TipRanks Smart Growth Portfolio #25: Detecting Upside
Dear Investors,
Welcome to the 25th edition of the Smart Growth Portfolio and Newsletter.
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Portfolio News
❖ Nutanix (NTNX) is set to report its fiscal Q4 2025 earnings on August 27. At the FQ3 earnings, the company guided FQ4 revenue of $635-645 million, implying approximately 17% year-over-year growth, alongside a non-GAAP operating margin of 15.5% to 16.5%. The quarter is expected to show a lower adjusted EPS on a quarter-over-quarter basis, due to higher guided operating expenses, sales cycle elongations impacting revenue recognition timing, and fading benefits of prior one-off financial items, despite solid revenue growth. For the full fiscal year, revenue guidance was raised to $2.52-2.53 billion, reflecting roughly 17.5% year-over-year growth, while the outlook for FY25 non-GAAP operating margin (around 20.5%) and free cash flow ($700-730 million) remained unchanged.
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❖ MKS Inc. (MKSI) is scheduled to pay its next quarterly dividend of $0.22 per share on September 5, with an ex-dividend date of August 25. The company has consistently been paying dividends for over a decade. Its current dividend yield of approximately 0.9% is significantly above the Technology sector average.
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❖ The U.S. government is reportedly in discussions to take a 10% equity stake in Intel, with indications that the Trump administration may consider similar positions in other firms. This has fueled speculation about government stakes in major semiconductor companies such as TSMC, Samsung, and Portfolio holding Micron (MU). However, the administration has since clarified these rumors, stating that while it is evaluating equity stakes in companies receiving support under the CHIPS Act, it does not intend to take shares in large, established chipmakers already investing heavily in domestic manufacturing.
Micron has been awarded up to $6.4 billion in direct funding under the CHIPS Act, with funds earmarked for the construction of two new fabs in Idaho, two in New York, and for the modernization and expansion of its existing Virginia facility. In recent years, the company has dramatically increased its domestic manufacturing commitments, aiming to produce about 40% of its global DRAM output in the U.S. by 2030 and to strengthen America’s chip supply chain for critical industries, including AI, automotive, and defense.
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❖ Clear Secure (YOU) announced the launch of biometric eGates at major U.S. airports ahead of the FIFA World Cup 2026, starting in August 2025 at Atlanta, Ronald Reagan National, and Seattle-Tacoma airports. The technology aims to enhance security and expedite passenger processing without taxpayer costs. Partnering with TSA, CLEAR’s investment underscores its commitment to modernizing America’s airports and improving traveler experience. Expansion across its nationwide network is planned, boosting CLEAR’s market presence and reinforcing its role in the secure identity space. This development positions CLEAR for growth, strengthening its competitive advantage and benefiting shareholders.
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❖ Needham reaffirmed a “Buy” rating on Monday.com (MNDY) with a $250 price target, which implies an upside of about 44% from current levels. The firm cited a positive outlook despite a slight revenue growth target cut from 30% to 25% due to Google pricing changes. MNDY’s strategic shift to larger deals and AI monetization, including a $300 million CRM ARR goal, should offset the impact of reduced self-service sales. Stabilized net revenue retention and confidence in Q4 growth underpin the optimism. Morgan Stanley also upgraded Monday.com to “Buy” while lowering the PT from $330 to $260 target. The firm highlighted MNDY’s strategic shift, strong revenue growth outlook, and attractive valuation metrics as reasons for confidence, viewing the recent share price decline as a buying opportunity.
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Under Review
❖ We are placing Innodata (INOD) under review due to heavy profit-taking and negative technical momentum weighing on the stock.
The company’s July 31 earnings release was a classic “beat and raise,” delivering a 79% YoY increase in revenue and an staggering 375% surge in adjusted EBITDA. Over the quarter, INOD reinforced its balance sheet with swelling cash reserves and locked in new projects with large existing customers, highlighting a robust pipeline expected to fuel strong performance in the second half of the year. Innodata’s business momentum continues, prompting the company to raise its full-year 2025 revenue growth guidance to at least 45% organic growth, up from the previously communicated 40%.
