TipRanks Smart Growth Portfolio #9: Credit-as-Code
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Dear Investors,
Welcome to the 9th edition of the Smart Growth Portfolio and Newsletter.
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Note to Investors
The last several days’ rally gave stock indexes a solid boost, helping them out of correction territory and sparking optimism. But let’s not forget – the underlying issues haven’t disappeared. Uncertainty around trade, policy shifts, and the broader economic outlook still casts a shadow, especially as we are at the peak of earnings season. Rather than react to every twist in the headlines, we’re staying focused on what really drives long-term performance: strong fundamentals, quality businesses, and smart diversification across resilient sectors. In a choppy market and a weakening economy, it’s the companies with staying power – those that can adapt, grow, and deliver – that offer the best opportunities.
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Portfolio News
❖ Clearwater Analytics Holdings (CWAN) delivered a strong Q1 2025, reporting revenue of $126.9 million – up nearly 24% year-over-year – and comfortably ahead of consensus expectations. The company continues to scale its cloud-based investment management platform, with annualized recurring revenue (ARR) reaching $493.9 million, up 23% year-over-year.
Profitability metrics showed improvement as well. Adjusted EBITDA came in at $45.1 million, up 40% YoY, reflecting a healthy 35.5% margin. Non-GAAP EPS was $0.13, above the $0.12 consensus. On a GAAP basis, net income was $6.9 million, or $0.03 per share.
Key retention metrics remained robust: gross revenue retention was 98%, while net revenue retention (NRR) hit 114%, highlighting both client stability and wallet share expansion. Clearwater also reported a 168% year-over-year increase in free cash flow, underscoring improving operating leverage. Gross margin continued to edge upward, coming in at 78.9% and approaching the company’s long-term target of 80%.
Strategically, CWAN made a series of notable acquisitions – including Enfusion, Beacon, and Bistro – aimed at deepening product capabilities and broadening market reach. Management indicated these moves would strengthen Clearwater’s presence in front-to-back investment operations.
Looking ahead, CWAN raised its full-year 2025 revenue guidance to $535.5-542 million, with adjusted EBITDA projected at $182-185 million. For Q2, the company expects revenue of $129-131 million and adjusted EBITDA of $43-45 million. Notably, Clearwater has not seen a significant impact on its revenues from tariffs, and emphasized that revenues are “very well protected from the downside.”
Taken together, the results reflect Clearwater’s disciplined execution and steady positioning in a highly competitive SaaS landscape, with durable metrics and recurring revenue growth continuing to lead the story.
In other company news, JPMorgan reinstated its coverage of Clearwater with a “Buy” rating, citing its Enfusion acquisition as a key rating driver, expected to strengthen CWAN’s positioning among asset managers and hedge funds. JPMorgan said that this year is likely to be a transition year for Clearwater, but thinks that asset integration with Enfusion “should be seamless” given the compatible cloud-native architectures. Moreover, JPMorgan believes that the integration should result in a comprehensive end-to-end solution and geographic expansion, facilitating sustainable ~20% revenue growth. This sentiment was chimed by Morgan Stanley analysts, who said that recent underperformance is a temporary situation driven by tactical rather than fundamental issues, presenting a buying opportunity for investors. According to MS, Clearwater is well-positioned for future growth and is expected to maintain its robust revenue growth outlook of approximately 19-20% year-over-year, even when accounting for near-term revenue growth dilution from Enfusion.
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❖ ACM Research (ACMR), scheduled to report its Q1 2025 results on May 5, has provided preliminary unaudited estimates for the quarter. ACMR’s revenue is expected to be in the range of $165 million to $170 million, representing year-to-year growth of 8.4% to 11.7%. Q1’s total shipments are expected to be in the range of $154 million to $157 million, a YoY decrease of 36% to 37%. This decrease is due in part to customer pull-ins in Q4 2024, which contributed to stronger total shipments for that period. For reference, combined total shipments for Q4 and Q1 are expected to grow by 8% to 9% versus the prior year periods. ACMR said that it anticipates a return to year-on-year growth in total shipments for the second quarter of 2025, and reaffirmed full year 2025 revenue outlook in the range of $850 million to $950 million, which would represent year-to-year growth of 9% to 21%.
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❖ Alkami Technology (ALKT) reported robust first-quarter 2025 financial results, with revenue reaching $97.8 million, a 28.5% increase year-over-year, strongly surpassing analyst expectations. This growth was driven by a 27% increase in subscription revenue, which now represents 95% of the total. ALKT reported a 33% YoY jump in ARR, as its strategic focus on enhancing digital banking services continued to yield positive results. The number of platform users surged by 2.3 million to 20.5 million, while revenue per registered user rose by 18% YoY. These numbers confirm that ALKT’s underlying fundamentals appear increasingly solid.
