Here are two of what I believe to be the best AIM stocks to buy right now.

Gear4music

Online musical instrument retailer Gear4music (LSE: G4M) is a company whose value has more than halved in the last year. That seems rather overdone.

Sure, the company’s purple patch may be over now that Covid-19-related lockdowns are a thing of the past. Nevertheless, recent trading doesn’t justify such a huge fall, in my opinion.

Total sales hit £47.2m in the three months to the end of 2021, down from the £52.2m achieved in the previous year. Even so, it’s far better than the £40.3m recorded two years earlier. In other words, Gear4music has been steadily executing its growth strategy if we ignore the anomaly that was 2020.

There are headwinds to consider, of course. The rise in the cost of living may dent demand for discretionary items of the sort G4M specialises in, albeit temporarily. Growth in Europe has also been held back due to “short-term Brexit-related challenges“, it said.

There’s little G4M can do about the former. Nevertheless, the January launch of its new home cinema and hifi equipment site AV.com will give the company access to a whole new market and set of customers.

As far as the latter is concerned, business from the region should recover in the next financial year, supported by new distribution centres in Ireland and Spain. Analysts have taken this on board and now have the stock trading on 13 times forecast FY23 earnings.

I expect another trading update from Gear4music in late April. On balance, I’d be prepared to start buying today.

Bioventix

Another of the best AIM stocks to buy right now, in my opinion, is antibody supplier Bioventix (LSE: BVXP). Having tumbled over 25% in the last 12 months, its shares now trade close to the 52-week low. Again, this strikes me as a potential opportunity to acquire shares in a quality business when it’s (temporarily) out of favour.

Yesterday, the company announced revenue fell 8% to £4.73m in the second half of 2021. Much of the blame lies with the pandemic forcing hospitals to focus on other things other than clinical diagnostics. Pre-tax profit fared slightly better, dropping to £3.56m from £3.72m the year before.

Based on its attitude to dividends, management doesn’t seem fazed. Yesterday, Bioventix announced a first interim payout of 52p per share — up 20% on last year. This doesn’t sound like a company in trouble to me. Indeed, Bioventix continues to look financially sound with £5.1m in cash balances.

Of course, all results announcements are backward-looking. And, yes, there’s nothing to stop the share price from sinking lower if the rotation into value stocks continues.

On a positive note, new products are “moving into commercial development” and will add to revenues in time. The antibody troponin (used to identify heart attacks) also looks set to become a great source of growth moving forward.

All told, I remain bullish on Bioventix over the medium-to-long term. I’d be happy to buy this AIM stock today.

The post 2 of the best AIM stocks to buy now appeared first on The Motley Fool UK.

Bum note

Revenue over the six months to the end of September came in at £64.7m. This was down 8% on the same period in 2020. However, one must remember that G4M benefited hugely from multiple UK lockdowns over that time. As such, beating that haul would always be a challenge. Earnings before interest, tax, depreciation and amortisation (EBITDA) also fell 43% to £4.8m.

On a more positive note, revenue and EBITDA were still 31% and 140% higher respectively than in the same six months in 2019. For me, this is a better gauge of how far the company has come. 

Here’s where things get more problematic. While the dip in sales was inevitable, investors didn’t like the news that revenue over G4M’s third quarter to date has been “slower than expected due to ongoing Brexit supply chain challenges“. Sales in Europe had also been slower than predicted.

This loss of momentum has forced CEO Andrew Wass and co to revise their guidance for the full financial year. EBITDA of “not less than £12m” is now expected — 36% lower than last year. It’s also lower than the £14m projected by analysts.

All this doesn’t look great, especially as the company only upgraded its forecasts back in June following a storming Q1. Nevertheless, G4M does expect the aforementioned challenges to be sorted out by the final quarter as its new distribution hubs in Ireland and Spain get up to speed.

Clearly, a successful pre-Christmas trading period is vital if the shares aren’t to fall further. However, I’m inclined to think that today’s fall is simply a bum note. The unstoppable rise of online shopping, even for very specific items like instruments, should allow G4M to continue grabbing market share. The proposed move into the audio-video space via the acquisition of AV Distribution Ltd is also a sensible move and should help to diversify earnings. 

