TipRanks Smart Growth Newsletter #11: The Power of You

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Dear Investors, 

Welcome to the 11th edition of our TipRanks Smart Growth Newsletter.

Through the Smart Growth Newsletter, we aim to provide you with high-potential investment insights to support your growth strategy. Each week, our analysts will identify cutting-edge companies positioned to capture market share and deliver exceptional growth, giving you unique insights for a dynamic investing landscape.

Stocks we recommend have been carefully analyzed and vetted using TipRanks data, ensuring you receive well-researched, high-potential opportunities aimed at delivering substantial, long-term growth. We will present you with a comprehensive analysis that outlines our selection process, giving you clear insights into why each stock stands out as a top growth opportunity.

With that in mind, let’s dive into this week’s top pick and explore why it could be a valuable addition to your Growth portfolio.

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This Week’s Top Growth Pick: Clear Secure (YOU

Clear Secure, Inc., aka CLEAR, is an identity verification and security technology company specializing in biometric authentication and seamless access solutions. Its platform integrates advanced biometrics, artificial intelligence, and encryption to enhance security while streamlining user experiences across airports, stadiums, and enterprise environments. Clear Secure enables individuals and organizations to verify identities quickly, reduce wait times, and improve operational efficiency. With a subscription-based model and an expanding partner ecosystem, the company is driving adoption in travel, healthcare, and digital identity management. Serving a growing user base, CLEAR addresses the increasing demand for secure, touchless, and efficient identity solutions in a digitally connected world.

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Here’s Why YOU’s Stock Is Likely to Grow: 

Market Leadership: A leading player in biometric identity verification, expanding across travel, enterprise, and digital security.

❖ Enterprise Growth Potential: CLEAR Verified is scaling in financial services, healthcare, and online security, driving high-margin revenue.

❖ Strong Financials: Debt-free, GAAP profitable, and generating strong free cash flow, ensuring financial flexibility.

❖ Recurring Revenue Model: Subscription-based business with high retention, pricing power, and an expanding member base.

❖ Shareholder Returns: Actively repurchasing shares and paying dividends, a rare combination among tech growth stocks.

❖ Undervalued Stock: Analysts see significant upside, with attractive valuation metrics supporting long-term gains.

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Clear Origins

Headquartered in New York City, Clear Secure, Inc. was founded in 2010 to develop biometric authentication technology for identity verification. Initially, it focused on airport security screening, using fingerprint and iris recognition to expedite TSA checkpoint access.

The company has expanded through acquisitions, partnerships, and investments which have enhanced its technology and market reach. In 2021, it went public on the New York Stock Exchange (NYSE) under the ticker YOU, raising $409 million to fund product development and expansion beyond airports.

In 2022, it acquired Whyline, a virtual queuing platform, to extend its solutions into healthcare and enterprise access management. The 2023 acquisition of Sora ID enabled Clear Secure to launch a reusable Know Your Customer (KYC) solution for banks and financial institutions.

Today, Clear Secure serves over 20 million members across services like CLEAR Plus and identity verification solutions. Its 100+ partnerships span airlines, stadiums, rental companies, financial services, healthcare providers, and hospitality businesses. The company has integrated its biometric verification with LinkedIn for identity authentication, Alloy for fraud prevention in financial services, and Tappit for event access and payments.

CLEAR is also one of three private companies authorized by the TSA to handle TSA PreCheck enrollments, strengthening its position in travel security. It partners with major U.S. airlines, including Delta Air Lines, United Airlines, and Alaska Airlines, offering loyalty program members discounted or free CLEAR Plus memberships for expedited airport screening. Delta has further integrated biometric-powered identity verification at select Sky Club locations, allowing eligible members to enter without a physical ID.

Beyond airports, Clear Secure has expanded into car rentals through its partnership with Avis, enabling Preferred Plus members to verify their identity digitally at select locations, reducing wait times and offering exclusive benefits. In 2024, CLEAR and Uber announced a partnership to enhance rider verification on the Uber platform, reflecting a broader trend towards integrating advanced identity verification solutions to enhance user trust and safety in shared economy platforms. Also in 2024, YOU partnered with Public, an investing platform, to streamline identity verification for brokerage account openings using biometric authentication.