Alkami continued to demonstrate meaningful profitability improvements with Adjusted EBITDA of $12.1 million, more than tripling from $3.8 million in the year-ago quarter. Margin expansion continued, with GAAP gross margin improving to 59.0% from 57.8% and non-GAAP gross margin rising to 64.3% from 61.7%. The GAAP net loss narrowed to $7.8 million from $11.4 million, showing consistent progress toward GAAP profitability. Despite the slight miss on non-GAAP EPS (coming in at $0.08 vs. $0.09 projected), ALKT’s quarterly results reflected strong momentum.
Moreover, despite short-term costs, Alkami’s acquisition of MANTL is expected to be accretive to Adjusted EBITDA by 2026, while immediately contributing to revenue growth and gross margin expansion.
Guidance appeared robust, with ALKT expecting its Q2 2025 revenue to rise 33% to 35% year-over-year and an Adjusted EBITDA of $9-10 million, continuing the company’s growth and profitability improvement trajectory. Looking further ahead, the full-year 2025 revenue guidance is set at $443-447 million – significantly above analyst consensus at the midpoint, representing an increase of over 33% from 2024 – with adjusted EBITDA projected at $49.5-52.5 million. This includes approximately $31.4 million in revenue and a $5 million adjusted EBITDA loss from the MANTL acquisition.
Taken together, the results and outlook reinforce Alkami’s position as a scaled operator executing consistently in a still-volatile fintech environment.
Portfolio Updates
❖ We are placing Backblaze (BLZE) under review for a potential sale from the portfolio. On April 24, short seller Morpheus Research released a highly critical report on Backblaze, accusing its management of inflating projections, manipulating financials, and concealing internal investigations. The report also flagged insider selling and alleged retaliation against whistleblowers.
The market reacted swiftly – shares dropped sharply, reflecting concerns around Backblaze’s transparency and financial health. Adding to the pressure, at least three law firms have launched investigations on behalf of shareholders, looking into possible securities fraud and other potential misconduct. But the implications go beyond the stock chart. With Backblaze serving small businesses and individuals alike, the report has sparked fresh questions about the reliability of its data backup services.
Backblaze was quick to respond, rejecting the claims as “baseless, inaccurate, and misleading,” and accusing short sellers of trying to manipulate the stock. The company pointed to independent reviews supporting the accuracy of its disclosures and emphasized that its storage platform remains stable and high-performing. It also highlighted strategic focus on AI/ML and HPC markets, along with recent product rollouts like B2 Overdrive, which are expected to accelerate its growth trajectory.
Still, the numbers tell a mixed story. Net losses continue to outpace revenue growth, and the 80% jump in shares outstanding since its IPO suggests repeated fundraising to cover gaps. That raises important questions about the sustainability of the model.
Despite our optimistic assessment of BLZE’s long-term business prospects, in the near term it faces a binary – “make or break” – outcome. If the lawsuits against the company are dismissed, the stock might stabilize or even surge. But if they proceed toward a court hearing, significantly more downside could be in store.
We are watching developments closely, ready to hit the “sell” button and remove the stock from the Growth Portfolio – but with the damage already done, we believe it’s more prudent to wait for Backblaze’s Q1 2025 report, scheduled for May 7. These results could either validate or refute Morpheus’ claims about cash flow and expenses, giving us a clearer picture as early as next week, while the lawsuits may take far longer to resolve either way.
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❖ Short-seller activity seems to be on the rise lately, with another Portfolio company targeted by a hedge fund known for its short-selling activism. Spruce Point Capital Management issued a strongly negative opinion on Clear Secure (YOU), alleging a declining value proposition and business challenges that are forecasted to intensify. The short seller also warns that key partnerships with airlines, which have driven growth, appear to be reaching maturity, while the current economic environment may further impact airport traffic, affecting CLEAR’s business. At the same time, Clear Secure is facing regulatory uncertainty, with TSA’s “Touchless ID” program posing an emerging threat, as its successful rollout would decrease – if not eliminate – the need for third-party verification layers like CLEAR by integrating identity verification directly into TSA’s process.
While Clear Secure has not addressed these specific allegations yet, the company’s upcoming earnings release on May 8 may provide answers to the concerns raised in the report. We’ll be keeping it under close watch to see whether the short seller’s accusations have merit.
