YB new stock pitches (Wed, Dec 11)

Daktronics (DAKT), a market leader in electronic displays with 46% share and an 11% revenue CAGR since 1993, is underperforming due to poor governance under current Chairman Reece Kurtenbach. Alta Fox, owning 12%, seeks board refreshment to improve shareholder alignment and management. With these changes, DAKT could reach $40/share by FY28 (100%+ upside). The company benefits from secular growth in sports/live events, commercial, and transportation markets, and advancing LED technology. However, it faces challenges including inconsistent EBIT margins, weak international performance, and outdated compensation structures. The bull case involves improved governance, better capital allocation, enhanced shareholder engagement, and potential margin expansion to mid-teens. Risks include entrenched management and the board's resistance to change. Even in a status quo scenario, DAKT offers upside potential, though less than with shareholder-driven reforms.

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Optex Systems Holdings (NASDAQ: OPXS) is a leading manufacturer of precision optical sighting systems for military and commercial applications, with Q3 2024 revenue up 26.3% to $9.06M and net income doubling to $1.26M. The company has a robust backlog of $45.6M, up 9.1% from October 2023, with 90% of revenue from defense customers. OPXS is an entrenched supplier for long-standing military programs and has a high market share in the US, expanding globally. Recent developments include a $2.1M order for Laser Protected Periscopes and the acquisition of Speedtracker. The company has a clean balance sheet with no debt, and the CEO owns 13+% of outstanding shares. OPXS is positioned to benefit from increasing defense budgets, with new opportunities in the M10 Booker Tank program ($20M potential) and a $1B worldwide market. The company demonstrates strong operating leverage, with improving factory efficiency above ~$20M revenue.

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Piper Sandler has elevated Vimeo, Inc. (ticker: VMEO) to Overweight from Neutral and raised the price target to $10 from $7, selecting it as their premier small-cap internet choice for 2025. They commend Vimeo for restructuring their costs in the past two years and refining their marketing strategy. Moreover, the firm highlights Vimeo's burgeoning enterprise segment, now boasting over $100M in annual run-rate, poised to propel growth irrespective of self-serve results. They also note that Vimeo's new CEO has expedited the company's operational pace.

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