The market has been behaving oddly recently. Cyclical issues were leading by a wide margin until last Friday, when the latest nonfarm payroll data came in weaker than expected.
Since then, bond yields have faltered, and cyclical sectors like financial, energy and industrials lost their bids and have been moving sideways to lower.
That’s a major reason why investors should look into cyclicals, and I have one pick that investors shouldn’t ignore.
That pick is Cardlytics, Inc. (Nasdaq: CDLX), a proven winner that’s well positioned to benefit from current market conditions.
The business is unique because the Atlanta-based company works with large banks to run their banking reward programs through digital channels. In simple terms, Cardlytics managers have figured out a way to determine where and when consumers are spending money. They call this “purchase intelligence.”
Related Post: Analyzing Credit Card Data Is the Future of Digital Marketing
This data is the foundation of a platform that helps banks build customer loyalty and marketers find new customers at scale. Cardlytics takes a cut for bringing the parties together. And the beauty is bank customers love the product.
Some notable partnerships include JPMorgan Chase & Co. (NYSE: JPM), Wells Fargo & Co. (NYSE: WFC), Bank of America Corp. (NYSE: BAC) and U.S. Bancorp (NYSE: USB).
In most cases, customers will get simple notifications inside their mobile banking applications. It might be a coupon for Amazon.com, Inc. (Nasdaq: AMZN), Hilton Worldwide Holdings Inc. (NYSE: HLT) or even cash back on a Five Guys purchase. Click on the coupon, and that’s it.
Your next purchase at Amazon.com, stay at Hilton or burger bought at Five Guys gets the discount added back to your bank card.
The business is genius and should benefit handsomely as consumers get back out into the real economy, buying goods and services.
Cardlytics also benefits from its massive scale with access to 168 million global bank customers, with many more to come as it consolidates the fragmented purchase intelligence sector.
2020 was a banner year for the company, and shares traded all the way up to around $165 in February 2021 before falling all the way to $86 in May.
This is despite margins near 70% and first-quarter billings of $76.3 million, up 13% year over year. For the full year, the company expects billings in the range of $380 million to $420 million.
Related Post: Investors, Take Note: Cardlytics’ Success Is Only Just Starting
CDLX has guided to $260 million to $285 million in revenue, but it’s important to note that the company pays out a substantial amount — around half — of its revenue to banking partners.
The company still only has a $3.62 billion market cap. Although valuations are still high and share prices are down over 33% from its February highs, the company’s growth should support these multiples. As I’ve said before, it’s a time-tested growth company.
So, not only is CDLX a cyclical winner that’s ready to thrive in a reopening economy, but it’s also a digital transformation play. Analyzing credit card data is crucial for businesses.
Savvy investors should consider buying shares into any near-term weakness.
Best wishes,
Jon D. Markman
