Expert in identity verification Clear Secure (NYSE: YOU) shows why investors should wait a few quarters following an IPO before buying the stock. The stock rose past $60 in its first few weeks after debuting at $31 in June 2021. It has since plunged roughly 70% from its peak.
The benefit of being patient is that the stock is now cheaper and the company has greatly improved its operations. Revenue increased 166% from 2021, and its free-cash-low (FCF) margin was 33% in 2023. Clear Secure's dividend yields 1.2% at the current share price. Here's why Clear Secure will rise as identity security becomes more important in today's tech-driven environment.
See Clear Secure Clear Secure, founded in 2010, has 20 million subscribers, up 33% in 2023. Users can enroll using their driver's license (or passport) and a selfie on its app to be biometrically validated throughout the Clear ecosystem. Free users can enter their flight number to combine gate numbers, walking timings, and Uber pick-up times and reserve an airport security time window.
However, the corporation is best known for its special entry lanes for its 6.7 million Clear Plus members at 56 US airports and 20 more worldwide. Plus members speed through priority lanes for $189 a year due to pre-verification. This time-saving advantage is a no-brainer for millions of regular flyers, explaining its 23% fourth-quarter 2023 membership growth.
These are only some of Clear Secure's airport streamlining capabilities. The company launched TSA PreCheck Enrollment Provided by Clear with the Transportation Security Administration (TSA) to help fliers speed through the airport.
PreCheck customers pay $1.30 a month to expedite security screening and "to keep their coat and shoes on and their laptop in their bag," according to CEO Caryn Seidman-Becker. Clear Secure can capitalize on this new relationship, which is only available in Newark, as the two complementing services spread out in additional airports and offer huge cross-selling possibilities.
Best yet for investors Clear Secure's identity network goes beyond airports. At 19 sports and entertainment venues, the company has priority lanes. Moving its identity-verification expertise from airports to stadiums and other venues seems like a natural development opportunity. Our two-sided network of members and business partners should get stronger as it becomes more valuable for venues and their customers.
While Clear Secure's expansion into new airports and verticals is encouraging, its cash production may impress investors more. The company has hit breakeven and become a cash cow with a 33% FCF margin.
These unexpected numbers show that Clear Secure has enough cash for dividends and share repurchases because 40% of its value is cash. At the current distribution level, the company uses 17% of its FCF, allowing room for dividend hikes. With $125 million left on its share repurchase authorization, management will likely keep buying back stock at a very low price-to-FCF ratio of 9.
High projected growth rates and a deeply discounted stock valuation could boost the company's share price like a coiled spring. Clear Secure's low prices may be due to biometric data privacy concerns, but the Department of Homeland Security has given its information security program the highest safety grade
This flawless safety rating is vital for any cybersecurity organization to avoid losing customer and market trust from breaches like Okta's. However, Clear Secure's outstanding growth rates, expansion possibilities, tremendous profitability, and low valuation make me willing to take this necessary risk and buy shares of this brilliant dividend stock.
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