Issue #28

The $5 Stock Duo We're Watching Right Now (Before Earnings Surge)

🏁 As Q4 earnings season heats up, two small-cap stocks under $5 are quietly building momentum—and could be ready to surprise the market.

On one side, Emerald Holding (NYSE: EEX) is staging a comeback in live B2B events, turning post-pandemic recovery into real revenue growth. On the other, Zedge (AMEX: ZDGE) is transforming from a ringtone relic into a profitable AI-driven content platform built for the creator economy.

For investors, both names offer rare value in different corners of the market—one a cyclical rebound story, the other a digital turnaround with scalable upside.

👉 Looking for a recovery play riding a strong event-industry rebound?
👉 Prefer a tech stock pivoting toward subscriptions and AI monetization?
👉 Want exposure to high-upside small caps before Q4 catalysts hit?

In this edition, we break down two under-$5 stocks that could jump as earnings roll in. Let’s dive in.

Emerald Holding (NYSE: EEX)

Emerald Holding is a leading operator of business-to-business (B2B) trade shows and events in the United States, complemented by a growing portfolio of media, content, and e-commerce solutions. The company is primarily focused on creating market-driven platforms that connect buyers and sellers, generating year-round commerce and community engagement across a diverse range of sectors, from jewelry and technology to healthcare and luxury.

Business Model and Revenue Streams 📦

Emerald’s business model is built around integrating the physical event experience with powerful digital tools, allowing it to capture value from three distinct, yet complementary, segments:

• Connections (Core Events): This is the company's foundational and largest revenue stream, derived from organizing over 140 B2B trade shows and events annually. Revenue here primarily comes from exhibitor fees, sponsorship sales, and attendee registrations. This segment is driven by the post-COVID recovery and the recognized necessity of face-to-face commerce.
• Content: This division provides B2B print publications and digital media products that complement the core events. It generates revenue through advertising, subscriptions, and content-marketing solutions, keeping customer engagement high between annual events.
• Commerce (Digital Platforms): This high-growth segment includes B2B e-commerce platforms like Elastic Suite and Bulletin. These platforms create a year-round digital transactional layer, allowing manufacturers and retailers to conduct business regardless of physical location. This recurring digital revenue stream helps diversify the company away from event-only seasonality.

Macroeconomic Impact: As a major B2B event and media company, Emerald is highly sensitive to macroeconomic sentiment. When corporate marketing budgets and consumer confidence are strong, exhibitor spending increases, driving event revenue. Conversely, a slowdown in the economy or the specific sectors it serves (like luxury or technology) can pressure organic growth. Notably, the company’s sizable floating-rate debt means that easing interest rates have a direct positive impact on its free cash flow, offering a material financial benefit in a favorable monetary environment.

Recent Performance and Corporate Developments 📈

Emerald has demonstrated impressive resilience and returned to strong top-line growth, signaling a robust recovery in the live events space.

Q2 2025 Financial Highlights: 💰

While the event business is cyclical and subject to timing shifts, the recent quarters highlight fundamental strength:

• Total Revenue: Q2 2025 revenue showed a jump of over 22% year-over-year, reflecting both the full return of key events and the contribution of recent acquisitions. This strong top-line performance underscored the demand for in-person B2B connections.
• Adjusted EBITDA: The company maintained strong Adjusted EBITDA and margin, confirming effective cost management and operating leverage despite an evolving macroeconomic backdrop.
• EPS Miss: The reported Earnings Per Share (EPS) for Q2 2025 missed analyst expectations, primarily due to factors like event scheduling and strategic growth investments.

Strategic Initiatives and M&A: 🤝

Emerald has been active in portfolio optimization, focusing on both digital enhancement and high-growth niches.

• Acquisition of Generis Group (August 2025): Emerald acquired Generis Group, accelerating its expansion into executive-level summits. This strategic move strengthens the company's offerings in the high-value, C-suite event space, which often commands higher margins.
• Digital Leadership: The company recently appointed a new Chief Digital Officer, underscoring its commitment to integrating its Connections, Content, and Commerce platforms and driving digital transformation to enhance customer ROI.
• Capital Allocation: The Board recently authorized an extension and expansion of its share repurchase program through December 2025, demonstrating management's belief that the stock is undervalued and providing support to the share price.

Path to Profitability and Fair Value 🎯

After the severe disruption of the 2020-2022 period, Emerald is firmly on a path toward sustained GAAP profitability, which is largely dependent on the execution of its integrated strategy.