Despite concerns around customer concentration, macroeconomic uncertainties, heavy reliance on the AI cycle, and near-term margin pressure from aggressive investment in new programs, these are “known knowns” that normally wouldn’t have caused a ~30% drop post-earnings. The sell-off looks like classic profit-taking after an 80%+ surge from April lows into earnings, which drove valuations to somewhat overheated levels and was likely read by the market as over-exuberance amid lingering anxiety. On top of that, news of Meta’s investment in Scale AI added to investor nerves over potential disruption in the AI data labeling and service space.
While Innodata’s long-term outlook remains intact – with its position at the forefront of the generative AI infrastructure wave driving optimism – the current setup is fragile, with the broader sell-off in AI-related large and megacaps weighing on sentiment. We are holding the position for now but keeping it under a magnifying glass.
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❖ We are keeping Clearwater Analytics (CWAN) under review, maintaining a “hold-with-vigilance” strategy.
This follows a sharp post-Q2 2025 earnings selloff, with the stock now down over 30% from February highs, suggesting technical breakdowns and market skepticism are currently outweighing strong fundamentals.
Operationally, Clearwater delivered solid results: revenue rose 70.4% YoY, beating estimates, while non-GAAP EPS matched expectations and adjusted EBITDA surged 74%. Annualized recurring revenue climbed 83%, with gross revenue retention steady at 98%, indicating healthy customer growth and integration execution. Non-GAAP gross margin remained robust at 77.4%. The company reaffirmed a confident Q3 outlook, projecting 75-76% YoY revenue growth.
On the flip side, GAAP net loss widened to $24.2 million – driven by acquisition-related expenses – and FCF growth slowed to a modest 4% YoY. Total debt ballooned to $878 million as Clearwater pushes forward with its capital-intensive integration strategy around Enfusion, Beacon, and BISTRO. This expansion approach is testing investor patience, especially in a still-high rate environment, while sentiment may have taken a hit due to the lack of upward revisions in full-year margin or free cash flow guidance despite the strong top-line beat.
Still, business momentum remains positive, buoyed by high-profile customer wins and partnerships – most notably with Bloomberg, which plans to integrate Clearwater’s accounting platform into its enterprise investment solutions. These developments tilt our view toward holding the stock. The latest results validate Clearwater’s acquisition and integration strategy by delivering growth and margin expansion amid complexity. Its growing infrastructure platform, expanding institutional partnerships, and strong retention metrics preserve upside potential.
Analyst sentiment is mostly bullish – Oppenheimer reiterated a “Buy” rating with a $36 price target, and Loop Capital maintained a “Buy” with a reduced $31 target – but some are tempering expectations around synergy timelines. The bullish case hinges on Clearwater’s ability to scale acquired assets from 13% to 20% revenue growth, improve margins, and convert debt-driven expansion into durable SaaS profitability. While these deals strengthen Clearwater’s front-to-back investment operations platform position, the path to earnings leverage remains under closer scrutiny.
The bullish camp expanded on August 12, with Goldman Sachs upgrading CWAN from “Hold” to “Buy” with an unchanged price target of $27. They acknowledge investor skepticism over Clearwater’s multi-business integration efforts but argue that, stripping out Enfusion’s value, the core business trades at ~31x free cash flow – unusually low for a platform growing over 20% annually. They view this disconnect as temporary integration concerns, not a fundamental business deterioration.
For now, we remain cautious though not bearish. Clearwater is executing well on integration and client expansion, but the stock remains under review until we see renewed traction in cash flow, debt reduction, or a reacceleration in valuation momentum.
