Israeli winners and losers on Wall Street in 2024

Teva has been a standout, and smaller stocks such as Eco Wave and Beamr have given exceptional returns, but there have also been disappointments.

Despite a rocky week last week, the leading New York stock indices are set to record a phenomenal year. The S&P 500 is up 24%, the Nasdaq 100 is up 28%, and both have hit all-time peaks. Israeli companies listed on US exchanges have certainly not missed out. Twelve of them have more than doubled their market caps this year. On the other hand, several have lost value substantially.

The US market has been officially bullish (up 20% or more from a low) since the middle of 2023. But the recovery of Israeli stocks traded in New York was delayed, and most of them started to climb only some time afterwards. "The performance of most of the stocks was fairly tepid until three months ago," says Oppenheimer Israel senior analyst Sergey Vastchenok, "and then the rise in second tier shares began, both on Wall Street in general and in Israeli companies. Until that point, there were many companies with high-growth profiles that struggled to outperform.

"Over the past three months, gaps have been closed in a major way," Vastchenok adds. "This was mainly thanks to an improvement in sentiment towards the Israeli companies, because of the moves to end the war, the victory on the northern front that started with the pagers operation and included the downfall of Assad, and the significant decline in the security threat to Israel, with a hostage release deal now on the horizon as well."

The pricing of the stocks varies with the acceleration in the companies’ growth rates and the expectations of the future, he says. "In general, global investors have gained a great deal of confidence following the elections in the US. Trump’s agenda is pro-growth and is encouraging for the US economy. That has a greater effect on second-tier stocks. If we look at Wall Street and who led the rises, it was the ‘Magnificent 7’. The reason for that was that growth took place in very specific places, chiefly AI and related microchips. Other segments, even within technology, performed less strongly. Now, we have reached the stage in which we can see other stocks participating in the rises. In my view, we are still at an early stage of the process, and Israeli stocks will feel the benefit as well."

Vastchenok believes that the Trump presidency could also encourage a trend of mergers and acquisitions. "Many Israeli companies - perhaps all of them - are candidates for acquisition. In many cases, these are companies with technological innovation that lack the ‘go to market’ and management that global companies are capable of. In my opinion, in 2025 there will be many mergers and acquisitions on Wall Street, including among Israeli companies. Many of them are traded at attractive valuations, and could become targets."

In the primary market, however, things are more complicated. Vastchenok explains that the pricing of the boom days of the Covid pandemic will probably not be repeated, and so a flotation will require compromise on a lower valuation, or at least a lower multiple.

The stars

Twelve Israeli companies, or companies with a connection to Israel, have risen by more than 100% this year (among companies with a market cap of at least $50 million). Renewable energy company Eco Wave Power Global (Nasdaq: WAVE) stood out. It began 2024 with a share price of $1.24, and is now traded at over $14, giving the company a market cap of $84 million, and a return of over 1.050%. Eco Wave Power, headed by its founder Inna Braverman, has developed technology for converting sea waves to usable energy. This month, it announced the launch of an official energy project in Israel. It sells the power it produces to Israel Electric Corporation.

Eco Wave Power was floated in the previous decade on the Swedish stock exchange, and became listed on Nasdaq in 2021. It is currently traded at a record high, and took advantage of the rise in its share price to raise $3 million at $10 per share three weeks ago. As mentioned, the share price is now $14.

Another small company that has shot up is video solutions company Beamr Imaging (Nasdaq: BMR), with a 154% return in 2024. Beamr, headed by its founder Sharon Carmel, appeared on investors’ radar a year after it made a small IPO on Nasdaq. A report by the company of collaboration with Nvidia boosted it by hundreds of percentage points within two days, and it took advantage of the rise to raise $12 million. Since February, however, the share price has fallen sharply, losing 77%.

The Teva renaissance

It’s generally easier for a small company to generate exceptionally good returns, since a relatively large investment by an investment institution can have a dramatic effect on the share price. This year, however, was also the year of the big companies, headed by Teva Pharmaceutical Industries (NYSE: TEVA), which only last week added $5 million to its market cap, taking it to $24 billion. Teva is currently the most valuable Israeli company on Wall Street. In the past, that was its natural status, but the crisis it underwent in the previous decade saw it cede its leadership, until its aggressive streamlining program bore fruit. Only in 2023, after five years of decline, did it start growing again, and this year it raised its guidance. Last week, it published strong results of a trial of an original drug for the treatment of inflammatory bowel disease, and the market rewarded the stock handsomely. Teva has more than doubled its market cap, but it is still a long way from the peak of over $61 billion that it reached in 2015.