Achieving Sustainable Profitability: The key is leverage. As event revenue normalizes and surpasses pre-pandemic levels, the company's operational structure, combined with lower interest expense (should rates stabilize or drop), drives profits rapidly to the bottom line. The growth of the higher-margin Commerce (digital) and Content segments provides crucial non-cyclical revenue, stabilizing future earnings. Analysts currently project that Emerald will achieve full-year GAAP profitability for the current fiscal year (2025).

Fair Value Assessment: Given its robust asset base (leading trade show brands), improving cash flow, and significant year-over-year revenue recovery, the stock is viewed as potentially undervalued. While its Price-to-Earnings (P/E) ratio is high due to its recent return to nominal profitability, its Price-to-Sales (P/S) ratio remains attractive relative to its growth trajectory. Independent valuation models suggest a strong upside potential based on projected free cash flow and EBITDA growth.

Analyst Estimates and Ratings 📊

In line with the profile of under $5 turnaround stocks gaining momentum, Emerald has secured strong institutional interest.

• Consensus Rating: The consensus rating among analysts covering EEX is a "Strong Buy", with a perfect score (1.00 ABR), indicating high confidence in the company's rebound and execution strategy.
• Price Target: The average 12-month analyst price target is approximately $7.95. This suggests an aggressive potential upside of over 70% from its recent trading price around the $4.60 range, indicating analysts believe the market has yet to fully price in the recovery and growth story.

Investor-Focused Takeaway: Is EEX Right for Your Portfolio?

Emerald Holding presents a compelling investment thesis as a pure-play on the continued post-pandemic recovery and modernization of the B2B event industry. While live events are inherently cyclical and carry macroeconomic risk, EEX is addressing this through strategic M&A and digital transformation, building year-round customer value.

What to Watch in the Near Term: 📈

• Organic Growth Rates: Monitor the organic revenue growth (excluding acquisitions and scheduling shifts) in the Connections segment to gauge the underlying health of B2B event participation.
• Debt Management: Watch the company's use of free cash flow to manage its net debt, especially in response to interest rate movements.
• Digital Integration: Assess the growth and adoption rates of its Commerce platforms (Elastic Suite/Bulletin), as this is key to long-term margin expansion and revenue diversification.

Recommendation:

Emerald Holding (EEX) is viewed as a Strong Buy opportunity, supported by robust analyst estimates and a significant gap between the current share price and the average price target. The company has navigated the worst of the crisis and is now leveraging acquisitions and digital tools to capitalize on the renewed demand for in-person commerce, offering a high-upside recovery play for investors comfortable with short-term volatility.

Zedge (AMEX: ZDGE)

Zedge, Inc. is a leading global platform in the digital content and entertainment space, operating a diversified portfolio of apps centered on user self-expression. Its core offering is the Zedge Marketplace, a freemium app that provides a vast library of mobile content, including wallpapers, video wallpapers, ringtones, and notification sounds. It also operates a skill-based photo challenge game, GuruShots, and is aggressively expanding into the creator economy through new AI-focused tools.

Business Model and Revenue Streams 📦

Zedge's business model leverages a massive global user base, prioritizing monetization and high-value users over sheer volume. Revenue is generated primarily from three sources:

1. Advertising Revenue: This is historically the largest revenue stream, generated from ads displayed within the free tiers of the Zedge Marketplace and other apps.
2. Subscription Revenue (Zedge+): This is the high-growth, high-margin revenue stream. Users pay a subscription fee for an ad-free experience and access to exclusive content. The shift to recurring subscription revenue is key to Zedge's path to profitability.
3. Digital Goods & Services (Zedge Premium): Revenue comes from the in-app sale of "Zedge Credits," the virtual currency used to purchase unique content from the Zedge Premium marketplace. This segment is bolstered by its new pAInt generative AI image maker, which allows users to create and sell unique content, further integrating the company into the "Creator Economy."

Macroeconomic Impact: Zedge is a mobile ad-tech company, making it highly sensitive to the global digital advertising market. When macroeconomic uncertainty causes brands to pull back on ad spend, Zedge's primary ad revenue stream suffers, pressuring the top line. To mitigate this, the company has focused on increasing its Average Revenue Per Monthly Active User (ARPMAU) by attracting users in well-developed markets and driving adoption of its high-margin subscription product, making its financial health more resilient to ad-market volatility.

Recent Performance and Corporate Developments 📈

Zedge has successfully implemented a restructuring and cost-saving program, driving a return to revenue growth and significantly improving its bottom line despite continued ad market headwinds.

