NetSpend Holdings Inc. (NTSP), interCLICK Inc. (ICLK) and Ambow Education Holding Ltd. (AMBO) are three top analyst stock picks priced at less than $10 per share. In this article, we’ll take a look at the catalysts behind these stocks and the best ways to profit from them.
NetSpend Could be a Buyout Target
NetSpend Holdings Inc. (NTSP), a provider of reloadable prepaid debit cards and related alternative financial services to under banked customers in the U.S., was recently initiated with a Buy rating and $8.00 per share price target by Sidoti. At a significant 44% premium to the current market price, the analyst’s price target reflects a very bullish sentiment on the firm’s future outlook.
With its depressed share price in a cut-throat market, some experts see the prepaid debit card company as a likely buyout target. Companies like Green Dot (GDOT) may be interested in acquiring a more diverse customer base, while larger companies like MasterCard (MA) and American Express (AXP) have also entered the market and may be interested in bolstering their positions.
Investors interested in taking a cheap position in the stock may want to consider the at-the-money 5.00 February 2012 calls trading at about $1.80 per contract. If the stock moves up to the $8.00 per share price target before February 17, 2012, the investor would bank a 166% return on investment, as well as be very leveraged for any additional upside if an acquisition materializes.
interCLICK Offers Strong Growth Potential
interCLICK Inc. (ICLK), an audience intelligence and targeting company serving digital agencies and marketers, was recently initiated with a Buy rating and $10.00 per share price target by Ladenburg. At a significant 77% premium to the current market price, the analyst’s price target reflects a very bullish position on the stock’s future outlook.
With its impressive growth rates and a low entry point, the data targeting company has been a popular stock pick among some investor circles. The firm’s low fixed costs also mean that it can efficiently scale its business when taking on additional leverage, as pointed out by one SeekingAlpha contributor. At the same time, Discovery Group increased its stake to 8.3% in August, signaling increased confidence.
Investors looking to capitalize on this name may want to look at the at-the-money 5.00 February 2012 calls trading for around $0.85 per contract. If the stock moves up to the $10.00 per share price target before February 17, 2012, the investor would realize a 588% return. However, it should be noted that these options are somewhat illiquid and a higher premium may be paid.
Ambow Education Holding Ltd. (AMBO), a national provider of educational and career enhancement services in China, was recently initiated with a Buy rating and $14.00 per share price target by Wunderlich. At a significant 133% premium to the current market price, the analyst’s price target reflects a very bullish opinion on the stock’s outlook.
While many Chinese firms have been struggling with the government’s tightening measures, the education sector has been relatively unscathed. During the second quarter, the company’s revenue increased 26.1% and its net income increased 22.2%. These results were primarily driven by an increase in student enrollments to about 298,000 by the end of the quarter.
Investors looking to capitalize on this opportunity may want to consider a pairs trade to hedge Chinese market risk. By going long AMBO and buying puts on a Chinese ETF like the iShares FTSE/Xinhua China 25 Index ETF (FXI), investors can profit from the firm’s relative outperformance of the larger Chinese market and limit any systemic risk.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.