You Stock Forecast: Clear Secure Announces Better than Expected Results. Time to Buy?
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You Stock Forecast: Support and Resistance
There has been lot of talks regarding the industrial recovery post Covid 19. Covid 19 affected the travel industry maximum and recently there has been evidence that travel industry is reaching the pre-pandemic levels in terms of revenue and footfall. Air travel was restricted across the globe in last couple of years and is recently coming out of woods as restrictions are eased. Clear Secure Inc allows subscribers to line cut at airports at an annual fee. It also initialed health pass services to allow individuals to upload identifying certificates and facilitating quicker entry into various venues. So the progress of Clear Secure is proportional or exponential to the footfall at venues like Airport and Hospitals.
At the time of Covid, along with along industries Clear Secure was hit hard and its revenue slumped. With the revival being witnessed across the globe, revenue and profitability is back on track for Clear Secure.
In this article we will look into the recent announced results and other factors and try to deduce whether Clear Secure Inc (NYSE: YOU) is a buy or not?
You Stock Forecast: First Quarter FY 2022-23 Financial Results and Future Guidance
People are spending larger part of their earnings to air travel compared to past two years and as a result Clear Secure has witnessed highest verification and enrollments in quarter ending March 2022. As Clear Secure is present in 43 airports across United States with 120 CLEAR Plus lanes, and a majority airports have already exceeded pre- pandemic levels. The revenue grew 79% YoY and bookings are up by 74%. The total reported is $90.5 million which beats the analysts’ estimates of $88.3 million.
Adjusted EPS loss came at 0.03 which is much better than consensus loss of $0.12 per share Apart from this, company has made a strong ground in field of free cash flow and reported $20 million in this quarter alone and with this is the fifth consecutive year of free cash for the company.
More importantly, net retention percentage is 95.3% in this quarter. Retention rate coupled with the growth in the bookings indicates a strong source of revenue in the coming quarters. In the second quarter, company expects a revenue of $99 to $101 million and a total booking of around $114 million.
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You stock forecast: Growth Opportunities Present in Future
Apart from helping the people of United States to cut the security checking line get special treatment, the company recently has been also awarded the opportunity to renew membership for TSA pre check, its government backed competitor and at present nearly two third CLEAR Plus members are also members of TSA pre check. For the new enrollments, Clear Secure is providing the bundled service of both memberships at a renewed price, which is going to boost the revenue in the coming quarters.
Secondly, Clear offers Health Pass, which is free digital pass combining biometrics with the health conditions of a particular person, like information on vaccination, Covid 19 test results to name few. It eases the access to sporting arenas and is currently in service in 26 such places. Going forward, places like hotels, Cinema Halls, Shopping Complex can adopt this method and be customers of Clear Secure. It has lot of potential to expand just like CLEAR Pass and contribute significantly towards revenue.
Thirdly, in the conference call, the management has increased the CLEAR Pass rate from $179 to $189. Seeing the amount of retention Clear Secure is witnessing, it is a smart move. Considering the retention may dip in future in lieu of rate hike, but this rate hike will contribute towards profitability of the company. Currently, the company is on the fence of reporting net profit ($0.03) in first quarter and this rate hike will take care further.
Recently, Clear Secure also expanded its business vertically by acquiring virtual queuing concern Whyline, which provides services of live wait time and waiting software, in January 2022. The concept is that software waits on the behalf of its user and can cut short the time at venues like airports, or ticket counter for an event. It can also prebook appointments at hospitals, banks and airports. If the company provides such diverse services, the rate hike is more than justified.
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You Stock Forecast: Major Headwinds for the Company
Although we can safely say that TSA pre check is the only known competitor for the Clear Plus, but the business model is something which can be easily reproduced. Companies like Apple and Google can easily copy the model and create competition for the Clear Secure. So, a startup in the same business is awaited and come capture the market share soon.
Secondly, although Clear appeals to the frequent fliers but surprisingly Clear boasts a net promoter score (NPS) of only 75. What it infers is that only 75% of the people will recommend Clear to other people. Moreover, the bigger concern is that recently Clear got an ‘F’ grade from Better Business Bureau. The reason being that terminating one’s free trail is proving to be nightmare for the customers and so the people are reporting it to the BBB.
A down grade from BBB can further reduce the retention rate of Clear Secure and management will be wary of this fact.
You Stock Forecast: Conclusion; Buy, Sell or Hold
In the questionnaire post first quarter results announcement, CEO Caryn Seidman Becker said that she sees the opportunities of international growth in terms of Clear Plus and Health Pass. The fact is that Clear has lot of scope of growth and capture the market that can sustain the exponential growth of revenue. Also, TSA pre-check launch is expected in the new few months and that will add to the both top line and bottom line growth of the company.
But management has to work hard to maintain the high rates of retention and improve the ratings in BBB. Coming back to the question on share performance, stock has done very well in the bad market scenarios and is down by about 1% in last one month as compared to Nasdaq being down by more than 30% in the same time period. Shareholders have rewarded the company for the better than expected results and guidance. So, Clear Secure stock is not meant to be sold at this point.
Fresh buying can be initiated well before second quarter result to grab another hike in the share price on the backdrop of continuation of good results. Stock is best to hold at this point and fresh buying can be initiated couple of months down the lane.
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