YB new stock pitches (Fri, Oct 18)

More stock pitches from Gehlen Brautigam in “The Rest of the Pitches” section. *I use Interactive Brokers link to trade international and OTC stocks (if you can’t trade them in your current brokerage)

The Gym Group plc (GYM.L), a low-cost UK gym chain, is showing strong post-Covid recovery with robust membership growth. The new management team is delivering results in line with expectations, and the company is capitalizing on attractive returns from new gym openings. Operational improvements are driving profitability, with even modest membership increases significantly boosting profits due to minimal additional costs. As the lowest-cost gym provider in the UK, GYM offers value to budget-conscious consumers and has demonstrated pricing power despite the weak economic environment. The company's ability to raise prices meaningfully in the current market conditions is noteworthy. Investors can expect continued growth and positive news in the coming quarters, with the full impact of membership gains likely to be reflected in next year's results. The stock's recent positive performance suggests a turning point in investor sentiment, supporting the long-term value creation potential of the business.

Read the full article here. Read time: 1 min

LegalZoom (LZ), an online legal services provider, is poised for growth under new CEO Jeff Stibel's leadership, focusing on Business Scaling, Ecosystem Building, and Expert Integration. The company is transitioning to a subscription-based model for stable revenue and implementing a freemium strategy to capture market share. LZ benefits from high business formation rates and a secular shift to online legal services, with potential to expand beyond its current 1% share of a $51bn SAM. The company expects cost cuts and margin expansion as it shifts towards higher-margin subscription and partner revenues. With a price target of $12.48, representing 82% upside, LZ trades at a discount to peers like Intuit. Risks include unauthorized practice of law allegations, which LZ has successfully defended against, and potential AI-driven obsolescence, though the company is actively adopting AI technologies. The stock's potential upside is based on achieving previous long-term guidance, which is under review by new management.

Read the full article here. Read time: 6 min

Kezar Life Sciences, Inc. (KZR), priced at 82 cents per share, presents an intriguing biotech net/net special situation. With $148 million in cash, equating to $2.03 per share, and a tangible book value (TBV) of roughly $1.84 per share, the company’s board recently rebuffed an initial buyout offer of $1.10 per share plus a contingent value right (CVR) from 13D filer Tang. They have also implemented a poison pill strategy.

Read the full article here. Read time: 1 min