Despite a tough week last week, New York’s leading stock indexes are expected to have an exceptional year. The S&P 500 rose 24%, and the Nasdaq 100 rose 28%, both reaching all-time highs. Israeli companies listed on American stock exchanges certainly did not miss the opportunity. The market value of twelve of them has more than doubled this year. On the other hand, many of them have lost their value significantly.
The US market has been officially bullish (20% or more above its lows) since mid-2023. But the recovery of Israeli stocks traded in New York has been delayed, and most of them did not start to rise until some time had passed. “Most stocks performed fairly tepidly until three months ago,” says Sergei Vastchenok, senior analyst at Oppenheimer Israel. “Then the rally in second-tier stocks started, both on Wall Street in general and in Israeli companies. Up until that point, there had been many… From companies with high-growth profiles that struggle to outperform.
“Over the past three months, the gaps have been significantly closed,” Vaschenok adds. This is mainly due to improved sentiment towards Israeli companies, due to moves to end the war, the victory on the northern front initiated by Operation Appeal that included the fall of Assad, and a significant decline in security. A threat to Israel, with a hostage release agreement now also on the horizon.
He says that stock pricing varies depending on the acceleration of companies’ growth rates and future expectations. “In general, global investors have gained a lot of confidence after the elections in the US. Trump’s agenda is pro-growth and encouraging for the US economy. This has a greater impact on second-tier stocks. If we look at Wall Street which led the rises, it was the ‘Magnificent 7’ The reason for this is that the growth occurred in very specific places, most notably artificial intelligence and related microchips, which have performed less strongly now that they have reached a “stage where we can see other stocks participating in the rallies.” “In my view, we are still at an early stage in the process, and Israeli stocks will also feel the benefit.”
Vaschenok believes that a Trump presidency could also encourage the trend of mergers and acquisitions. “Many – perhaps all – Israeli companies are takeover candidates. In many cases, these are companies with technological innovations that lack the ‘go-to-market’ and management that global companies are able to do. In my opinion, in 2025 there will be many Mergers and acquisitions on Wall Street, including among Israeli companies, many of which are trading at attractive valuations, could become targets.
But in the primary market, things are more complicated. Vaschenok explains that pricing in the boom days of the Covid pandemic will likely not be repeated, so a flotation would require settling for a lower valuation, or at least a lower multiple.
The stars
The prices of a dozen Israeli companies, or companies with ties to Israel, have risen by more than 100% this year (among companies with a market capitalization of at least $50 million). Renewable energy company Eco Wave Power Global (Nasdaq: WAVE) emerged. It started 2024 with a share price of $1.24, and now trades at over $14, giving the company a market cap of $84 million, and a yield of over 1,050%. Eco Wave Power, whose founder is Ina Braverman, has developed technology to convert sea waves into usable energy. This month, it announced the launch of an official energy project in Israel. It sells the energy it produces to the Israeli Electricity Company.
Eco Wave Power went public the previous decade on the Swedish Stock Exchange, and became listed on the Nasdaq in 2021. It is currently trading at a record high, and took advantage of its rising stock price to raise $3 million at $10 per share. Three weeks ago. As mentioned, the stock price is now $14.
Another small cap that has stood out is video solutions company Beamr Imaging (Nasdaq: BMR), with a 154% return in 2024. Beamr, headed by founder Sharon Karmel, appeared on investors’ radars a year after it held a small IPO on the Nasdaq. A company report in cooperation with Nvidia boosted it by hundreds of percentage points within two days, and it took advantage of the rise to raise $12 million. But since February, the stock price has fallen sharply, losing 77%.
Teva Renaissance
It is generally easier for a small company to achieve exceptionally good returns, since a relatively large investment by an institutional investor can have a significant impact on the stock price. However, this year has also been the year of big companies, led by Teva Pharmaceutical Industries (NYSE: TEVA), which just last week added $5 million to its market cap, bringing it to $24 billion. Teva is currently the most valuable Israeli company on Wall Street. In the past, this was its normal situation, but the crisis it experienced in the past decade made it abandon its leadership, until its aggressive simplification program bore fruit. Only in 2023, after five years of decline, did it start growing again, and this year it raised its guidance. Last week, it published strong results from a trial of an original drug to treat inflammatory bowel disease, and the market rewarded the stock handsomely. Teva has more than doubled its market capitalization, but it is still far from the peak of more than $61 billion it reached in 2015.
