This unknown growth stock has tremendous upside potential
Jamie Louko (Semrush): Most investors might not be familiar with Semrush, but they should. According to Needham analyst Scott Berg, this unknown growth stock has almost 80% upside potential from its current prices.
Semrush specializes in marketing technology tools, helping businesses reach their target audience through marketing. This is not an advertising stock, however. Semrush provides tools for product marketing streams like social media marketing, search engine optimization, and content marketing. It is the top dog in this space, according to G2, with over 91,000 paying customers.
With over 50 tools spanning dozens of marketing categories, Semrush has tools for nearly everything a marketing team may need. Conversely, its rivals tend to specialize in just one or two categories. This gives Semrush the advantage of being one of the only companies providing an all-encompassing suit at scale. It also makes it incredibly hard for customers to leave Semrush once they integrate into the system.
This proved to be true in Q2, when the company saw continued growth, despite uneasy macroeconomic factors. Revenue jumped 39% year over year to $63 million in Q2, and the company saw rapid adoption among large customers. Those spending over $10,000 annually increased 80% versus the year-ago period in Q2. This signals how robust the demand for Semrush and its tools is, even during a precarious economic time.
To maintain this lead, Semrush has invested in itself, specifically its people. The company has been spending heavily to move its Russian employees, who made up over 60% of its total workforce, out of the country permanently. Semrush has done so successfully: Nearly all its employees are now out of the country. Having its employees out of that environment means it now has talent in politically stable countries, potentially allowing them to work more efficiently and innovate. However, this hit profitability: Semrush expects its non-GAAP net loss to reach $30 million for the full year, much worse than its $500,000 non-GAAP loss in 2021.
Semrush is seeing the fruits of its labor with steady growth during the precarious time. With its investments in the future, high adoption rates, and a sticky leadership position, the company has a bright future ahead. Additionally, with the stock down 47% year to date, now seems like a good time to grab a slice of Semrush.
