Send me real-time posts from this site at my email

The SPAC Opportunity You Don't Want To Miss

A fresh cloud software business is about to hit the public market via special purpose acquisition company or SPAC for short.

It’s worth getting our feet wet in this high-risk/high-return public issuing region of the market. Leading HR cloud provider, Alight Solutions, will be taking its shares public through a merger with the 'blank check' company, Foley Trasimene Acquisition Corp. WPF, for an enterprise value of $7.3 billion.

SPACs have been the hottest new way to bring private businesses public, with traditional IPO's taking a back seat in the speed-driven digital era of the markets as businesses rush to enter the equity market at a record pace before the euphoria ends. I think it is time that we jump on board this SPAC space shuttle that is taking some companies to the moon.  

The buying opportunity in Alight's pre-merger SPAC WPF may be too good to pass up at its current price level. WPF is poised to soar, with the risk-appetite for fresh public companies standing at a 2 decade high.

The Business

70% of the Fortune 100 and 14% of the US working population are Alight clients, not to mention enterprises across more than 100 different countries. Its cloud solutions give businesses scalable software for growing operations to help them navigate the increasingly complex and expensive healthcare system as well as ensure employees' financial stability.

Alight is a next-generation cloud software provider that enhances human capital and business solutions through its data and IA-driven software. The enterprise is rapidly developing its business process as a service (BPaaS) platform. Alight is building out its BPaaS platforms, which will include the Wealth Cloud, the Health Cloud, the Payroll Cloud with annual revenue growth expectations in the high-single-digits, with the hopes that 50% of its revenue will come from BPaaS by 2023 (currently only 13%).

The Buy Catalyst

Despite Alight's present transformational stage, its revenue stability and visibility are almost unparalleled in the software sector, with contracts lengths of 3-5 years. 97% revenue retention rate and 81% of 2021's revenue derived from recurring obligations.

This type of contract/subscription-driven predictability excites analysts like me, especially at this reasonable valuation.

Based on the ownership breakdown presented in the recent investor presentation shown below, the company is being given a market value of $7.4 billion (this figure is based on the market cap of WPF divided by its portion of the company, 19.2%).

This valuation puts WPF's post-merger price to sales at 2.5x, which is quite sensible for a business that is poised to accelerate its top & bottom-line. Alight's P/S represents a significant discount to the broader cloud software market, with many of these stocks trading at high double-digit P/S ratios. Its primary comparables include Broadridge BR, Paychex PAYX, and ADP ADP. Each are trading at a premium and don't have the substantial growth outlook figures as the digitally leveraged Alight.

Management is projecting high-single-digit topline growth in the short-term and 10%+ growth combined with expanding margins in the long-term as its cloud business takes off.

Alight is in the midst of a digitally inclined transformation, and this SPAC's current pricing is conservative, to say the least when considering its long-term potential. They are giving WPF shares away at their current price and I would not hesitate to start a small position in this ‘value’ oriented SPAC opportunity.

+1,500% Growth: One of 2021’s Most Exciting Investment Opportunities

In addition to the stocks you read about above, would you like to see Zacks’ top picks to capitalize on the Internet of Things (IoT)? It is one of the fastest-growing technologies in history, with an estimated 77 billion devices to be connected by 2025. That works out to 127 new devices per second.

Zacks has released a special report to help you capitalize on the Internet of Things’s exponential growth. It reveals 4 under-the-radar stocks that could be some of the most profitable holdings in your portfolio in 2021 and beyond.

Click here to download this report FREE >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Paychex, Inc. (PAYX): Free Stock Analysis Report
Automatic Data Processing, Inc. (ADP): Free Stock Analysis Report
Broadridge Financial Solutions, Inc. (BR): Free Stock Analysis Report
Foley Trasimene Acquisition Corp. (WPF): Get Free Report
To read this article on click here.
Zacks Investment Research

Welcome! Is it your First time here?

What are you looking for? Select your points of interest to improve your first-time experience:

Apply & Continue