There’s still much to like about this growth stock and I’d be willing to buy at this level.

On song

G4M is not the only music-related growth stock out there. Another company — audio products supplier Focusrite (LSE: TUNE) — also reported to the market this morning.

In sharp contrast to G4M, TUNE reported a 34% jump in revenue to just under £174m. Adjusted EBITDA also soared 67% higher to £47.5m as musicians and podcasters snapped up Focurite’s products “in record numbers” over lockdowns.

There could be more good news to come. As live events return, CEO Tim Carroll said that demand had “remained strong” into the new financial year. Product launches also make him “cautiously optimistic” on achieving “modest revenue growth“. However, operating costs are expected to rise, partly in light of supply chain pressures.

Of the two growth stocks mentioned, I’d probably snap up G4M over TUNE. I’ve always felt that the latter’s valuation was getting ahead of itself. Even before today’s 8% rise, the stock was trading on 39 times forecast earnings. As good a company as this is, that’s very rich.

For me, G4M probably offers a better margin of safety.

The post The Gear4music (G4M) share price just crashed. I’d buy this growth stock now appeared first on The Motley Fool UK.

Having fallen an eye-watering 65% in value in just 12 months, is this a golden opportunity for me to snap up the stock on the cheap or a warning to steer clear? I think it’s very much the latter.

THG share price: blame the shorters?

Not providing analysts with what they expect is never likely to impress. Using a platform to publicly blame hedge funds for poor performance instead feels even worse, especially as only one has actually declared a short position against the company (Psquared Asset Management). I somehow doubt it will be the last.

Instead, Moulding should really be addressing concerns that Japanese investment firm SoftBank‘s interest in the company might be waning. Given the cost involved, better justification for wanting to spin off THG’s beauty division so soon would also be ideal. The market’s reaction, while undeniably brutal, is understandable.

For me, the capitulation of the THG share price only serves to reinforce a few rules I have about IPOs, namely ‘don’t believe the hype’ and ‘wait for things to settle’. This is particularly true for unprofitable companies.

Personally, I can think of many other UK-listed growth stocks with an online focus that I’d rather invest in right now. One such candidate — musical instrument retailer Gear4music (LSE: G4M) — reported to the market this morning. 

Back on song

I’ve been a fan of this company way before the word ‘coronavirus’ entered our lexicon. Of course, we now know that multiple UK lockdowns turned out to be a boon for the York-based business. Its shares duly rose from around 150p in March 2020 to over the 1,000p mark by this July.

Since then, the volume of chatter around the stock has inevitably declined and profit-taking has commenced. Notwithstanding this, today’s update on trading over the six months to the end of September read well to me. 

At £64.7m, total sales may have been 8% below that achieved over the same period last year. However, this was always going to be a tough comparative to beat. Personally, I prefer to focus on this figure being 31% above that achieved in pre-Covid 2019. For me, this shows just how well management is executing its growth strategy. 

As one might expect, G4M hasn’t been immune to headwinds. A 16% fall in sales in Europe was attributed to “post-Brexit challenges“. On a more positive note, two new distribution centres in Ireland and Spain are now operational and should help address this going forward.

Perhaps most encouragingly, CEO Andrew Wass stated that the company was “well placed” to deal with the ongoing supply chain crisis after “deliberately” increasing inventory in advance to the tune of £30.4m. As such, G4M’s founder is confident that full-year numbers will meet analyst expectations.

With its peak trading period fast approaching and a home cinema and hifi-focused site launching in January (AV.com), I’m bullish on the outlook for G4M stock.

But quite where the THG share price goes from here is anyone’s guess. Over to you, Mr Moulding.

The post Forget the THG share price! I’d buy this growth stock instead appeared first on The Motley Fool UK.

Podcast powerhouse

Forecast upgrades at Audioboom (LSE: BOOM) have given the podcast giant’s share price a modest bump in Tuesday’s session. Up half a percent on the day, the company is 344% more expensive that it was a year ago.