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This Week’s Top Growth Pick: Evolv Technologies (EVLV)
Evolv Technologies Holdings, Inc. is a pioneer in AI-based weapons detection systems, redefining how public spaces approach physical security. Its cloud-native platform, Evolv Express, blends sensors, computer vision, and machine learning to identify potential threats without slowing down crowds. Built for stadiums, schools, hospitals, and other high-traffic venues, the system replaces outdated metal detectors with faster, smarter screening that integrates directly into broader security operations. Real-time analytics, remote software updates, and a continuously evolving AI engine enable venues to modernize safety protocols without sacrificing flow or experience. Positioned at the intersection of public safety and digital transformation, Evolv isn’t just screening for weapons – it’s reshaping how physical spaces manage risk in a more unpredictable world.
Source: Evolv Technologies Holdings, Inc. corporate website
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Evolv or Lose
Founded in 2013 by security technology veterans Michael Ellenbogen and Anil Chitkara, Evolv Technologies began with a vision to bring machine learning into physical security. Its first commercial product, Evolv Edge, helped validate demand for frictionless threat detection – but the real transformation came in 2019 with the launch of Evolv Express. Designed for continuous, high-throughput screening in public venues, Express marked a major leap in detection speed, accuracy, and integration potential.
The company went public in 2021 through a SPAC merger with NewHold Investment Corp., raising approximately $385 million in gross proceeds. That milestone gave Evolv the capital needed to scale operations, strengthen its AI core, and expand into education, healthcare, and sports and entertainment verticals – sectors now central to its go-to-market strategy.
In the years since, EVLV has steadily evolved from a hardware-focused screening vendor to a cloud-native platform company. The launch of Evolv Insights in 2022 introduced real-time operational analytics to its customers, while the debut of Evolv Cortex AI in 2023 enabled faster, smarter threat identification based on aggregated screening data. Both are delivered via the cloud, allowing for continuous software updates and rapid learning across deployments.
The company has also expanded its detection capabilities beyond entry points. Evolv Extend – a visual AI module launched in 2023 – enables firearm detection using third-party camera feeds, extending protection into open spaces. In 2024, EVLV introduced its Safer Experience System, including Evolv eXpedite, an autonomous bag screening product, and Evolv Eva, a personal safety app.
Strategic deployments have helped build brand visibility. From 2023 through 2025, Evolv systems were adopted by major sports franchises including the Phoenix Suns and multiple MLB stadiums. It also partnered with Cosm to secure immersive venues in Los Angeles and Dallas, and its technology was selected for FIFA Club World Cup 2025 host locations – cementing its position in the live events space.
Meanwhile, Evolv Express has been steadily upgraded, with new hardware generations and open API releases that allow deeper integration with venue management and security platforms. These enhancements have made the system more modular, scalable, and compelling for long-term partners.
Evolv’s transformation over the past five years reflects a clear growth arc – from a niche screening innovator to a category-defining player in AI-based weapons detection. The company’s mix of cloud-first architecture, data-driven intelligence, and strategic venue partnerships positions it well to scale further in a world demanding smarter physical security.
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Screening for Scale
EVLV makes money by selling AI-based weapons detection systems that combine hardware, software, and cloud intelligence into a unified screening solution. Its business is built around Evolv Express – a sensor platform installed at entry points – paired with software and analytics delivered through its Evolv Insights and Evolv Cortex AI platforms. These systems are deployed in high-traffic locations where safety and throughput are equally critical: schools, hospitals, stadiums, industrial facilities, tourist venues, and houses of worship.
The company’s revenue breaks down into two streams: the recurring streams from its Subscription segment, which have surged to 62% of total revenue in Q2 2025 – covering software licenses, analytics, customer support, and remote system monitoring – and Product revenue, which includes hardware sales and installation services. This shift toward a higher subscription mix reflects Evolv’s ongoing transition to a recurring revenue model.
To accelerate this transition, Evolv has committed fully to a direct sales model, moving away from third-party resellers. That introduces upfront cost burdens and short-term margin pressure, especially with the added field service infrastructure. But it also increases recurring revenue per customer, boosts long-term gross profit dollars, and strengthens pricing control. As the installed base grows, the model scales favorably.
The company has also launched Evolv eXpedite – a high-speed, AI-powered X-ray bag scanner – to expand into adjacent screening categories and enhance detection capabilities in layered security environments. This adds differentiation and opens new verticals beyond its traditional walkthrough systems.
