TipRanks Smart Growth Portfolio #34: The Network Effect
Dear Investors,
Welcome to the 34th edition of the Smart Growth Portfolio and Newsletter.
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Portfolio News
❖ Applied Digital (APLD) announced a 15-year lease agreement with a U.S.-based, investment-grade hyperscaler for 200 megawatts of critical IT capacity at its Polaris Forge 2 campus near Harwood, North Dakota. The deal includes a contractual provision giving the customer the right to lease an additional 800 MW, representing the full 1-gigawatt potential of the Polaris Forge 2 campus. With this agreement, APLD’s total leased capacity across its Polaris Forge 1 and 2 campuses has reached 600 MW, distributed among two of the largest global hyperscalers. Construction at Polaris Forge 2 is underway, with the initial 200 MW expected to come online in 2026 and ramp to full capacity by 2027.
The contract represents approximately $5 billion in total contracted revenue over the estimated lease term, providing significant long-term visibility to Applied Digital’s income stream. This agreement reinforces Applied Digital’s position as a rapidly scaling builder of AI infrastructure in the U.S., aligned with the growing investment in compute capacity for large-language models and cloud AI workloads.
APLD’s expansion in data center and AI processing hardware infrastructure through long-term, multi-billion-dollar deals with the U.S. technology leaders continues to draw analyst praise. Recently, B. Riley raised Applied Digital’s price target from $23 to $47 while maintaining a “Buy” rating, citing substantial and highly visible revenue streams arriving from these contracts.
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❖ Micron (MU) is exiting the server chip business in China, saying it will no longer provide semiconductor products directly used for data centers inside the country. However, the memory producer plans to continue supplying its Chinese clients’ operations outside of mainland China, and is expected to continue regular operations in the country in the auto and mobile chip spheres. The exit is believed to be the outcome of the long-standing ban on its products in critical Chinese infrastructure, slapped on back in 2023. Micron was the first U.S. chipmaker to be targeted by China’s bans, which have since hit Nvidia, Intel, Qualcomm, and others. MU’s total China sales represent just about 12% of its revenue, well below the industry average, and the company is positioned to offset this loss with growth in other global markets fueled by surging AI demand for data center memory. Moreover, demand for MU’s products far outstrips supply, with the global shortage allowing memory chip producers to significantly increase prices. According to many analysts, surging demand from AI buildouts is driving a memory “super cycle,” with some projecting that DRAM could soon become more profitable than HBM.
Meanwhile, Micron continues to progress on its domestic business expansion. The New York Public Service Commission approved a new underground transmission line connecting the Clay substation to Micron Technology’s future semiconductor megafab in Onondaga County. This transmission line will power Micron’s planned $100 billion semiconductor manufacturing campus, which is the largest private investment in New York State’s history. The facility will house the largest clean room in the U.S. and aims to produce about a quarter of all MU’s U.S.-made chips by 2030.
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❖ Atlanticus Holdings Corporation (ATLC) is acquiring about $165 million worth of Vive Financial credit card receivables portfolio from Prog Holdings for $150 million in cash. This acquisition significantly strengthens Atlanticus’ financial services portfolio and expands its presence in the second-look credit market for near and below-prime consumers, a key strategic focus for the company. The deal is expected to boost ATLC’s revenue base, operational scale, and profitability potential, making it an important strategic move for the company.
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❖ Enova International (ENVA) reported strong Q3 2025 operational and financial results. Although revenue slightly missed consensus – rising 16% year-over-year to $803 million versus estimates of roughly $806 million – adjusted EPS beat expectations decisively, surging 37% to $3.36, well above the consensus estimate of $3.03. This performance was driven by the company’s focus on operational efficiency and higher-margin products. Net revenue margin reached 57%, and adjusted EBITDA grew 27% YoY to $218 million.