The jump in the share price of another fairly large healthcare company, NovoCure (Nasdaq: NVCR), came mainly at the beginning of this month, following good results in its trial of a drug for pancreatic cancer. The company’s market cap is $3.4 billion, up 111% in 2024.

Comeback stocks

Several other stocks that have stood out this year were recent arrivals on the public market, making their debuts in the peak years of 2020-2021, through an IPO or a merger with a SPAC. Two of them are digital insurance companies: Lemonade (NYSE: LMND), which has risen 143%; and Hippo Holdings (NYSE: HIPO), which has risen 175%. Both reported improved results, on the way to positive EBITDA. Digital investigations solutions company Cellebrite (Nasdaq: CLBT) has posted a positive return of 36%, and is one of the few Israeli companies that were merged into SPACs during the boom period and that currently have a market cap higher than their valuation in the merger. Cellebrite was in the news this year when it became known that it participated in the investigation of the attempted assassination attempt on US president-elect Donald Trump at an election rally, and helped the FBI hack the telephone of the attacker.

Another company that was the subject of a SPAC merger and that has risen substantially this year is advertising technology company Innovid (NYSE: CTV), which announced last month that it would be sold at a premium, although still at a valuation lower than its valuation in the merger.

Alongside the new companies, there are Israeli companies that have been traded in New York for years and that have risen sharply this year. Among them are telecommunications equipment companies Allot (Nasdaq: ALLT), which has risen 187%, and Ceragon Networks (Nasdaq: CRNT), which has risen almost 100%. Aircraft components and maintenance company TAT Technologies (Nasdaq: TATT) has also risen significantly, by 149%. Private equity firm FIMI Opportunity Funds, which controls the company, took advantage of the rise in its share price to sell part of its holding for $129 million.

According to Vastchenok, most of the companies that achieved returns in excess of 100% did so thanks to two things: pricing, and accelerated growth. "Allot, for example, was priced very low, because it wasn’t growing, it was posting losses, and its balance sheet was not very strong, raising fears over its financial stability. The last two sets of financials that it released represented a pleasant surprise, as it went back to generating cash." Vastchenok sees the stock as underpriced even after its rise this year.

The disappointments

Two of the large companies stood out negatively: SolarEdge Technologies (Nasdaq: SEDG), and Mobileye (Nasdaq: MBLY). SolarEdge, which at one time was the most valuable Israeli company on Wall Street, with a market cap of almost $20 billion, currently has a market cap of less than $1 billion, after shedding more than 85% of its value since the start of the year.

Solar energy technology company SolarEdge has declined because of difficulties in its sector, but also because personnel problems. Its distributors built up high stocks during the boom in the sector, and when demand fell, they stopped buying from the company, pushing it into losses. "SolarEdge is a very sad story," says Vastchenok. "If you look at the sales multiples, SolarEdge is currently perhaps the cheapest of the Israeli stocks, with a pricing that isn’t even logical. The entire solar market crashed, and the company itself started burning cash and failed to adapt its cost structure to the new reality. Its cash balance shrank, and the share price fell following a series of disappointments."

Vastchenok identifies SolarEdge as a speculative investment for 2025. "There is certainly a chance of SolarEdge getting back to its old self, and the share price is extremely depressed. The company has to get back to generating cash, and we have to see what the new CEO has to offer. The whole sector is coping with a difficult problem that will probably continue, because it’s fair to expect that the Trump administration will cancel President Biden’s green energy initiatives, but SolarEdge’s current pricing reflects an extreme horror scenario. This is a serious company, it has technology and a marketing presence, and it’s traded as though it’s going bankrupt."

Amnon Shashua’s driver assistance systems company Mobileye has also gone downhill this year, shedding almost 60% of its value following a series of cuts to its guidance, and on account of fears that parent company Intel will sell its holding because of its own difficulties. In its latest financial statements, Mobileye made a huge write-down of goodwill, amounting to $2.7 billion. Vastchenok says that Mobileye shares are still not cheap, but that the share price could recover when growth is restored.

Among other stocks that have stood out negatively this year is Perion Network (Nasdaq: PERI), which was hit by changes introduced by Microsoft, which had been its biggest customer, and had to cut its guidance. Vastchenok estimates that Perion, which is traded at a market cap roughly the same as its cash, is ripe for acquisition by a private equity fund. 3D printer company Stratasys (Nasdaq: SSYS), which last year repelled takeover attempts by two companies in the industry at prices of $23.6-25 per share, is now traded at under $10, after losing about a third of its value this year.

Published by Globes, Israel business news - en.globes.co.il - on December 23, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.