Additionally, EVLV recently rolled out a Certified Pre-Owned (CPO) program to repurpose returned or refreshed systems for redeployment in cost-sensitive settings. This program not only extends asset life but also brings margin-friendly scale to price-constrained markets like smaller schools and community venues.
Evolv operates in a fast-growing and underpenetrated market. Its total addressable market (TAM) is estimated at $20 billion, covering physical security infrastructure across public venues, healthcare, education, and enterprise settings. The current footprint covers under 1% of that space, giving EVLV virtually unlimited room to scale across multiple verticals.
Execution risks remain – including rising competition in AI-based screening, the cost and complexity of scaling a direct service model, and potential delays tied to public sector procurement. But Evolv has continued to counter these headwinds with strong renewal rates, growing deployment volume, and successful expansion into sectors like healthcare and K-12 education. Its latest product cycles and customer wins suggest that vertical traction isn’t just holding – it’s accelerating.
Recent federal legislation is also working in EVLV’s favor. The One Big Beautiful Bill (OBBB) fiscal package, passed in July, reinstates full R&D expensing and expands bonus depreciation, both of which directly benefit EVLV’s operating model. These provisions improve cash flow, reduce taxable income, and support the company’s sustained investment in software development, AI model training, and infrastructure expansion.
With a category-defining product and rising demand for screening tech in high-density environments – including new offerings like eXpedite and CPO systems – EVLV is positioned to turn its early lead into a long-term compounder.
Source: Evolv Technologies Holdings, Inc. corporate website
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Recurring Security
Evolv Technologies delivered another standout quarter in Q2 2025. Revenue came in at $32.5 million, up 29% year-over-year and beating analyst expectations by a measurable margin, prompting full-year guidance upgrade. Growth was driven by subscription momentum – with ARR rising 27% YoY to $110.5 million, reflecting continued success of the company’s transition toward a direct purchase-plus-subscription model.
EVLV’s shift to a “security-as-a-service” model has been pivotal, enhancing revenue visibility and customer retention. The success of the transition was further validated as recurring revenue made up 62% of total sales in the quarter, or roughly $20.2 million, with product revenue contributing the remaining 38%. This is a notable increase from the 55% subscription share earlier in 2025, underscoring the company’s accelerating pivot toward SaaS-like business model – which aims to provide more predictable, scalable growth.
Undergoing two strategic shifts at the same time – from product-driven to recurring and from distributor partnerships to direct sales – is a demanding task, but EVLV seems to be navigating it just fine. However, margins remain under pressure in the near term. Q2 adjusted gross margin declined to 55%, compared to 59% in the year-ago period. Management attributed the drop to inventory reserves related to legacy product components and to costs tied to the ongoing shift toward in-house fulfillment under the direct sales model. Gross margin is expected to stay in the 54-56% range for the second half of 2025, reflecting the transitional nature of this strategic pivot.
Meanwhile, the company’s profitability metrics showed meaningful progress. EVLV posted its third consecutive quarter of positive adjusted EBITDA, delivering $2 million in Q2 for a margin of 6%. Adjusted EPS came in at –$0.02, improving from –$0.07 in Q2 2024 and in line with consensus expectations. On a GAAP basis, net loss narrowed slightly to –$40.5 million, or –$0.25 per share, reflecting ongoing investment in growth and operational build-out.
Cash performance also turned a corner. Evolv ended the quarter with $36.9 million in cash – up $2 million sequentially. Operating cash flow was positive $2.1 million, a stark turnaround from –$21.6 million in the same period last year. The company also secured a $75 million credit facility in Q2, providing a substantial liquidity cushion without shareholder dilution. With this line in place, Evolv has a clear runway of at least 12 months to continue executing its strategy.
Looking ahead, Evolv raised its full-year revenue guidance to $132-135 million, up from $125 million previously – representing 27-30% growth YoY. This updated forecast reflects strong Q2 performance, new deployments across schools and healthcare systems, and early traction from recent product launches. Management also reiterated its goal of generating positive full-year adjusted EBITDA and expects to turn FCF positive by Q4 2025. This suggests confidence not only in current demand but also in the scalability of the recurring model.