With a growing presence in travel, finance, healthcare, and digital identity, Clear Secure continues to expand its role in biometric authentication across industries.

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Identifying Opportunities

CLEAR has distinguished itself through its innovative use of biometric authentication and identity verification across multiple industries. The company’s proprietary technology leverages fingerprint and iris recognition to provide secure and efficient identity verification, particularly in environments requiring expedited access and heightened security.

A notable advancement was the introduction of EnVe Pods (Enrollment and Verification Pods) in November 2024. These next-generation kiosks utilize high-resolution, wide-angle cameras for face-first biometric verification, eliminating the need for fingerprint or iris scans. This development significantly reduces verification time, enhancing both operational efficiency and user experience.

A key differentiator is YOU’s federated identity network, which allows users to authenticate once and reuse their verified credentials across multiple platforms and industries. This approach positions Clear Secure ahead of single-use identity verification providers like ID.me, while alternatives such as TSA PreCheck and Global Entry remain confined to government travel programs.

Clear Secure leverages AI to enhance its biometric identity verification processes, ensuring both accuracy and efficiency. CLEAR’s technology portfolio is protected by patents, including one for “physical token-less security screening using biometrics,” which enables individuals to be identified solely through biometric data. This patent highlights the company’s commitment to advancing secure, document-free identity verification.

Clear Secure operates in the fast-growing digital identity verification market, which is being driven by rising security concerns, regulatory compliance requirements, and the increasing shift toward contactless solutions. The total addressable market (TAM) for identity verification was estimated at $30 billion in 2023 and is projected to grow at a CAGR of over 15% through 2028, fueled by expanding adoption across travel, financial services, and digital security applications.

Beyond travel, Clear Secure’s expansion into finance, healthcare, and enterprise security strengthens its ability to capture a larger share of the growing identity verification market. With increasing demand for secure, frictionless, and reusable identity verification, the company is well-positioned to extend its reach across both physical and digital authentication ecosystems.

Source: Clear Secure, Inc.

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Verifying Expansion

Clear Secure operates on a subscription-based business model, with its revenue primarily generated through CLEAR Plus memberships. Members pay an annual fee for expedited security screening at participating airports, leveraging the company’s biometric verification technology. This model provides a predictable recurring revenue stream, contributing to financial stability.

However, it is one of the company’s newest solutions, CLEAR Verified, that represents the strongest growth opportunity. Introduced in September 2023 through a partnership with LinkedIn, the service has expanded through strategic partnerships to enhance identity verification across multiple platforms.

While CLEAR Plus targets individual consumers, CLEAR Verified is a B2B identity verification solution that enables businesses to verify customer identities for account creation, security access, KYC compliance, and fraud prevention. This expansion has added an enterprise business model alongside Clear Secure’s consumer segment, allowing for scalable deployments with higher profit margins due to its minimal physical infrastructure requirements.

CLEAR Verified also diversifies revenue streams beyond travel, reducing dependence on the cyclical nature of travel-related services. Unlike CLEAR Plus, which is directly tied to travel demand, CLEAR Verified addresses broader enterprise needs in fraud prevention, security, and compliance, making its revenue more stable and predictable.

Additionally, CLEAR Verified operates on multi-year enterprise contracts, ensuring locked-in revenue over extended periods. In contrast, CLEAR Plus depends on individual subscriptions, which are subject to churn and demand fluctuations based on travel frequency. As a B2B solution, CLEAR Verified also benefits from higher pricing power, without the churn risk associated with B2C price increases.

While both services generate recurring revenue, CLEAR Verified is a higher-quality revenue stream with significant long-term potential. According to management, the service is already contributing to gross profit dollar growth today, and the company expects it to be a “significant contributor” in 2025 as it continues to scale.

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Scaling Identity

Clear Secure’s path to sustained profitability is supported by its strong financial position. The company has no long-term debt, giving it greater financial flexibility compared to most growth companies that rely on leverage. Without debt repayments or interest expenses, Clear Secure retains more capital for growth and investment.

Over the past three years, the company’s revenue has grown at a CAGR of 48.1%, while EPS has increased at a CAGR of 83.6%. Total Bookings – which include revenue plus changes in deferred revenue – have followed a steady upward trajectory, reflecting expanding demand and pricing improvements.

