So far, this earnings season has been quite strong. As of Wednesday, 84% of S&P 500 companies had topped EPS estimates, while 74% beat revenue estimates. This is despite analysts hiking estimates over the past month.

Two of the most impressive performances were by Google (GOOG) and Facebook (FB). Both companies beat on the top and bottom-line by a significant margin and issued guidance above expectations. Their results indicate that businesses are aggressively spending on online advertising to reach new customers.

While Google and Facebook are the two biggest beneficiaries, there might be more upside in some smaller stocks that will also benefit from increased spending on online advertising. Investors should consider buying Shutterstock (SSTK), Travelzoo (TZOO), and Brightcove (BCOV).  

Shutterstock (SSTK)

SSTK is a marketplace that sells stock images, videos, sound clips, and other sorts of content. The company’s business model is attractive as it simply connects artists with potential clients and takes a cut of each transaction. Therefore, it’s capital-light similar to some of the most successful tech stocks of the past generation.

Further, it’s essentially a duopoly with Getty Images in terms of dominating this market. Given that its market and valuation are a fraction of other tech companies with similar market share, it’s unlikely to draw attention from regulators. 

This is reflected in its recent earnings report in which the company topped expectations for revenue, earnings, user growth, and revenue per user. The reality of doing business in 2021 is that every company needs to have an online presence. SSTK is an intermediary of this process and as more content is created online, its business will grow.

In addition to the positive macro environment and strong earnings report, SSTK has exceptional POWR Ratings. The stock is rated an A for its Overall rating which translates to a Strong Buy. This is consistent with its large market share in a growing niche. A-rated stocks have an average annual performance of 30.7% which compares favorably to the S&P 500’s 7.3% annual return. 

Further, it is rated an A for Growth. This is consistent with its recent earnings report. Even more impressive is the recent acceleration in revenue growth which seems likely to continue based on the company’s upgraded forecast.

(Note that SSTK is one of the current stocks in Jaimini Desai’s POWR Growth portfolio. Learn more here.)

Travelzoo (TZOO)

TZOO provides travel, entertainment, and local deals from various companies and businesses and operates in Asia Pacific, Europe, and North America. It has a variety of channels to market its deals including its website, mobile apps, email newsletter, text alerts, and third-party resellers. It serves airlines, hotels, cruise lines, vacation packages, tour operators, destinations, car rental companies, travel agents, theater and performing arts groups, restaurants, spas, and activity companies.

The company was hit hard by the pandemic, however, it’s started to show signs of improvement as travel is picking up. And, many believe there is going to be massive pent-up demand for traveling, once the pandemic recedes. 

This improvement is reflected in its recent earnings report which showed that revenue increased 19.6% year-over-year to $1.56 billion for its fiscal year 2021 first quarter. Remarkably, it managed to remain profitable with a net income of $727,000.

TZOO’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. B-rated stocks have posted an average annual performance of 19.7%. 

TZOO is graded a B for Growth. This is likely due to expectations of a massive increase in travel and tourism over the next 18 months. Already, indicators like flight bookings and hotel reservations are showing that people are excited to get out of their homes. To see more of TZOO’s component grades including Quality, Value, Sentiment, Momentum, Stability, and Industry, please click here.

Brightcove (BCOV)  

BCOV provides cloud content services for digital media. Essentially, companies use its platform to create videos for the web and mobile. It also offers Brightcove App Cloud, a platform for software application and management.

BCOV solutions are provided to a wide array of customers, including those in the education, financial services, tech, retail, government, and media spaces. It’s also likely to benefit from businesses spending more on online advertising to reach customers. 

BCOV posted earnings and sales that topped estimates in its last quarter with an 18% increase in revenue and a 132% gain in EPS. This was the best performance in the company’s history. However, shares dropped as guidance came in under expectations. Yet, BCOV has a history of giving “soft” guidance, so it could be setting up an interesting entry point for bulls.

The POWR Ratings are quite constructive on BCOV as it’s rated an A which translates to a Strong Buy. The company has steady growth and high rates of recurring revenue. This is an indication that customers find value in BCOV’s product. 

BCOV has a B for Sentiment. This isn’t surprising given the recent drop in share prices. For contrarian-minded investors, it could prove to be a buying opportunity. Often, stocks with high sentiment scores have major upside as it tends to be a mean-reverting measure. To see more of BCOV’s component scores including Growth, Value, Momentum, Stability, Quality, and Industry, please click here.

Discover Today’s Best Growth Stocks

This article was written by Jaimini Desai, Chief Growth Strategist for StockNews.com.  Jaimini has been dialed into the hottest trends in investing:

• Electric Vehicles
• 5G
• Internet of Things
• Cloud Computing
• Genomics
• And Much More

If you would like to see more of his best growth stock ideas, then click the link below.

See Jaimini Desai’s Favorite Growth Stocks

SSTK shares were unchanged in premarket trading Monday. Year-to-date, SSTK has gained 21.89%, versus a 12.49% rise in the benchmark S&P 500 index during the same period.

About the Author: Jaimini Desai

Jaimini Desai has been a financial writer and reporter for nearly a decade. His goal is to help readers identify risks and opportunities in the markets. He is the Chief Growth Strategist for StockNews.com and the editor of the POWR Growth and POWR Stocks Under $10 newsletters. Learn more about Jaimini’s background, along with links to his most recent articles. More...

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