While wagering on analyst-backed stocks may usually be the smart option, adventurous investors may have a contrarian opportunity with identity management software specialist Clear Secure (NYSE:YOU). Through its biometric travel document verification system, Clear allows smooth transitions across airport security protocols. With the travel sector booming, such a convenient service should rise in demand. Therefore, I am bullish on YOU stock.
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Follow the Logic on YOU Stock
Fundamentally, the bullish narrative of YOU stock centers on investors reaching a logical conclusion. If air travel demand rises, airports across the nation will likely see an increase in passenger volume. That raises the pressure on the Transportation Security Administration (TSA) to hurry the security process along. However, the protocol can only be so productive.
Not only that, but as a federal government agency, productivity may not exactly be high on the agenda. Indeed, some estimates place the time “penalty” associated with TSA mandates at two hours per flight. Whatever the actual figure is, the lost time is a burden for both passengers and overall economic productivity; that is, that time could have been used for other purposes.
That’s where Clear Secure comes into the picture. Members who take advantage of the company’s pre-verified biometric identification program can breeze through the security lines, saving them stress and hassle. Under any situation, that’s an excellent selling point. However, the advantage that YOU stock levers now is that the travel sector has fully recovered from the COVID-19 malaise.
In February 2020, air revenue passenger miles hit 89.73 billion. By April, this figure had fallen to 3.34 billion due to the severe impact of the pandemic. Quickly, though, the metric started to rise. After having reached a record 93.71 billion miles in December 2023, the latest read from January 2024 shows 91.82 billion miles.
Call it revenge travel, or label it travel prioritization, where consumers focus on experiential expenditures. Whatever the case, the data speaks for itself: people are taking to the friendly skies more often. And that adds strain to the overall airport security directive, making Clear Secure’s biometric-related services quite compelling.
Subsequently, investors should pay attention to YOU stock, even though analysts are pensive about the opportunity.
Hard Numbers and Enticing Projections Speak Loudly
Another factor that makes YOU stock an attractive idea to consider is the numbers. The company is on a strong growth trek. Combined with the fundamentals of a booming travel market, Clear Secure should be able to hit revenue projections with ease.
It starts with the actual data. In 2019, Clear Secure posted revenue of $192.28 million. By 2023, the company generated sales of $613.58 million. That translates to a compound annual growth rate (CAGR) of 33.65%. What’s significant about this figure is that it’s beating the forecasted trajectory of the underlying industry.
Per one study, the global identity verification market size reached a valuation of $10.45 billion in 2023. By 2032, the sector could be worth $39.82 billion. If so, we’re talking about a CAGR of 16.2% from 2024. That’s an impressive growth rate but well short of what Clear has achieved in the past four years.
Granted, the law of small numbers dictates that during a company’s initial expansion phase, growth can be stratospheric. However, as the business matures and the nominal comparisons rise, the percentage gains become smaller. Unless the company in question is truly exceptional, it’s difficult to overcome this math.
However, Wall Street analysts – again, who are not overwhelmingly supportive of YOU stock – project, on average, that sales may reach $747.32 million in Fiscal 2024. By Fiscal 2025, revenue could rise again to $857.21 million.
Between the end of 2023 to the projected end of 2025, Clear’s revenue could potentially expand at an 18.2% CAGR. That’s still conspicuously beating the underlying industry’s growth rate.
Contextualized Valuation Helps the Narrative, Too
To be fair, the above analysis isn’t completely an apples-to-apples comparison. Simply, the industry projection goes out for a longer time period. Nevertheless, the main takeaway is that YOU stock is backed by a credible business, a business which itself is backed by the enticing fundamentals of a recovered air travel sector.
Because of this dynamic, YOU stock deserves a reassessment of its valuation. Right now, shares trade at 2.29x trailing-year revenue. That’s already low compared to the software application sector’s sales multiple of 3.9x. However, if Fiscal 2024 sales hit $747.32 million and assuming a share count of 93.02 million, then YOU stock is trading at 2.06x projected revenue.
That might seem like a value trap right now because YOU stock is down 16% year-to-date. However, the analysts’ projections align with the hard data we’re seeing in the travel ecosystem. Therefore, the conclusion is that Clear is genuinely undervalued.
Is Clear Secure Stock a Buy, According to Analysts?
Turning to Wall Street, YOU stock has a Hold consensus rating based on two Buys, four Holds, and one Sell rating. The average YOU stock price target is $24.29, implying 43.3% upside potential.
The Takeaway: YOU Stock Is About Recognizing Clear Trajectories
For those considering the speculative bullish case for Clear Secure, it comes down to a simple logical framework. Travel demand is booming, which means that security protocols will be more time-consuming and, therefore, frustrating. Subsequently, demand for the ability to pass through security checkpoints quickly should accelerate. However, the market isn’t feeling the love for YOU stock, which makes it an undervalued opportunity.