Audioboom has said that it will “generate revenues significantly in excess of current market expectations” this year. And it expects adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) to exceed 2020 levels too. Signed advertising bookings in the first half now account for almost all the recently upwardly revised sales expectations for the whole year, it said.

Audioboom said that the upgrade has been “driven by recent developments in relation to Audioboom’s content-focussed expansion plan.” It noted that improvements to its advertising tech capabilities and associated revenue streams have enabled the re-monetisation of its content back catalogue.

The UK media share has been able to increase average advertising unit pricing by 22% versus the same 2020 period thanks to high demand for premium ads. Audioboom has also achieved a fill rate north of 97% on its top 15 shows so far in 2021.

The business has also continued to grow its audience through new content partnerships and new show launches on its Audioboom Originals Network like Dark History. This particular show topped the Apple Podcast Chart in the US, UK, Canada, and Australia following its release in early June, with episode one attracting more than 2m views.

According to the Triton Digital Podcast Report, Audioboom is the fourth-largest podcast publisher in the US by weekly reach. And the UK share has increased its weekly reach by 69% from the corresponding 2020 period.

Another UK share beating expectations

The release of solid financials has helped the Gear4music (LSE: G4M) share price rise too. Up 2% on Tuesday, the UK retail share has gained 144% in value over the last 12 months.

Gear4music — which sells musical instruments and sound equipment online — has benefited greatly from the e-commerce explosion following the coronavirus outbreak. Revenues here shot 31% higher year-on-year during the 12 months to March 2021, to £157.5m. This helped pre-tax profit soar to £14.6m from £3.1m a year earlier.

The number of active customers at the retailer jumped 32% from financial 2020 levels, to 1.06m. Chief executive Andrew Wass said the business “is in a strong position to build upon the significant success” of last year, too, as it develops its bespoke e-commerce platform and opens new distribution centres in Ireland and Spain.

Gear4music also said trading in the first two months of the new financial year had been better than expected. The retailer is retaining “a good proportion” of last year’s gross margin gain. All the means Gear4music now expects this year’s results to beat prior expectations.

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“Exceptional financial performance”

Today, G4M said the company had delivered an “exceptional financial performance” despite the hurdles caused by Covid-19 and our exit from the EU.

Thanks, in part, to high street retailers being forced to shut up shop, revenue jumped 31% to £157.5m in the 12 months to the end of March. The number of active customers served by G4M’s multilingual, multicurrency websites grew by almost the same percentage, to 1.06 million.

It gets better. Earnings before interest, tax depreciation and amortisation (EBITDA) soared 154% to £19.8m. The latter was ahead of what analysts were expecting the AIM-listed firm to deliver.

So, what does the future hold for Gear4music? Well, here’s where things get interesting.

Beating expectations

Since more UK lockdowns look very unlikely, G4M’s management doesn’t expect trading in the first six months of FY22 to match that seen in FY21. As a consequence, profits will likely be lower. 

Taken on its own, this might be enough to generate a drop in the share price. After all, the company is effectively saying it’s hit a high note and all the good news is now priced in. However, the opposite has actually happened this morning. I think there are three reasons for this.

First, the UK growth stock had already flagged the possibility that trading would moderate, helping to cushion the blow as/when it happens.

Second, it was announced today that trading in the first quarter had been “stronger than the Board previously expected.” As a result, the company went on to say that financial results for the FY22 would now be better than first thought. 

Third, G4M’s growth strategy remains compelling. It is now preparing to launch two new distribution hubs in Ireland and Spain. These will complement those it already has in North Yorkshire, Sweden and Germany.

On top of organic growth, the company has also begun making acquisitions. Drum brand Premier and bass amp brand Eden have already been snapped up. I wouldn’t be surprised if the company continues adding to its portfolio over the next 12 months. Finances are certainly solid enough to allow this (it held net cash of £2.7m in March).

Risks

G4M’s shares were up over 4% in early trading. The question is, will these gains stick? I’m bullish for the reasons mentioned above. However, the shares are certainly not devoid of risk.