Total originations jumped 22% YoY to nearly $2 billion, contributing to a record $4.5 billion in total combined loans and finance receivables – a 20% increase from the prior year. SMB products accounted for 66% of the portfolio, with 29% revenue growth driving overall expansion, while consumer products, whose top line increased 8%, comprised the remainder. Credit performance improved as expected despite the larger loan base, with the 30-plus-day delinquency ratio falling to 7.2%. The net charge-off ratio held steady at 8.5%, indicating stable credit quality and consistent customer repayment behavior.
Management highlighted a strong balance sheet with $1.2 billion in liquidity, continued share repurchases ($38 million in Q3, with $80 million in remaining Q4 capacity), and a focus on both organic growth and opportunistic capital returns. No significant credit or competitive risks were noted in the near term.
Following these strong results, ENVA issued updated Q4 guidance, projecting 10-15% YoY revenue growth and a 20-25% increase in adjusted EPS, supported by its diversified portfolio, solid liquidity, and disciplined expense management.
Analysts viewed the results positively, with BTIG raising its price target on the stock from $129 to $144, highlighting the company’s disciplined underwriting and stable credit performance. Citizens JMP likewise lifted ENVA’s target from $135 to a Street-high $149, citing “industry-leading” growth, limited competition across its product lines, and strong excess liquidity. The firm added that it sees a “valuation disconnect” at current share levels.
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Under Review
❖ We are keeping Monday.com (MNDY) under review following a strong decline over the past three months and persistent weakness across the software sector, despite strong fundamentals and analyst support.
The stock has dropped roughly 16% year-to-date, reflecting investor rotation out of SaaS names rather than any deterioration in company performance.
MNDY’s Q2 results were solid, with revenue and non-GAAP EPS surging past analyst estimates, while enterprise customer additions remained robust. Guidance for Q3 and full-year 2025 points to ~26% annual growth with a 13% operating margin and 26-27% FCF margin. Yet the stock sold off sharply after management’s cautious tone on growth and margin trajectory, with R&D spending rising and GAAP operating profit slipping into negative territory.
The market reaction reflects broader fears that “AI is eating software,” compressing multiples for even high-quality SaaS firms. Monday.com’s high forward P/E (~47) leaves little margin for error, and investors remain sensitive to any hint of slowing ARR or margin compression. While the company’s new AI tools – Monday Magic, Agents, and expanded automations – could meaningfully boost enterprise adoption, monetization is not yet visible in forecasts.
Analysts remain overwhelmingly bullish, with consensus price targets averaging $276 (45%+ upside) and revenue growth expectations of 22-30% through 2028. Institutions like JPMorgan have doubled their stakes this year, signaling confidence in the long-term story. But sentiment in the software space remains fragile, and MNDY continues to trade near $190 – a level that could either prove to be a base or a breakdown zone if momentum fails to stabilize.
Monday.com remains a fundamentally strong, cash-rich growth company with world-class products and execution. However, given the sharp technical deterioration and continued sector pressure, we’ll keep MNDY under review until its November 10 earnings report. A confirmed recovery or improving guidance could justify retaining it in the Smart Growth Portfolio – but if the stock fails to regain traction, we’ll likely exit rather than try to “catch a falling knife.”
❖ We are keeping Clear Secure (YOU) under review following its underperformance over the past three weeks, despite the recent rebound.
The stock is down about 14% from its recent peak on September 22 despite several positive news items and announcements. YOU expanded CLEAR+ enrollment to travelers from 40 additional countries across Europe, Asia, and the Americas, enabling international visitors to expedite security screening at U.S. airports through the company’s network of over 150 lanes operating at 60 airports nationwide. Additionally, Clear announced an eGate pilot program designed to provide scalable security solutions ahead of the World Cup and America’s 250th anniversary celebrations.
Earlier, the company revealed a new identity verification solution developed in partnership with DocuSign. This solution leverages Clear’s B2B secure identity platform, CLEAR1, and its biometric verification technology to make it easier and more secure for people to verify their identity directly within the DocuSign agreement experience. The partnership aims to address the challenge of maintaining security amid the growing threat of identity fraud, driven by generative AI’s rising abilities.
