While betting on analyst-backed stocks might usually be a smart choice, adventurous investors could consider identity management software specialist Clear Secure.NYSE:YOUClear helps people get through airport security protocols smoothly through its biometric travel document verification system. With the travel industry booming, demand for such convenient services should rise. That's why I'm bullish on YOU stock.
Follow the logic of YOU stocks
Essentially, the bull story for YOU stock is centered around investors reaching a logical conclusion: Higher demand for air travel could lead to increased passenger volume at airports across the country. This would increase pressure on the Transportation Security Administration (TSA) to expedite security processes. However, there are limits to how productive this protocol can be.
Not only that, but as a federal agency, productivity may not be all that important. In fact, the time “penalty” associated with TSA regulations is estimated to be two hours per flight. Whatever the actual figure, lost time is a cost to passengers and overall economic productivity – time that could have been used for other purposes.
That's where Clear Secure comes in: its pre-authenticated biometric program allows members to breeze through security lines, saving them stress and hassle. That's a great selling point under any circumstances. But the advantage YOU stock is currently taking advantage of is that the travel industry has fully recovered from the COVID-19 slump.
In February 2020, air passenger revenue miles reached 89.73 billion miles. By April, this figure had fallen to 3.34 billion miles due to the severe impact of the pandemic. However, the indicator has started to rise rapidly. After reaching a record high of 93.71 billion miles in December 2023, the latest figures for January 2024 show 91.82 billion miles.
Call it revenge travel or a travel prioritization where consumers are prioritizing experiential spending. Either way, the data speaks for itself: people are flying more frequently and through friendly skies. And that's putting strain on airport security mandates overall, making Clear Secure's biometric services very attractive.
Therefore, investors should keep an eye on YOU stock even if analysts are cautious about the opportunity.
Solid numbers and compelling predictions speak volumes
Another factor that makes YOU stock worth considering is the numbers. The company is on a strong growth trajectory, and when combined with the fundamentals of a booming travel market, Clear Secure should be able to hit its revenue forecasts with ease.
Let's start with the actual data: In 2019, Clear Secure posted revenue of $192.28 million. By 2023, the company is on track to achieve $613.58 million in sales, which equates to a compound annual growth rate (CAGR) of 33.65%. What's important about this figure is that it outpaces the projected trajectory of the underlying industry.
According to one study, the global identity verification market size is expected to reach $10.45 billion in 2023. By 2032, the sector could be worth $39.82 billion, which would represent a compound annual growth rate of 16.2% from 2024. While this is an impressive rate, it's nowhere near the growth rate Clear has achieved over the past four years.
Indeed, the law of small numbers dictates that growth rates can be exponential during a company's initial expansion phase. But as a business matures and nominal comparisons rise, the percentage increases get smaller. This math can be hard to overcome unless the company in question is truly exceptional.
However, Wall Street analysts (again, not overwhelmingly in favor of YOU stock) on average expect sales to reach $747.32 million in fiscal 2024. By fiscal 2025, revenue could grow again to $857.21 million.
From the end of 2023 to the projected end of 2025, Clear's revenues could expand at a CAGR of 18.2%, which is still significantly higher than the underlying industry growth rate.
Contextual assessment also helps with stories
To be fair, the above analysis is not an entirely apples-to-apples comparison; industry forecasts simply span a longer time horizon. Still, the main takeaway is that YOU stock is backed by a reliable company that is itself backed by attractive fundamentals in a recovering air travel sector.
Given this trend, YOU stock merits a valuation reassessment. Currently, YOU shares are trading at 2.29x trailing earnings, which is already low compared to the software applications sector's sales multiple of 3.9x. However, assuming FY2024 sales of $747.32 million and a share count of 93.02 million, YOU shares would trade at 2.06x forward earnings.
YOU shares are down 16% so far this year, so this may seem like a value trap at the moment, but analyst forecasts are in line with hard data we see in the travel ecosystem, which leads us to conclude that Clear is truly undervalued.
Is Clear Secure stock a buy according to analysts?
Turning to Wall Street, YOU stock has a consensus rating of Hold, based on 2 Buy, 4 Hold, and 1 Sell ratings. The average price target for YOU shares is $24.29, indicating an upside potential of 43.3%.
Conclusion: YOU stock is a clear trajectory
For those considering a bullish speculative case for Clear Secure, it comes down to a simple logical framework: Travel demand is surging, making security protocols more time-consuming and frustrating. As a result, demand for the ability to get through security checkpoints faster should accelerate. However, the market has not been attracted to YOU stock, making it an undervalued opportunity.
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