Stocks to buy

Since its debut on July 25, Getty Images Holdings (NYSE:GETY) stock has been an exception among special purpose acquisition company (SPAC) stocks. Since the start of the market downturn, investors have shied away from SPACs. A sharp reversal, considering this was an area where excitement ran high during 2020 and 2021.

What’s going on with this stock seems somewhat reminiscent of those times. Since CC Neuberger Principal Holdings completed the purchase of Getty, a provider of stock images, the stock has zoomed more than 3x.

This could possibly be for a reason unrelated to fundamentals (a short-squeeze), but it’s not for certain. Yet, while talk of it being a short-squeeze stock could scare you off at first, that’s not to say it’s going to drop following its stunning pop. Rather, there may be worthwhile long-term upside for shares.

GETY Stock and Its Recent Spike in Price

Up until its merger closing, there was admittedly little excitement out there about this SPAC deal. After the announcement last December, for most of 2022, shares traded below their $10 per share original SPAC price.

But not too long after its deSPACing, GETY stock went parabolic. Investors owning it beforehand have seen a triple-digit percentage return in a matter of weeks. Many, including InvestorPlace contributor Dana Blankenhorn, have argued that this stunning jump in price, at a time when SPAC stocks are out of favor, is due to one factor: speculation over a possible short-squeeze.

With a low amount of outstanding float, traders are hoping they can force short sellers to pay up in order to close out short positions. However, while it’s getting a lot of press, the possible short-squeeze isn’t what’s important here. What’s more important for investors now is whether the stock, based on its fundamentals, is worth buying.

Taking a closer look at the details, the answer to this question appears to be “yes.” While it’s a SPAC stock, its business is far more established than many typical SPAC merger targets. Furthermore, Getty has many ways it can materially re-accelerate growth and increase earnings.

A SPAC Stock With Substance

As short-squeezes have a short shelf life, you may be worried that a big plunge awaits GETY stock. Not only that, while so far it’s been the exception to the rule, we’ve seen time and again SPAC stocks sputter after an extended period of time.

So, why do I think the situation here could play out differently? To reiterate a point I made above, this is an established, profitable business. As CEO Craig Peters has put it, Getty has “real revenue, real customers, and real profits.”

This sets it apart from the scores of early-stage and pre-revenue companies that go public via the SPAC route. It could also minimize downside risk. With this concern out of the way, let’s look at the other side of the equation: upside potential. Yes, it’s far past the point of being in high growth mode.

Even so, that doesn’t mean it’s entered zero-growth mode. In 2021, its revenue grew by around 12.7%. Getty’s shift to a subscription-based business model has started to pay off. It could further increase its rate of growth, thanks to a growing addressable market, and by moving into faster-growing areas like stock video footage and non-fungible tokens (NFTs).

The Takeaway

Short-squeeze status may have you thinking enthusiasm for this stock will be short-lived, but I wouldn’t jump to that conclusion. Getty is steady when it comes to earnings. In contrast to more speculative SPAC stocks, its $45.7 million in reported net income last year is not too shabby.

The move to a higher-margin subscription model points to further increases in its profitability. Along with strengthening its existing stock photo business, new opportunities in video and other areas could lead to even more growth.

On top of what it could achieve organically, there’s big potential here as well if the company chooses to further bolster Getty’s position in the industry, through strategic acquisitions of rivals like Shutterstock (NYSE:SSTK).

Consider GETY stock a buy. There’s a lot more at play with this leading stock-photo provider than recent headlines suggest.

GETY stock earns an A rating in my Portfolio Grader.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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