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This Week’s Top Growth Pick: Enova (ENVA)
Enova International, Inc. is a technology-driven financial services provider offering credit solutions to consumers and small businesses primarily in the United States and Brazil. The company operates online through proprietary digital platforms, delivering unsecured installment loans, lines of credit, and receivables purchase agreements. Enova utilizes advanced analytics and machine learning models to assess credit risk, streamline underwriting, and manage fraud. Its portfolio includes multiple brands tailored to distinct borrower segments, with products designed for both near-prime and non-prime markets. Enova’s business model emphasizes data-driven decision-making, regulatory adaptability, and scalable digital infrastructure. As financial access continues shifting toward online channels, Enova plays a role in extending credit to underserved demographics outside traditional banking frameworks.
Source: Enova International, Inc. Investor Presentation Q1 2025
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Credit Where Due
Enova International traces its roots to 2004, when it was launched as the online lending arm of CashNetUSA. It became an independent, publicly traded entity in 2014 through a spin-off from Cash America International. Initially focused on U.S. consumer lending, the company has since evolved into a diversified, tech-enabled financial services provider operating across consumer and small business credit markets.
Over the past five years, Enova has entered a deliberate expansion phase defined by selective M&A, platform enhancements, and deeper investment in applied AI. The 2020 acquisition of OnDeck Capital was a major inflection point – broadening Enova’s offerings to include small business loans and enabling entry into new verticals. The deal also added a complementary underwriting engine and customer acquisition channel, significantly expanding total addressable market while maintaining Enova’s risk discipline. Other targeted acquisitions, including Pangea USA (a digital remittance platform), have extended Enova’s reach into adjacent financial services and expanded its product capabilities.
Technology has remained a central driver of Enova’s scalability and margin profile. The firm’s credit infrastructure is built around AI-powered analytics – including machine learning models, real-time decision engines, and proprietary risk scoring systems. These platforms support everything from initial underwriting and fraud detection to loan servicing and collections. Importantly, Enova owns and continuously refines these models using first-party behavioral and transactional data, giving it a competitive edge in cost-to-serve and pricing accuracy. This architecture has enabled Enova to grow its loan portfolio efficiently while preserving credit quality across changing economic conditions.
Geographically, the company has expanded beyond the U.S. to selected international markets, most notably Brazil, where demand for non-bank financial products and digital lending channels continues to rise. This expansion has been supported by Enova’s ability to adapt its AI underwriting models to local market conditions, regulatory frameworks, and risk profiles.
Operationally, Enova has added integrated payment, funding, and disbursement capabilities to streamline the borrower experience and reduce acquisition friction. The result is a more comprehensive financial services platform with improving customer lifetime value and operating leverage. However, Enova has remained strategically conservative in capital deployment even as it opportunistically grows market share. The firm declined participation in the volatile BNPL space and avoided overexposure to macro-sensitive lending categories. Instead, it has focused on building resilient loan portfolios with dynamic risk-based pricing, supported by first-party data collection and behavioral analytics.
Enova’s recent trajectory reflects a disciplined shift toward durable, data-driven growth – combining selective M&A, product diversification, and AI-led decisioning to scale responsibly across underserved segments of the consumer and small business credit markets.
Source: Enova International, Inc. Investor Presentation Q1 2025
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Lend and Let Scale
Enova International operates a fully digital lending platform built around two core business segments: consumer lending and small business lending. Together, these verticals target borrowers underserved by traditional banks, offering tailored credit products via a scalable, AI-enabled infrastructure.
Consumer lending is Enova’s largest segment, generating 67% of total revenue in 2024. This includes unsecured installment loans and lines of credit offered through brands like CashNetUSA and NetCredit. Customers are predominantly non-prime U.S. consumers facing limited access to mainstream credit. These products are fully originated, underwritten, and serviced in-house using proprietary risk models. Enova’s automation covers over 85% of underwriting decisions, with machine learning optimizing acquisition, fraud prevention, and collections across the lifecycle.
Small business lending contributes the remaining 33% of revenue, primarily through OnDeck, which Enova acquired in 2020. These loans are designed for U.S.-based small businesses typically underserved by commercial banks, and average around $250,000 or less. The business loan portfolio spans over 900 industries, including construction, healthcare, retail, and professional services. Enova’s algorithms assess cash flow, bank data, and creditworthiness in real-time, delivering rapid decisions and capital access to businesses with an average age of 11+ years.
Enova’s revenue is 95% derived from the United States, with 5% attributed to Brazil, where the company is scaling its consumer lending products. This geographic focus minimizes exposure to volatile international markets or U.S.-China trade tensions, and offers a measure of macro insulation relative to peers with global footprints.