Clear Secure’s broad push into finance, real estate, healthcare, and automotive verticals showcases its ability to leverage biometric identity solutions across diverse industries, unlocking new revenue opportunities. Together with extensive partnerships – recent examples include Fidelity National Financial, Nordic, Hackensack Meridian Health, and Snappt – these solutions strengthen its long-term potential. However, investors need to see at least some of these positive developments reflected in YOU’s bookings growth when it reports Q3 results on November 6.
The recent stock weakness may be driven in part by profit-taking after a ~55% rally from mid-July to mid-September, and was also likely exacerbated by worries about the government shutdown impacting Clear’s existing operations and delaying new contracts and regulatory approvals. If these concerns are quickly dispelled, this could lead to a relief rally – potentially even producing a short squeeze. YOU’s short interest is high at about 21% of its float, one of the highest in the software sector, reflecting entrenched negative investor sentiment.
While the company’s fundamentals remain intact and its expansion into various verticals is expected to continue driving growth, investors – along with some analysts like Wells Fargo – are questioning its government-dependent business model at a time when the Trump administration continues to send conflicting signals regarding federal spending plans.
Wells Fargo recently maintained a “Sell” with a price target implying a ~20% downside, citing concerns about the company’s business challenges, competitive risks, and financial outlook. In contrast, D.A. Davidson initiated coverage with a “Buy” rating and a Street-high PT of $45, which signals an upside of nearly 44%, citing optimism about Clear Secure’s growth potential, expanding partnerships, and the increasing adoption of its biometric identity solutions.
With analyst opinion mixed and the stock firmly in oversold territory, we will be keeping YOU under a magnifying glass at least until its earnings date.
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This Week’s Top Growth Pick: Allot (ALLT)
Allot Ltd. is a network-intelligence and cybersecurity company rethinking how service providers and enterprises secure and manage digital traffic. Its software platform analyzes network data in real time to deliver visibility, control, and threat prevention – turning raw traffic into actionable insight and revenue-generating protection services. Positioned at the intersection of connectivity and cybersecurity, Allot enables telecom operators to safeguard millions of users while monetizing security-as-a-service. Focused on 5G, IoT, and cloud-native networks, the company bridges infrastructure management with subscriber defense – helping carriers stay agile as data volumes and digital threats surge worldwide.
Source: Allot Ltd. Corporate Presentation, August 2025
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Packet Revolution
Allot’s story began in 1996 in Hod HaSharon, Israel, when a small engineering team set out to bring structure and intelligence to the growing flow of digital traffic. Its early breakthroughs in deep-packet inspection1 and real-time analytics made it a trusted partner to telecom operators seeking to understand – and control – how data moved across their networks. By 2006, Allot had gone public on the Nasdaq under the ticker ALLT, cementing its position as a global specialist in network intelligence.
The real transformation came later. As 5G, IoT, and cloud adoption reshaped global connectivity, Allot realized that visibility alone was no longer enough – networks needed built-in protection. The company began pivoting from being a hardware vendor into a Security-as-a-Service (SECaaS) platform provider, embedding cybersecurity directly into service-provider infrastructure. This shift required a complete technological and cultural overhaul, which Allot delivered piece by piece.
The transformation accelerated through partnerships. Cloud alliances with Amazon Web Services, Microsoft Azure, and VMware allowed Allot’s solutions to operate across multi-cloud environments, giving operators flexibility in how they deploy and scale security. Network and integration partnerships with Dell, HPE, Amdocs, and Tech Mahindra expanded reach – enabling rapid rollout through established telecom ecosystems while linking its analytics and security modules to carrier monetization systems. In parallel, ALLT deepened its cybersecurity credentials through collaborations with industry leaders such as Palo Alto Networks, integrating advanced threat-intelligence layers with its own inline network defense.