The financial restatements tied to channel partner misconduct – which previously clouded visibility – are now resolved, and regulatory overhangs have materially diminished. With internal controls strengthened and new leadership in place, EVLV appears better positioned to scale its “security-as-a-service” model while improving margin efficiency.
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Upside Detected
Stock performance and valuation comps for Evolv are complicated, as it operates across industry-bracket borders – a setup that’s increasingly common among high-tech firms. While it remains hardware-based, EVLV’s SaaS-style revenue model and AI-driven screening services blur the lines between hardware and software – especially as it shifts toward a subscription-led “security-as-a-service” model.
That’s why meaningful comps must include both industrial security hardware providers and recurring-revenue software or access-security firms serving similar end markets. These include cloud-based security platforms like Alarm.com, physical security hardware players with fast-growing recurring revenue like Napco, biometric access leaders like Clear Secure (a Portfolio holding), and connected home security champions like Arlo (also a Portfolio holding).
Evolv’s stock has outperformed all of these peers – as well as most ETFs tracking various Tech-sector names – with a year-to-date gain of nearly 100%. Despite the surge – driven by EVLV’s financial outperformance, cleared regulatory risks, successful business-model shift, and soaring demand for its AI-powered security solutions – analysts still see meaningful upside ahead.
Fresh upside potential came into focus following a string of analyst upgrades and target hikes. Lake Street Capital upgraded the stock from “Hold” to “Buy” and raised its price target from $5.50 to $9. TD Cowen reinstated coverage with a “Buy” and a $10 target. Northland raised its target to $9.50 from $8, maintaining a “Buy” rating. Cantor Fitzgerald also kept a “Buy,” while lifting its target from $7 to $9.
Despite its strong stock gains year-to-date, Evolv’s valuation still reflects a high-growth transition story – not a mature SaaS business. EVLV trades at 10.6x trailing price-to-sales and 10.1x forward EV/sales – rich on the surface, but not unreasonable relative to its 54%+ three-year revenue CAGR and a 27-30% full-year growth outlook. While peer valuations are notably lower, so is their forward growth, with only Clear Secure forecast to grow revenue at double digits.
EVLV’s elevated forward EV/EBITDA multiple of ~195x reflects its early-stage margin profile and recent pivot to positive adjusted EBITDA – not yet fully reflected in traditional profitability metrics. But that premium may compress rapidly as operating leverage builds and free cash flow turns positive, as guided. Notably, price-to-cash flow stands at 213x – a number skewed by legacy burn and front-loaded infrastructure investments.
Evolv’s strong gross margins (~55%) and 12+ month cash runway support its strategic execution – suggesting the stock’s valuation premium is more about timing than structural overpricing. And as the recurring model scales, the business becomes more defensible and cash-generative – typically commanding higher multiples.
With demand growing across geographies and sectors, Evolv’s geographic expansion (Canada being low-hanging fruit), product diversification (such as AI-powered analytics), and moat-building partnerships could unlock significant upside, further supporting the case for a rerating as the model matures.
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To Sum It All Up
Evolv is redefining physical security through AI-native screening systems built for speed, intelligence, and scale. Anchored in public safety, it serves critical infrastructure like schools, hospitals, and sports venues where legacy metal detectors fall short. Its cloud-first platform combines real-time analytics, continuously trained AI, and high-throughput hardware to deliver safer, frictionless entry experiences. With a recurring “security-as-a-service” model, direct sales motion, and strong vertical traction, EVLV is building a defensible, data-driven moat. As demand for modern threat detection accelerates and software-led scale improves margins, Evolv offers a high-conviction growth story at the convergence of physical security, public policy, and intelligent automation.
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Smart Growth Portfolio
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Disclaimer
The information contained in this article represents the views and opinions of the writer only, and not the views or opinions of TipRanks or its affiliates and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy, or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices, or performance.