Unlike traditional lenders, Enova owns its entire tech stack. Its Colossus™ analytics engine underpins decisioning across both verticals, supported by over 40 million data points and daily-updated fraud models. Enova’s end-to-end digital model, diversified borrower base, and embedded AI architecture position it as both a credit provider and a data-driven financial platform. Its business mix delivers recurring revenue at scale, with strong margin dynamics across economic cycles.
Source: Enova International, Inc. Investor Presentation Q1 2025
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Margin of Safety Net
Enova closed Q1 2025 with revenue of $746 million, up 22% year-over-year, setting a new quarterly record for the company. Growth was driven by rising demand across both consumer and small business lending segments, supported by effective risk-based pricing and strong customer acquisition. Total loan originations rose 26% YoY to $1.7 billion, with the portfolio reaching an all-time high of $4.1 billion in combined receivables.
Profitability remained robust. Adjusted EBITDA rose 27% year-over-year to $190 million, representing an EBITDA margin of 25.5%. Enova reported non-GAAP EPS of $2.98, up 56% from the prior year. Net revenue margin held steady at 57%, while the net charge-off ratio was stable at 8.6%, indicating disciplined credit performance despite continued origination growth.
Enova exited the quarter with $1.1 billion in liquidity, providing ample flexibility for both share repurchases and ongoing platform investments. The company also maintained a balanced capital structure, with leverage supported by predictable cash flows and consistently high operating margins.
Looking ahead, while Enova does not issue formal quarterly revenue guidance, management signaled continued confidence in its “balanced growth strategy” – leveraging product diversity, an AI-native underwriting engine, and a lean, online-only cost base. The company’s performance in Q1 outpaced internal expectations, and commentary suggests tailwinds from sustained consumer demand and stable small business credit quality, even in a slowing macro backdrop.
That said, there are near-term risks worth noting. Higher funding costs and a modest uptick in delinquencies across the broader sector could pressure margins if unemployment trends shift materially. Additionally, while Brazil continues to offer outstanding growth potential, it remains a small contributor (~5% of revenue) and brings FX exposure.
Still, with no China exposure, no hardware supply chain risk, and a deeply embedded analytics infrastructure, Enova remains structurally advantaged. Its combination of high return on equity, scalable tech stack, and recurring revenue mix underpins a financial profile that is both resilient and expansionary. Enova’s current trajectory suggests it is not just navigating volatility – it’s monetizing it.
Source: Enova International, Inc. Investor Presentation Q1 2025
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Credit Check, Value Clear
Like so many technology stocks, ENVA rallied from November 2022 – with the release of ChatGPT providing a starting shot – to a peak in February 2025, after which it gave back some of its previous gains. However, given Enova’s lack of exposure to China, no need for supply chain rearrangement, and moderate valuation even at its all-time high, the stock hasn’t suffered as severe a correction as many of its peers in the Growth bracket of the Technology sector. The stock has gained nearly 50% in the past year – outperforming both the S&P 500 and Nasdaq Composite. ENVA has also far outpaced all but one of its industry peers.
Despite this strong performance, ENVA remains attractively valued – trading at a large discount to both the Technology and Financials sector averages. It sits near the bottom of its peer group on TTM and forward P/E, both GAAP and non-GAAP. Moreover, based on projected cash flows, the stock appears undervalued by 50% to 70% – presenting a compelling entry point.
Wall Street maintains a bullish stance, with top analysts rating the stock a “Strong Buy.” The average price target implies an upside of over 41% for the next 12 months, with some targets suggesting potential gains exceeding 50%.
In a market gripped by volatility and caution, Enova offers something rare – consistent execution, healthy margins, and a valuation that hasn’t caught up to its fundamentals.
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To Sum It All Up
Enova is a technology-led digital lender serving non-prime consumers and small businesses through a fully online platform built on AI-powered underwriting and risk analytics. With 95% of revenue from the U.S. and no China exposure, Enova avoids tariff and supply chain risks while scaling a resilient, asset-light model. Recent acquisitions have expanded its addressable market and deepened product diversity, while disciplined pricing and automation support consistently high margins. Despite strong performance and record loan volume, Enova trades at a steep discount to both tech and financial sector peers. Backed by recurring revenue, robust cash flow, and operational efficiency, Enova offers a rare combination of profitable growth, downside insulation, and valuation upside in a volatile market landscape.
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Smart Growth Portfolio
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Click here for more stock analysis from TipRanks Macro & Markets research analyst Yulia Vaiman
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Disclaimer
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