Unlike some retailers, G4M doesn’t strike me as one that most people will visit on a weekly basis. More generally, shoppers will be wanting to spend their cash on things they’ve not been able to do. Both need to be borne in mind by prospective investors. This is even more important given the frothy-looking valuation (44 times forecast earnings, before markets opened).

I also suspect a few investors will decide to bank some profit. After all, the stock has climbed over 200% in just one year! The fact that G4M’s stock is less liquid than those higher up the market spectrum might exacerbate any downward pressure as well.

On balance however, I think G4M remains a very promising UK growth stock and one I’d be happy to hold for the long term.

The post If I had £1,000 to invest, here’s a top UK growth stock I’d buy now appeared first on The Motley Fool UK.

Halfords

Bike and car parts retailer Halfords (LSE: HFD) was a huge beneficiary of the push to exercise during lockdowns. With movement restricted and most shops and all leisure facilities closed, what could be better than peddling the misery away? Sales duly rocketed, followed by its share price.

The company, which also operates auto repair centres, releases its latest set of full-year numbers next month. While the inevitably good numbers should push the shares higher, a cautious outlook could do the opposite. After all, trading may be about to get tougher as the UK prepares to fully unlock.

Halfords faces two problems: those with bikes won’t be in a hurry to replace them and people now want to spend their money on things they’ve been itching to do. On top of this, it still presents as a pretty unexceptional company without last year’s unexpected tailwind. Margins are low. Returns on capital — what it makes on the money it invests in itself — are also very average.

I wouldn’t buy and might even sell some if I needed cash to invest in what I see as a better growth pick.

AO World

Another company that’s done well out of the pandemic has been online domestic appliance seller AO World (LSE: AO). In fact, it was one of the best-performing UK shares last year. The share price rocketed from 57p a pop in April 2020 to 411p a share by 31 December.

Since then, however, we’ve seen sentiment turn. I don’t think this is surprising. CEO John Roberts is confident that AO will “continue to be a double-digit growth business in the year ahead,” but the market seems to think otherwise. On 29 times earnings, the stock also looks pretty expensive for a company with no discernible moat or market-leading position. Will customers remain loyal? I’m sceptical.  

Prior to Covid-19, AO was a loss-making, ‘jam tomorrow’ stock. Without evidence that it can continue to thrive in normal market conditions, I’d be taking some profit here if I hadn’t already started doing so.

Gear4music

Multiple UK lockdowns have also been kind to online musical instrument seller Gear4music (LSE: G4M). Over the last year, the share price has leapt 225%! The question now is whether this momentum can be sustained after the company reports to the market on 22 June.

Like Halfords, Gear4music faces some tough comparisons going forward. While playing music can be a lifelong pursuit, one has to wonder whether people have all the guitars, drums and trumpets they need for now. G4M’s small-cap status also means it’s more susceptible to big share price moves compared to the average FTSE 100 juggernaut. If investors get nervous, the party could be (temporarily) over.

But the long-term growth prospects are surely excellent thanks to the gradual reduction of independent musical instrument retailers on the high street. For this reason, I’d be happy to hold this UK share. If the shares fall back next month, I’d back up the truck and buy too.

The post Would I buy or sell these top-performing UK shares? appeared first on The Motley Fool UK.

Tumbling demand

Play on!

Of course, if I’m looking for a beneficiary rather than a victim of the multiple lockdowns, I can look no further than online musical instrument retailer Gear4music (LSE: G4M).

Back in November, I said that the company would continue to benefit from more people spending time at home and that has proved to be the case. 

At £52.2m, total sales were up 30% over the three months to the end of 2020. Overseas sales were a particular highlight, rocketing 51% higher than in 2019. UK sales rose 10% to £23m. What a contrast to Whitbread and other battered FTSE 100 stocks!

All told, gross profit rose 47% to £15.6m, leading the company to predict that earnings for FY21 would now be ahead of recently upgraded market expectations “and not less than £16.5m“. To put that in perspective, earnings for the last financial year came in at £7.8m.