The jump in the stock price of another large healthcare company, NovoCure (Nasdaq: NVCR), came mainly at the beginning of this month, after good results in its trial of a drug to treat pancreatic cancer. The company’s market cap is $3.4 billion, up 111% in 2024.
Stock return
Many other stocks that have stood out this year have been recent entrants to the public market, debuting in the peak years of 2020-2021, via an IPO or merger with a SPAC. Two of them are digital insurers: Lemonade (NYSE: LMND), which is up 143%; and Hippo Holdings (NYSE:HIPO), which is up 175%. Both reported improving results, on their way to positive EBITDA. Digital investigations solutions company Cellebrite (Nasdaq: CLBT) generated a positive return of 36%, and is one of the few Israeli companies that were integrated into SPACs during the boom that currently has a market capitalization higher than its valuation in the merger. . Cellebrite made news this year when it was known that it participated in the investigation into the attempted assassination of US President-elect Donald Trump at a campaign rally, and helped the FBI hack into the attacker’s phone.
Another company that has been the subject of a SPAC merger and that has soared this year is ad tech company Innovid (NYSE: CTV), which announced last month that it would be sold at a premium, though it remains at a valuation lower than its valuation. In integration.
In addition to the new companies, there are Israeli companies whose shares have been traded in New York for years, and they have risen sharply this year. Among them are telecommunications equipment companies Allot (Nasdaq: ALLT), which is up 187%, and Ceragon Networks (Nasdaq: CRNT), which is up nearly 100%. Shares of aircraft components and maintenance company TAT Technologies (Nasdaq: TATT) also rose significantly by 149%. The private equity firm FIMI Opportunity Funds, which controls the company, took advantage of the rise in its share price to sell part of its holdings for $129 million.
According to Vaschenok, most companies that achieved returns of more than 100% did so thanks to two things: pricing and accelerated growth. “For example, Allot’s price was very low, because it was not growing, it was reporting losses, and its balance sheet was not very strong, which raised concerns about its financial stability. Its last two sets of financial statements were a surprise. A pleasant surprise, “It returned to generating cash.” Vaschenok believes the stock is underpriced even after rising this year.
Disappointments
Two major companies emerged negative: SolarEdge Technologies (Nasdaq: SEDG) and Mobileye (Nasdaq: MBLY). SolarEdge, at one time the most valuable Israeli company on Wall Street, with a market capitalization of about $20 billion, currently has a market capitalization of less than $1 billion, after losing more than 85% of its value since the beginning of the year. year.
Solar technology company SolarEdge declined due to difficulties in its sector, but also due to employee problems. Its distributors built up large inventories during the sector’s boom, and when demand fell, they stopped buying from the company, pushing it into losses. “SolarEdge is a very sad story,” Vaschenok says. “If you look at sales multiples, SolarEdge is currently probably the cheapest among Israeli stocks, at a price that doesn’t even make sense. The solar market has completely collapsed, and the company itself has started burning money and has failed to adapt its cost structure. To the new reality, its balance has shrunk cash, and the stock price fell after a series of disappointments.
Vaschenok identifies SolarEdge as a speculative investment for 2025. “There is definitely a chance that SolarEdge will bounce back, and the stock price is very low. The company has to get back to generating cash, and we will have to see what happens. The new CEO has to deliver on this entire sector, which is It faces a difficult problem that will likely persist, as it is fair to expect the Trump administration to reverse President Biden’s green energy initiatives, but SolarEdge’s current price reflects a very scary scenario – this is a serious company, and it has technology and presence Marketing, and it’s trading as if it’s going bankrupt.”
Amnon Shashua’s driver-assistance systems company Mobileye also fell this year, losing nearly 60% of its value after a series of cuts to its guidance, and due to fears that parent company Intel would sell its holdings due to its difficulties. In its latest financial statements, Mobileye wrote off a significant amount of goodwill, amounting to $2.7 billion. Mobileye shares are still not cheap, but the share price could recover when growth is restored, Vaschenok says.
Another stock that has emerged negative this year is Perion Network (Nasdaq: PERI), which was affected by changes made by Microsoft, which was its largest customer, and was forced to lower its guidance. Vaschenok estimates that Perion, which trades at a market capitalization roughly equivalent to its cash, is ripe for acquisition by a private equity fund. 3D printing company Stratasys (Nasdaq: SSYS), which last year fended off takeover attempts by two industry players at prices between $23.6 and $25 per share, is now trading at less than $10, having lost about a third of its value this year.
Published by Globes, Israel Business News – en.globes.co.il – on December 23, 2024.
© Copyright Globes Publisher Itonut (1983) Ltd., 2024.