On the operator side, collaborations with Tier-1 carriers including Verizon Business, Telefónica, Vodafone UK, and several major European and Latin American communications service providers (CSPs) demonstrated the scalability of Allot’s model. Telefónica rolled out Allot-powered consumer cybersecurity across multiple markets, while Verizon integrated Allot’s client-less mobile-security technology directly into its network – eliminating the need for user downloads and bringing protection to millions of devices by default.
By mid-2025, these long-term partnerships culminated in a landmark multi-year agreement with a Tier-1 EMEA operator valued in the tens of millions – a clear signal that Allot’s SECaaS vision had arrived.
Nearly three decades after its founding, ALLT stands as a different kind of company – one that has evolved from a behind-the-scenes network optimizer into a multi-cloud, operator-embedded cybersecurity partner. Its partner network remains one of the most underappreciated engines of that evolution – the bridge that connects performance, protection, and profitability in the modern digital ecosystem.
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1 Deep-packet inspection (DPI) is a network-analysis technique that examines the full content of data packets, enabling real-time traffic classification, performance optimization, and threat detection beyond basic routing information.
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Source: Allot Ltd. Corporate Presentation, August 2025
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Traffic Enforcer
ALLT is a network-intelligence and cybersecurity company operating at the intersection of connectivity, visibility, and protection. Its business model rests on two core pillars: Allot Smart and Allot Secure – a dual-platform structure that transforms how CSPs and enterprises analyze, optimize, secure, and monetize network data traffic.
Allot Smart is the company’s analytics and optimization suite. Powered by inline deep-packet inspection (DPI) technology, it analyzes every packet of network, application, and security data in real time to extract actionable intelligence. Service providers use Smart to prioritize traffic, manage congestion, and optimize quality of experience (QoE) while cutting access bandwidth costs by about 10%, deferring costly capacity expansions by one to two years, and reducing revenue leakage by up to 15%. The platform turns raw network flow into an efficiency engine – enabling CSPs to extract more value from existing infrastructure and sustain profitability even in bandwidth-heavy environments.
The total addressable market for Allot Smart – spanning network analytics, traffic optimization, and policy-control solutions for service providers – is difficult to quantify, but industry estimates for comparable segments suggest an approximate range of $5-10 billion, growing at a double-digit annual pace.
Allot Secure is the company’s growth engine. It’s a network-based, carrier-embedded cybersecurity suite that enables CSPs to offer protection to millions of subscribers through a zero-touch model2. Built for both consumers and small-to-medium businesses (SMBs), Allot Secure delivers comprehensive protection across mobile, fixed, and converged networks, defending users from malware, phishing, DDoS attacks, and other emerging online threats. The platform gives operators a meaningful upside, typically boosting average revenue per user by about 10-15%. That tangible return has accelerated adoption among carriers, fueling strong customer acquisition and year-over-year growth above 70%, with the segment now contributing roughly 27% of ALLT’s total revenue mix.
This network-native Security-as-a-Service (SECaaS) model differentiates Allot sharply from endpoint or app-based cybersecurity vendors. CSPs like Verizon Business, Telefónica, and Vodafone have adopted it to offer branded protection plans directly to their customer bases – creating a scalable, low-friction channel with high stickiness and recurring subscription economics.
The total addressable market for network-delivered cybersecurity and intelligence – Allot Secure’s addressable domain – is estimated at roughly $10 billion, with double-digit growth expected as telcos expand digital-service bundles for consumers and SMBs. With deployments across more than 500 service providers and 1,000 enterprises, ALLT commands a credible footprint but still holds only a modest global share – leaving ample headroom for expansion as operators seek to capture more value beyond connectivity.
Recent U.S. policy under the One Big Beautiful Bill (OBBB) fiscal package reinforces these tailwinds. The restoration of immediate R&D expensing and extended bonus depreciation benefits innovation-driven firms like ALLT, improving cash flexibility, and effectively subsidizing ongoing software development. The Trump administration’s renewed emphasis on domestic digital infrastructure and cybersecurity investment also broadens long-term demand, particularly among North American operators seeking secure, compliant network solutions.