Yes, this was a peak trading period and, yes, the shares are up over 500% since the dark days of March 2020. However, as CEO Andrew Wass suggested this morning, the lifting of restrictions should see other parts of the business — relating to rehearsing and performance — doing well. 

There could be some profit-taking ahead but I’d still back Gear4music to perform for investors over the medium-to-long term.

The post FTSE 100 stock Whitbread still looks a great recovery play to me! appeared first on The Motley Fool UK.

Even so, this return is nothing compared to what investors could have made through careful stock-picking. Unsurprisingly, some of the biggest winners since March’s market crash have been in the small-cap arena.

Today, I’m looking at a personal favourite — online musical instrument seller Gear4music (LSE: G4M). Shares in the business are up a stunning 400% in the last eight months. Based on today’s set of interim results, it’s not hard to see why. 

Lockdown beneficiary

At £70.2m, revenue was 42% higher over the six months to the end of September than that achieved over the same period in 2019. Gross profit also soared — by 61% — to £20.1m. 

This isn’t exactly a surprise. When lockdowns were enforced in March, many of us were forced to entertain ourselves in the comfort of our own homes — a perfect scenario for companies selling products such as video games, books and, yes, musical instruments. As a consequence, Gear4music had 403,000 new customers making purchases over the six months — a 52% improvement on the previous year. 

All told, a record net profit of £4.9m for the period was reported. This compares favourably to the £0.1m loss over the same period in 2019. 

But will this form continue?

Will these impressive gains be maintained? I think so. In fact, I remain bullish on Gear4music from both a near-term and long-term perspective.

While one would suppose that many budding musicians will already have most of what they need during the second UK lockdown, news that trading in November “continues to be very strong” would suggest otherwise.

Of course, it could be that people are simply cautious on lockdown restrictions actually being lifted and are getting their Christmas shopping done online instead. Regardless, those already owning the shares will likely be encouraged by news that results for the full year are now predicted to be ahead of market expectations, which were only recently upgraded. Not many FTSE 100 constituents are saying this right now!

On a longer time horizon, the signs look equally positive. As CEO Andrew Wass commented today, more people now “appreciate the benefits that playing and creating music can bring.” Moreover, the fact that mastery of an instrument takes a long time could play into the company’s hands.

The ongoing growth in online shopping should also be good news, albeit at the expense of independent retailers on the high street. I suspect many of the latter will become casualties of 2020 and shut up shop for good.

With European hubs and distribution networks already up and running, negotiating Brexit shouldn’t be an issue either.

FTSE 100 beater

There’s certainly nothing wrong with owning a FTSE 100 tracker or exchange-traded fund. This is particularly the case for those who have little interest in the stock market. Over the long term, anyone adopting this strategy should do well so long as they reinvest the dividends they receive.

But I remain a huge advocate of buying shares in promising small-cap UK companies that can grow revenue and profits far quicker than your typical FTSE 100 giant.

For me, Gear4music continues to hit all the right notes. 

The post Forget the FTSE 100. This UK small-cap share is up 400% since markets crashed! appeared first on The Motley Fool UK.

Puppy power

Thanks to the demand for new companions (particularly puppies) during the first lockdown, I continue to be bullish on pet product retailer Pets at Home (LSE: PETS). The fact that owners won’t be prepared to cut back on spending means that even a prolonged recession is unlikely to impact the industry too heavily. This is assuming most manage to keep their jobs, of course. 

Now, some of this is clearly already priced-in. After all, Pets at Home has more than doubled in value since March thanks to strong trading. That said, there’s no guarantee it won’t fall along with everything else in the event of a second lockdown being announced. In such a scenario, panicked investors tend to sell what they can, not what they should. Pets at Home is a liquid FTSE 250 stock, hence it may be thrown out with the bathwater.

If so, I think this would be a great opportunity. As we often say at Fool UK, a market crash should be embraced by patient investors, not feared. For me, Pets is a solid hold for the long term.

Game on!

Another share worth buying on any lockdown-related sell-off, in my opinion, is game developer Codemasters (LSE: CDM).