Source: Clear Secure Q3 2024 Shareholder Letter

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In the past eight quarters, Clear Secure has consistently added approximately 2 million new enrollments per quarter, while cumulative platform uses have risen steadily, reflecting increased member engagement. CLEAR’s gross dollar retention increased to 89%, up 100 basis points year-over-year, reflecting the value delivered through an expanded network and member perks.

In Q3 2024, YOU reported $198.4 million in revenue, marking a 23.7% year-over-year increase. Non-GAAP EPS grew nearly 43%, while Total Bookings reached $227.5 million, up 18.7% YoY, reflecting continued recurring revenue growth driven by membership expansion and price adjustments. The company ended the quarter with over $544 million in cash and marketable securities.

Source: Clear Secure Q3 2024 Shareholder Letter

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The company guided for Q4 2024 revenue of $202-204 million, with total bookings ranging from $224 million to $226 million. CLEAR also projects full-year 2024 FCF to be at least $280 million, a 40% increase year-over-year.

Although Q3 2024 saw negative operating and free cash flow, this was a seasonal effect due to a $182 million annual payment to its credit card partner. In previous quarters, CLEAR generated strong positive operating and free cash flows, and future quarters are expected to reflect normalized cash flow generation.

Additionally, robust Adjusted EBITDA highlights strong underlying profitability. Clear Secure achieved GAAP profitability in Q2 2023, reporting $8 million in net income, and has since remained profitable on a GAAP basis. The company was non-GAAP profitable even earlier, consistently delivering positive Adjusted EBITDA before reaching GAAP profitability.

With multiple consecutive quarters of GAAP profitability, Clear Secure has established a solid financial foundation. Its expansion in CLEAR Plus and enterprise adoption of CLEAR Verified is expected to drive long-term revenue growth and margin expansion. Combined with operating leverage and disciplined financial management, the company is well-positioned for sustained profitability.

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Clearing the Path to Value 

Clear Secure’s stock is up about 23% over the past 12 months, held back by a sharp post-earnings drop. This decline followed a ~70% rally between January and October 2024, which left the stock vulnerable to a correction as investor sentiment grew cautious. The pullback was driven by concerns over seasonality, including the $182 million annual payment, as well as uncertainty around the potential impact of price increases on gross additions and member retention.

Meanwhile, the stock’s decline has brought CLEAR’s valuations to attractive levels, with its TTM and Forward P/E multiples – GAAP as well as non-GAAP – carrying a discount to the broad Technology sector averages. Moreover, YOU comes towards the bottom of the valuation scale for its peers in the industry. Future cash flow analyses suggest the stock may be undervalued by approximately 55%, highlighting its potential appeal for long-term investors.

In contrast to most technology growth companies, CLEAR pays dividends, having initiated them in 2022. The payouts are at the company’s discretion, but YOU has already progressed from once-a-year dividend payment to three disbursements per year.

Enhancing its investment case, Clear Secure has been actively repurchasing shares since 2022. In March 2024, the Board authorized an additional $100 million for the existing share repurchase program. By the end of the third quarter of 2024, the company had repurchased shares totaling approximately $225.2 million.

Analysts at leading Wall Street firms rate Clear Secure a “Buy,” granting it an average price target implying an upside of over 64% in the next 12 months.

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To Sum It All Up

Clear Secure is a leader in biometric identity verification, offering frictionless authentication across travel, enterprise, and digital security. With a subscription-driven model and expanding enterprise adoption, the company benefits from strong recurring revenue and high customer retention. Beyond airport security, YOU is diversifying through CLEAR Verified, a high-margin enterprise solution for identity verification and fraud prevention. Its financial strength, debt-free balance sheet, and consistent profitability provide flexibility for innovation, acquisitions, and shareholder returns. Despite recent stock volatility, CLEAR’s long-term growth prospects remain strong, with analysts recognizing its undervalued potential. As digital identity solutions continue scaling up, Clear Secure is well-positioned to capture new market opportunities, making it a compelling investment in the evolving identity security landscape.

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Click here for more stock analysis from TipRanks Macro & Markets research analyst Yulia Vaiman

 


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