We recently compiled a list of the 10 Best Up and Coming Stocks To Buy According to Analysts. In this article, we are going to take a look at where Concentrix Corp. (NASDAQ:CNXC) stands against the other up and coming stocks.
Donald Trump’s victory in the recent presidential election is expected to encourage companies that have been hesitant to pursue IPOs in 2025, capitalizing on the positive market reaction and anticipated deregulation. Following the election, the Russell 2000 Index rose to near a three-year high, while the S&P 500 reached record levels, creating a favorable environment for risk-taking among investors. Nearly $40 billion has been raised through IPOs this year, marking a 64% increase from 2023, although still below pre-pandemic averages. The pro-cryptocurrency stance of Trump may also influence the market, with expectations of increased activity in crypto-related IPOs if regulatory conditions improve. While an immediate surge in IPOs is unlikely due to a limited number of companies ready to file, there is optimism for a larger set of IPOs next year as companies seek to raise capital and insiders look for liquidity.
Generally, there’s also a noticeable disconnect between the tech IPO market and the broader IPO landscape, with many firms opting to remain private longer due to the growth of private credit as an alternative funding source. However, optimism exists that public markets will regain attractiveness as valuations rise and investor demand for public offerings increases. On October 24, Ashley MacNeill of Vista Equity Partners appeared on CNBC to shed light on the then-current stagnant state of the IPO market. We covered this in detail in our 10 Best IPO Stocks To Buy Heading into 2025 article, here’s an excerpt from it:
“MacNeill emphasized that for the IPO asset class to function effectively, 3 key conditions must align: a stable macroeconomic environment, investor willingness to deploy capital, and companies’ ability to communicate their earnings forecasts…
Despite the prevailing sentiment of a strong economy and record highs in the stock market, the IPO market remains stagnant. MacNeill suggested that this disconnect may stem from a bifurcation between the tech IPO market and the broader IPO market… MacNeill noted that this trend has contributed to the delay in the IPO market’s return to normalcy. However, she remains optimistic about the evolution of IPOs, suggesting that public markets will regain their appeal as high valuations and investor demand for public offerings increase.”
Additionally, expectations for M&A activity are on the rise, fueled by renewed investor eagerness. Mitch Berlin, vice chair of strategy and transactions at EY Americas, joined CNBC’s ‘The Exchange’ on November 22 to discuss what he sees for M&A activity in 2025. He noted that while there is a general sense of optimism, it is essential to differentiate between private equity and corporate growth. Berlin anticipates a 16% increase in private equity activity and an 8% increase in corporate transactions, driven largely by pent-up demand and significant capital reserves available for investment. This growth is also influenced by maturing assets that private equity firms are eager to leverage.
Looking ahead, Berlin speculated on potential headlines for early 2025, predicting larger deals primarily within the tech sector, fueled by advancements in AI. He also highlighted the continued importance of oil and gas in M&A, albeit from a value rather than volume perspective. Life sciences companies are expected to utilize their cash-rich balance sheets to make strategic acquisitions aimed at replenishing their research and development pipelines. Furthermore, he expressed optimism that regulatory hurdles from the Federal Trade Commission (FTC) and Department of Justice (DOJ) would become less of a barrier, allowing for smoother deal approvals.
Addressing concerns about interest rates, Berlin reassured that the current environment would not hinder deal-making. He expects interest rates to decrease further in 2025, which could stimulate more activity. Many deals are being funded through cash on hand, and private credit continues to be a significant source of financing, with three-quarters of deals this year being supported by such credit.
Berlin’s insights reflect a robust outlook for both private equity and corporate M&A activity as firms adapt to changing market conditions. As firms adapt to the changing market, investors should stay alert for new opportunities. With an anticipated strong IPO market in 2025, this context sets the stage for our upcoming list of the 10 best up-and-coming stocks to buy according to analysts.
Methodology
We used the Finviz stock screener to compile an initial list of 30 stocks that went public in the last 5 years. We then selected the 10 stocks with high analysts’ upside potential and that were also the most popular among elite hedge funds. The stocks are ranked in ascending order of analysts’ upside potential.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A digital dashboard detailing customer experience/user experience data.
Concentrix Corp. (NASDAQ:CNXC)
Average Upside Potential as of November 26: 58.16%
Number of Hedge Fund Holders: 21
Concentrix Corp. (NASDAQ:CNXC) is a global provider of customer experience solutions that help businesses improve their interactions with customers. It offers a range of services, including customer support through various channels like voice, chat, and email, as well as technology-driven solutions for process optimization and analytics. It’s a team of technologists and engineers who build and integrate technology solutions and the infrastructure that powers them.
The company’s offerings in process automation and data analytics set it apart from competitors. Its extensive global reach and diverse customer base provide a strong foundation for sustained growth. To further strengthen its position, it’s investing in technology and GenAI. The company’s AI advancements in knowledge management, customer support, and automation are expected to drive efficiency and cost savings. The recent patent for its AI platform, GILES, which automates coding and testing processes, highlights its commitment to innovation.
Concentrix Corp. (NASDAQ:CNXC) reported solid financial results for the third quarter of 2024, ending in August. The company is actively transforming its business by focusing on higher-value, long-term contracts and leveraging technology to drive efficiency. However, it faces challenges such as lower transaction volumes in certain segments and margin pressure from dual costs and upfront investments. Despite these challenges, the company remains optimistic about its long-term growth prospects, driven by its strong market position, strategic investments, and ability to adapt to changing industry dynamics.
FPA Queens Road Small Cap Value Fund stated the following regarding Concentrix Corporation (NASDAQ:CNXC) in its Q3 2024 investor letter:
“Concentrix Corporation (NASDAQ:CNXC) is one of two top customer experience (CX) vendors globally. The company began by managing call centers but has since evolved into a high-tech business process outsourcer (BPO) that also designs and runs customer-facing websites and apps, integrates the data, and optimizes a client’s customer interactions. The company was spun out from TD Synnex, another of the Fund’s core holdings, and we have always been impressed with CNXC’s innovation and growth. CX is a relatively new business model, and Concentrix has been rolling up smaller competitors. In March, 2023 they bought WebHelp, a leading European CX player, for $4.8B in cash and stock. 22 We believe the WebHelp acquisition will help consolidate an industry where Concentrix and Teleperformance are the largest players.
The market is currently concerned about the potential of artificial intelligence to disrupt Concentrix’ core call center business – all CX companies’ shares are down badly over the last two years.23 On Sep. 25, 2024 CNXC stock got hit again when they released fiscal 2024 Q3 results and took down revenue guidance – fiscal 2024 organic revenue is now expected to come in between -.5% and 1.5%. 24 Concentrix has a debt to EBITDA ratio of 3x from the Webhelp deal which will be a problem if earnings deteriorate quickly. But Concentrix now trades at less than five times adjusted EPS and is highly cash generative. We think, but don’t know, that Concentrix’ domain knowledge and integration into customers’ work flows make for meaningful switching costs and that clients will be reluctant to let AI manage the relationships with their customers. We have held on to Concentrix shares but have not added to the position.”
Overall CNXC ranks 8th on our list of the best up and coming stocks to buy according to hedge funds. While we acknowledge the potential of CNXC as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CNXC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.