Not that a second stay-at-home order is really necessary for Codemasters and other developers to continue thriving. Gaming is already a multi-billion dollar industry. Perfectly-timed for Christmas, the forthcoming release of the PlayStation 5 and XBox Series X/S in November will only serve to further increase its popularity. 

Like Pets at Home, shares in Codemasters have already doubled in value in the seven months since the market crash.  However, I think they could go even higher. Trading has “remained strong” during the first half of the year, partly due to the rise in digital sales thanks to Covid-19. The launch of games such as F1 2020 and Fast & Furious Crossroads also helped. Another title — DIRT 5 — will be released next month. 

With no debt and almost £50m net cash on its balance sheet, Codemasters also looks financially bulletproof. It’s an easy ‘buy’ for me.

Hitting a high note

The first national lockdown played right into the hands of online musical instrument seller Gear4music (LSE:G4M). I can see this happening again if another series of restrictions are announced.

Again, some of this is already reflected in the £130m valuation slapped on the York-based business. Since March’s market crash, the shares have soared roughly 300% in value! 

Even if a lockdown wasn’t announced in the next few days/weeks, the company is likely to see a flood of orders come in for Christmas. Its pureplay status also allows Gear4music to avoid the high fixed costs that come from having a high street presence.

The small-cap is due to announce interim results on 17 November. There’s no telling where the share price will be by then, but I continue to think the business will go from strength to strength.

The post Stock Market Crash! 3 no-brainer growth shares I’d buy for a SECOND UK lockdown appeared first on The Motley Fool UK.

Of course, there are no guarantees when it comes to investing. Here, however, are three minnows that I suspect will have rewarded investors by the time they’re ready to swap the office for the beach.

Future ISA star

As I predicted almost two months ago, online instrument supplier Gear4music (LSE: G4M) released some cracking numbers this week. The business has benefitted hugely from the lockdown with more people than ever learning and practicing music to pass the time. 

Naturally, the share price has reacted positively to news that profits have exceeded management expectations. Whether this momentum will remain near-term is hard to say. The lifting of restrictions could mean earnings have peaked for a while. 

On the other hand, the likelihood that many independent retailers on the UK’s high street will find the going tough could play into the £90m-cap’s hands. Indeed, CEO Andrew Wass has said Gear4music is “confident of continued financial improvements during FY21.“

Regardless of what happens in the rest of 2020, I remain confident this stock could prove a real winner for long-term investors.

Move fast

Another small-cap stock that could reward patient ISA investors is software company Oxford Metrics (LSE: OMG).

Already operating in over 70 countries, Oxford assists firms in measuring and capturing motion. It does this via its infrastructure management-focused Yotta division or movement analysis Vicon business.

What I particularly like about this company is the diversity of its clients. These range from highways authorities needing help to manage road networks to film studios wanting support in creating visual effects. 

Perhaps unsurprisingly, Oxford’s share price hasn’t really recovered from March’s sell-off. It’s still 33% below the all-time high hit back in February.

While recent trading is unlikely to be good, I sense now might be an opportunity for ISA holders to acquire a slice of the business whose fundamentals have been steadily improving. The balance sheet also shows no signs of distress, boasting net cash of almost £11m.

Expensive…but worth it

Last on my list of small-cap opportunities is US-focused software firm Craneware (LSE: CRW). Its tech is designed to highlight operational and financial risks to hospital managers and how they can make things more efficient.

The thing to realise about Craneware is that its valuation has always been high. Despite the recent market crash, shares still trade on a forecast price-to-earnings (P/E) ratio of 31 for FY 21 (beginning in July).

Before dismissing the company, however, it’s worth mentioning that the five-year average P/E is 36. Moreover, Craneware has consistently shown why it deserves its premium rating. Margins and returns on capital are seriously high. It also dominates its niche and carries very little debt. This all piques my interest, even if the adoption of its new analytics platform is taking longer than expected. 

Craneware’s share price could remain under pressure if we get a second Covid wave/market crash. However, I’m having trouble finding reasons to see why it won’t reward ISA investors over the long term.

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