Ask a group of tech investors to list their favorite disruptive tech stocks and no two will come up with an identical list, but we can set some parameters. These are stocks that live in the tech universe, that bring some new twist to their niche, whatever it is (and tech can apply to most any type of business, from online gaming to online trading to ordering a pizza or the weekly groceries).
Whatever disruptive tech an investor chooses, there are some general factors that need to be considered. First, these are stock investments that require patience. Like the biopharmas, disruptive tech firms are known for long lead times before profitability. This can stem from development required for a product, or the time necessary to penetrate a market, or perhaps both or something else; whatever the reason, investors need to be ready for to hold on for the long term.
So we’ve opened up the database at TipRanks, and picked out a couple of tech stocks that offer disruptive potential. According to Brian Dobson, of Chardan Research, these stocks are sound choices for investors interested in disruptive tech. Both have entered the public markets this year, via SPAC transactions, and both offer opportunity to make waves in their respective business niches. Here are the details, along with Dobson’s commentary.
The first stock we’ll look at is Lottery.com, a newly public company in the online gaming space. The name says it all – this company brings lottery games to the world of online and mobile apps. The company offers players the ability to remotely purchase legally sanctioned lottery games, up to 800 such games from 40 countries around the world. Lottery.com publishes real-time results, and allows players to choose their favored games, buy tix online, and find out if they won. It’s an industry leading take that makes lotteries convenient and quick.
It also makes them secure. Lottery.com uses proven security systems to verify customers’ ID, age, and location – all necessary to keep the games honest and the cashouts for winners easy and reliable. And along with honest gaming, Lottery.com even has an initiative with WinTogether.org, to help non-profit organizations ‘gamify’ charitable donations – making a fundamental change in the incentives given to potential donors.
Lottery.com was the object of a SPAC merger in October this year. It was acquired by Trident Acquisitions Corporation, in a move approved by Trident’s shareholders on October 28. The LTRY ticker hit the NASDAQ on the 29th of the month; the combined Lottery.com entity realized $63 million in gross proceeds from the business combination.
It has been a rough start for the new entrant, LTRY shares are down down 59% since the new ticker went public.
On a more positive note, Lottery.com reported its 3Q21 results last month, and showed both increased revenues and a turn to profitability. The top line came in at $32.2 million, up from $1.6 million in the year-ago quarter, while net income switched from a $1.2 million loss to an $11.2 million profit.
In Dobson’s view, the positives should rule and the negatives shouldn’t dissuade investors. He is bullish in his description of Lottery.com’s overall position and prospects: “The company has a significant first mover advantage in the digital transformation of a well-established industry. In our view, LTRY is poised for growth through 2023 (+115% CAGR) driven by new jurisdictions and rising market share.”
Going on, Dobson notes that the company has several solid business models, including B2C and B2B2C, and goes into details on the B2C channel, writing, “We expect significant growth momentum through 2025 as the company pushes into new U.S. States, including New York, and drives consumer acceptance of the product. The company's strong brand name and high quality games of chance, including those administered by U.S. states, resonate well with consumers in the United States, Mexico, and Latin America. While servicing fees in the U.S. are likely to remain static and highly regulated, international fees and mark-up related revenues are likely to rise in the coming years.”
In line with this upbeat outlook, Dobson rates LTRY shares as a Buy, with a $14 price target that implies a one-year upside of 152%.
There are only two reviews of LTRY on file, and both say it’s a stock to buy. This makes for a Moderate Buy consensus rating, on a stock with a $5.55 trading price and a $15 average price target suggesting an upside of 170% for the next 12 months. (See Lottery.com’s stock analysis at TipRanks.)
BM Technologies (BMTX)
From lottery games we’ll shift our gears to the banking industry. BM Tech is a digital banking platform, one of the largest such platforms in the US. It uses cloud-based software to provide its customers with a suite of products, including checking and savings accounts, and loans and credit. BM Technologies works with both individual and business customers, as a full-service online bank, bringing the as-a-Service digital model to finance to create Banking-as-a-Service (BaaS).
BMTX is not actually a bank, itself. Rather, it’s a tech company with a platform, offered to banks with an online presence. Account holders and bank customers are the end-users; but BMTX’s immediate customers are banks, financial institutions, and non-bank companies looking to offer a new service to their own companies. It’s in this niche that BMTX has the power to disrupt the banking industry – especially the digital banking industry. By divorcing the platform creation from the bank company, this tech innovator can focus on building the best software product – and then marketing it.
Like a host of companies, especially in the tech sector, BM Technologies was the subject of a SPAC merger early this year. BankMobile Technologies merged with Megalith Financial Acquisition, in a combination that closed on January 5. The combined entity started out with an enterprise value of $140 million, but the shares have also slipped since – by about 24%.
Chardan’s Dobson sees the company’s business model as the key driver here, writing, “BMTX is a leading provider of banking solutions for the higher-education industry and also allows non-bank corporations to offer banking as a service ("BaaS") to their customers via a suite of white label products best seen today through the current T-Mobile MONEY agreement. Over the next three years, we project growth in these segments will drive an 8.5% revenue CAGR. Should BMTX lock-in a large new customer BaaS win, our estimates could prove conservative.”
His Buy rating on this stock comes with a $21 price target, enough to suggest an upside of 87% over the coming year. (To watch Dobson’s track record, click here.)
Again, we’re looking at a stock with just two reviews – but that’s two positive reviews, supporting the Moderate Buy consensus rating. BMTX has a trading price of $11.23 and an average price target of $23 implies an upside of 105% from that level. (See BM Technologies’ stock analysis at TipRanks.)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.