ALLT’s transformation from a hardware-centric vendor into a SaaS-like, software-first company is nearly complete. With recurring security revenue climbing, an entrenched operator base, and a partner ecosystem spanning AWS, Azure, VMware, Dell, HPE, and Palo Alto Networks, the company is steadily shifting from traffic control to protection control – monetizing network intelligence while securing the connected economy.
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2 Zero-touch refers to a provisioning model where cybersecurity protection is activated automatically at the network level, requiring no manual setup, app installation, or user configuration on individual devices.
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Source: Allot Ltd. Corporate Presentation, August 2025
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Control Shift
Allot turned in another strong quarter in Q2 2025, extending a six-quarter streak of non-GAAP EPS beats and four consecutive revenue beats. Revenue rose 9% year-over-year to $24.1 million, powered by the surge in its network-delivered cybersecurity business, Allot Secure. Annual recurring revenue (ARR) for Secure jumped 73% to $25.2 million, contributing over a quarter of total revenues for the first time – a clear sign of momentum behind ALLT’s pivot toward recurring, software-based income.
Profitability moved sharply in the right direction. Non-GAAP operating income reached $1.2 million versus a $1 million loss a year earlier, while gross margin widened to 73.4% from 70.6%. That marked Allot’s fourth straight quarter of triple-digit non-GAAP EPS growth, following two quarters of high-double-digit gains, as operating leverage from the SECaaS model began to take hold. Operating cash flow improved to $4.4 million from $1.2 million last year, keeping free cash flow positive even with heavier R&D spending.
The balance sheet was strengthened through a $46 million follow-on share offering used to repay $30 million in convertible debt and convert another $8.5 million into equity. While modestly dilutive, the move wiped out all debt and left ALLT with $72 million in cash – a clean, well-funded runway to finance growth internally without added leverage.
Recent wins reinforced that growth base. Play (Poland) expanded its deployment of Allot DNS Secure to protect fixed-broadband users – building on its earlier mobile rollout – while Rakuten Mobile (Japan) integrated Allot’s Network Protection and Deep Network Intelligence into its cloud-native Symphony platform, showcasing the company’s strength in 5G-ready, containerized architectures. These additions, along with a multi-year Tier 1 EMEA telecom contract valued in the tens of millions of dollars – Allot’s largest deal in five years – broadened its footprint while underscoring its growing partner ecosystem.
Analyst consensus for Q3 2025 calls for revenue of $25.67 million and non-GAAP EPS of $0.04 – up 35% year-over-year, but slower than the triple-digit gains of prior quarters. The moderation doesn’t reflect weakness; it’s simply the cost of growth. ALLT is investing in new Secure offerings like OffNetSecure and expanding into the SMB market – moves that temporarily lift expenses but set up the next leg of scalable, high-margin growth.
Guidance remains upbeat. Management reaffirmed full-year 2025 revenue of $98–102 million and raised its Secure ARR growth outlook to 55-60%, implying about 15% top-line growth and further margin expansion. Non-GAAP profitability is expected to keep improving as recurring revenue scales, with analysts projecting GAAP breakeven in 2026 and sustained non-GAAP profits from 2025 onward as operating leverage deepens.
With stronger gross margins, a debt-free balance sheet, and a model shifting firmly toward recurring security revenue, Allot is gearing up for 2026 from a position of control – financially stable, operationally focused, and on track for consistent profitability. That foundation is already reflected in investor sentiment, as markets are acknowledging that Allot’s turnaround is no longer just a plan – it’s fully underway.
