions to continue in 2022. Based on their forward projections, Bunge expects to deliver an adjusted EPS of $9.50 for the full year 2022, which, if achieved, will be the company's second-highest earnings results in its history. Take note that the outlook on the Agribusiness, full-year 2022 results are forecasted to be lower than the record 2021 period. But there could be a potential upside revision to the outlook if solid demand and tight commodity supply continue. Bunge Limited's subsequent earnings (Q1 2022) release will take place on the 27th of April 2022, before the U.S market opens.
Technical
Bunge’s price action has been on a steady uptrend since its pandemic lows and has pushed even higher since its base breakout and retest in December, which has seen the price up over 40% in 1 year. Short interest in Bunge, now at 4.12%, has nearly doubled over the last four months, which could indicate a short squeeze that could see higher prices if true.
We could also see the price action move lower to find support at the $103.42 support level or 50-day simple moving average of price as investors take profits until the next earnings release.
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Informed decisions
If investing in single stocks is not your thing, and you would rather spread your risk within a bundle or even a cost-effective exchange-traded fund (ETF), then look at these options.
The Emperor Enhanced USD Bundle's objective is to achieve capital appreciation by following a quantitative medium to long-term equity strategy investing primarily in foreign markets. Both DigitalOcean Holdings Inc and Bunge Limited are holdings in the bundle.
The Invesco DB Agriculture Fund ETF (DBA) is not for the fainthearted but gives the investor a cost-effective way to invest in the most liquid agricultural commodity futures. The ETF's top holdings include Corn, Soybeans, Sugar, Coffee, Live Cattle, Cocoa, Lean Hogs, and Wheat, to name a few.
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New to investing
and want to know more about our other stock picks?
Read: Oil and Gas - Exploring the African Continent
Sources –EasyResearch, Reuters, Bloomberg, Barchart, Koyfin, DigitalOcean Holdings Inc, Bunge Limited, Oxfam, Invesco, Emperor Asset Management.
Follow Barry Dumas
@BEEF_FINMARKETS
Barry is a market analyst with GT247, with a wealth of experience in the investment markets. Now in his tenth year in the markets, Barry "The Beef" Dumas brings a combination of technical analysis and fundamental insights to the table.