Insiders are pouring millions into these two stocks, with Morgan Stanley saying they have upside potential of up to 140% — here’s why you should be careful

Legendary investor Peter Lynch has a clear view of corporate insiders and their trading in the stock market. He put it simply: Insiders can sell stocks for a variety of reasons, but they only buy stocks when they think the price will go up.

Keeping a close eye on insider stock purchases can prove to be a profitable investment strategy. Company insiders, which include company executives and board members, have valuable knowledge of company policies and performance that can affect stock prices. They can use this information to make informed decisions when buying stocks, but are required by law to publicly disclose their own stock holdings. This transparency allows the public to gain insights from these purchases.

With that in mind, we used TipRanks' Insiders' Hot Stocks tool to draw our attention to two stocks that are showing signs of strong insider buying and warrant a closer look. Additionally, these stocks are getting strong endorsement from analysts at banking giant Morgan Stanley and offer upside potential of up to 140%. Let's take a closer look.

match group (MTCH)

The first stock we look at is Match Group, the parent and holding company of some of the most active dating sites in the online world. Match Group owns Tinder, OKCupid and – plus nine other popular and niche online matching sites. The company has been in business for over twenty years and boasts that 65% of all LGBT+ couples can trace their relationships back to a match group website.

That's not too surprising since Match Group specializes in niche dating sites. The company's overall success and longevity is based on the size of its operations and the breadth of its reach. The company's apps have been downloaded over 750 million times and the products are available in 40 languages. With 40% of all new relationships in the US starting online, Match is poised for a strong future.

The company is currently reporting mixed results. In the most recent reporting quarter, 1Q23, Match reported total revenue of $787.12 million. That was down 1.5% year over year and missed analysts' forecast by nearly $7 million. The company raises money worldwide and therefore also reports sales on a currency-neutral FXN basis; According to that metric, revenue was $822, up 3% year over year.

Bottom line, Match earned 42 cents per diluted share. That EPS figure was down from 60 cents in the year-ago quarter, but beat estimates for the current quarter by 2 cents.

Turning to insiders, we find that CEO Bernard Kim has expressed his confidence in MTCH by purchasing 31,439 shares. This cost him over $1.08 million in an open market purchase; Kim now owns a $2.5 million stake in the company.

Kim may have been optimistic, but he's not the only bull at Match Group. Lauren Schenk, an analyst at Morgan Stanley, was also bullish on MTCH shares, writing, “Given the encouraging April update (Tinder revenue picks up again, downloads improve, new user growth improves), we remain on our unconsensus view Tinder's assessment is convincing.” can accelerate sales growth back to double-digit or better values ​​by the end of the year. Until then, there is a lot of uncertainty and therefore a lot of uncertainty, but for now our thesis remains broadly on track and at 11xFY23 EBITDA, our updated sum-of-the-parts analysis implies the market is paying ~12x for Tinder, which is what we think After one is a compelling entry point for a 45-50% margin business, even if Tinder only delivers 10-12% revenue growth going forward.”

Schenk keeps an Overweight (ie, Buy) rating on MTCH stock with a price target of $95, suggesting strong upside potential of 140% over the next 12 months. (To view Schenk's track record, click here)

Overall, The Street analyst consensus gives MTCH a Moderate Buy rating based on 21 recent analyst ratings, which include 15 “buy” versus 6 “hold” values. Shares sell for $39.72 and the average price target of $53.42 implies a ~34% one-year gain. (See MTCH Stock Forecast)

Technically align (ALGN)

We started with a classic in the online dating space — but finding a date that leaves you with a great smile is always easier, and next stock, Align Tech, can help with that. Align works with both high tech and orthodontics; The Company's flagship product is a clear orthodontic aligner for tooth straightening. The company uses a range of high-quality 3D scanners to manufacture its proprietary Invisalign product.

Align's beginnings date back to the 1990s, and Invisalign was first approved for use in 1998. The company has grown into a $23 billion giant over the past 25 years and employs over 24,000 people worldwide. Align had combined sales of $3.8 billion last year and has served approximately 15.1 million Invisalign patients since the product was launched.

The current year started better than the analysts had expected, both in terms of sales and profits. Revenue for the first quarter of '23 was $943.1 million, beating expectations by $39.9 million, while diluted earnings per share (non-GAAP) of $2.25 exceeded consensus by 13 surpassed cents. However, the Company's case volume decreased 1% from 575.4,000 in Q1 2023 compared to Q4 2022.

On a positive note, Align's clear aligner revenue, its key revenue driver, grew 8% sequentially, despite a 1% decline in case volume. The company believes that rising consumer confidence and easing of restrictions in China after the COVID-19 crisis will bring stability to the target market. Align is forecasting revenue in the range of $980 billion to $1 billion for the second quarter of 2023.

Notably, Kevin Dallas, a member of the company's board of directors, made a significant insider purchase last week. Dallas showed its confidence in the company by investing nearly $2 million in purchasing 7,000 shares. As a result, his total ownership of ALGN is now approximately $3.7 million.

Morgan Stanley 5-Star Analyst Erin Wright is also bullish on Align. She writes of the company, “Our longer-term thesis for ALGN remains that its leadership position in an attractive, severely underpenetrated market, coupled with increasing adoption of digital workflows, should support +DD LT's revenue growth.” Overall, we don't believe that the current valuation reflects the company's longer-term growth prospects as its shares now trade at 35.8 times our 2024 earnings per share (EPS), putting it on par with its closest competitor Straumann.”

Wright's comments support her “Overweight” (ie, “Buy”) rating on the stock, and her price target of $383 implies solid 26% upside potential over a one-year period. (To view Wright's track record, click here)

Once again we are faced with a stock whose consensus rating is Moderate Buy from the street. Align's 7 most recent analyst ratings are each broken down into 5 Buy and 1 Hold and Sell; The stock's average price target of $349.33 and trading price of $304.68 suggest upside potential of about 15% in a year. (See ALGN stock forecast)

For great stock trading ideas at attractive valuations, visit TipRanks Best Stocks to Buy, a tool that brings together all of TipRanks' stock insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is very important to do your own analysis before investing.

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