Source: Allot Ltd. Corporate Presentation, August 2025
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Allot of Gains
There aren’t many direct public comparables for Allot – few companies operate natively within telecom networks or blend traffic intelligence with Security-as-a-Service. Its closest peers span both carrier-embedded and SaaS-based models: A10 Networks, Radware, and NetScout Systems mirror Allot’s network-centric DNA, while Rapid7, OneSpan, and Telos reflect adjacent software-security plays at varying stages of the recurring-revenue transition. Together, they frame how investors benchmark Allot’s scale, margins, and growth trajectory within the connected-network and cloud-security ecosystem.
Among these peers, ALLT has posted the strongest share gains over the past 12 months, climbing more than 170%, although year-to-date it comes second after Telos, logging in “only” 68%. Allot’s stock surged more than 55% following its standout Q2 earnings report, and while broad-market risk-off bouts over the past three weeks have trimmed that gain, it’s still up by about 35% post-Q2 and heading into its Q3 release. Despite that, analysts see a potential upside of nearly 40%, citing a successful business strategy, a sprawling partner ecosystem, and broad cybersecurity-demand tailwinds.
The company’s profitable transformation, supporting strong investor sentiment, is drawing fresh attention to the previously thinly covered stock, with TD Cowen and Needham both initiating ALLT with “Buy” ratings in the past week. Needham noted that current consensus estimates don’t yet capture the full benefit of the Verizon agreement, while TD Cowen analysts expect Allot to sustain double-digit growth over the coming years.
Institutional holdings of the stock have been rising along with growth and coverage, increasing from roughly 39% at the end of 2024 to more than 51.5% as of October 2025, indicating growing confidence in the company’s financial setup among large investors. ARK Investment Management recently lifted its ALLT position by 12%, joining JPMorgan Chase, QVT Financial LP, Renaissance Technologies, and other investment giants among the top shareholders.
Meanwhile, the company is moderately valued, especially when taking into account the massive improvement in profitability and capital efficiency over the past year. Moreover, Allot wields enviable gross margins – reaching above 73% in Q2 – well above the tech sector average and already comparable to levels typically seen at more mature SaaS names such as its primary peers. The company is progressing fast toward its sector averages on EBITDA margin, while already surpassing them (and some peers) in terms of FCF margin.
As for valuation metrics, Allot’s non-GAAP trailing and forward P/E ratios are considerably higher than those of its peers (except Telos, which lacks a P/E due to continued losses). These elevated multiples are justified by the steep earnings inflection as SECaaS scales and operating leverage expands. Meanwhile, the company’s forward EV/Sales ratio of 3.8x is above the peer average but moderate for a company with 70%+ ARR growth and improving margins. Allot’s EV/EBITDA remains elevated but is falling quickly as margins expand and the Secure segment scales.
The most striking fact is that on a forward Price/Sales basis, the stock sits on par with A10, Radware, and NetScout – all larger, more mature, and lower-growth peers – underscoring a valuation disconnect rather than parity. Its forward non-GAAP PEG of about 1.0 – notably below both the tech-sector average and most of its peers – reinforces the view that the market still isn’t fully pricing in ALLT’s shift to a SaaS-like model and expanding margins.
Taken together, Allot’s improving fundamentals, accelerating profitability, and parity-level valuation with slower-growth peers point to a company still in the midst of a market re-rating – as recurring revenue keeps expanding and execution remains consistent, the gap between Allot’s operating reality and its current multiple is likely to narrow.
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To Sum It All Up
Allot offers a growth investment case built on convergence, consistency, and underrecognition. Operating where network intelligence meets cybersecurity, the company has turned a legacy hardware niche into a scalable, software-led platform with recurring revenue at its core. Execution has been methodical – stronger margins, disciplined cost control, and deepening Tier-1 partnerships are translating into visible operating leverage. Yet the stock still trades as if its transformation were incomplete, overlooking the structural shift to subscription economics and platform-driven growth. That disconnect defines the opportunity. With rising ARR, expanding carrier adoption, and a balance sheet built for reinvestment, Allot is positioned to compound through the next stage of network-native security growth – a steady compounder gaining both speed and recognition.
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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.