Q3 2025 Financial Highlights: 💰

• Total Revenue: Total revenue was $7.8 million, a modest 1.3% increase year-over-year, but which beat analyst expectations of $7.2 million.
• Net Income & EBITDA: The company returned to GAAP profitability with a net income of $0.2 million. Adjusted EBITDA saw a strong 46% year-over-year increase to $1.2 million, demonstrating the early success of cost-saving and efficiency measures.
• Subscription Momentum: The active subscriber base for Zedge+ hit an all-time high of nearly 900,000, representing a 37% year-over-year increase. Deferred revenue, which primarily consists of future subscription income, surged 83% year-over-year, providing excellent revenue visibility.
• User Quality: Despite a decline in overall Monthly Active Users (MAU), the focus on attracting higher-value users paid off, as ARPMAU grew by 33% year-over-year.

Strategic Initiatives and Mergers: 🤝

• Generative AI Focus: Zedge is prioritizing the integration of Gen AI across its core products. The launch of its pAInt image generator and Tapedeck (an AI audio generator) are key initiatives designed to convert consumers into creators, significantly increasing the volume of unique content and the potential for digital goods sales.
• New Revenue Streams: The company recently introduced Dataseeds.AI, an enterprise offering that provides rights-cleared, on-demand visual datasets, opening a nascent B2B revenue source with high potential for recurring income.
• Capital Allocation: Zedge has a very strong balance sheet with minimal debt and a solid cash position. It recently announced the initiation of a quarterly cash dividend and continues its share repurchase program, signaling management's confidence in sustained free cash flow generation. The company had no significant mergers or acquisitions in the most recent quarter.

Path to Profitability and Fair Value 🎯

Zedge has achieved its key milestone of returning to GAAP profitability in fiscal Q3 2025. The path to sustained, expanding profitability is clearly defined:

1. Revenue Shift: The pivot from low-margin advertising revenue to high-margin subscription and digital goods revenue is critical. As recurring subscription revenue grows, it provides a more stable, predictable, and profitable financial foundation.
2. Cost Discipline: The company's recent global restructuring is delivering significant annualized cost savings, driving margin expansion.
3. AI Monetization: Successfully leveraging the Gen AI tools (pAInt, Tapedeck) to drive content creation and Premium purchases directly impacts the higher-margin revenue segment.

Fair Value Assessment: Trading at a Price-to-Sales (P/S) ratio of around 1.5x (compared to an industry average of 1.5x), ZDGE appears to be trading near its fundamental value based on sales. However, analysts believe its deep penetration into the high-growth subscription and AI-driven creator economy warrants a higher valuation. Its strong financial health (high current ratio, minimal debt) and accelerating profitability make a case for the stock being undervalued relative to its growth potential.

Analyst Estimates and Ratings 📊

• Consensus Rating: The consensus rating for Zedge is a "Strong Buy" (ABR of 1.00), based on a limited but highly confident set of analyst coverage.
• Price Target: The average 12-month price target is $5.00, representing a potential upside of approximately 48% from its recent trading price around $3.37. The unanimous "Strong Buy" rating confirms high conviction in the stock's turnaround.

Investor-Focused Takeaway: Is ZDGE Right for Your Portfolio?

Zedge offers a compelling investment in a small-cap technology company successfully executing a strategic pivot toward recurring, high-margin revenue streams. The strong growth in its subscriber base and the successful launch of its Gen AI products position it well to capture value in the lucrative Creator Economy.

What to Watch in the Near Term: 📈

• Subscription Trajectory: Continue to monitor the growth rate of Zedge+ subscribers and deferred revenue; this is the primary indicator of the long-term health of the business model.
• Ad Market Stability: Watch the health of the digital ad market, as Zedge's largest revenue stream remains exposed to macro volatility.
• AI Product Adoption: Look for management commentary on the monetization success and user engagement with its new AI-focused products (pAInt, Tapedeck, Dataseeds.AI).

Recommendation:

Zedge (ZDGE) is a Strong Buy supported by robust analyst confidence, a clear and proven strategy to drive sustained profitability through a shift to subscription revenue, and a solid financial foundation with no significant debt. The high projected upside suggests a favorable risk/reward profile for investors comfortable with a small-cap tech stock in a turnaround phase.

💥 Final Take: Two Under-the-Radar Winners With Q4 Breakout Potential

As Q4 earnings season kicks into high gear, Emerald Holding (EEX) and Zedge (ZDGE) represent two high-upside opportunities at opposite ends of the market spectrum—one riding a macro recovery in live B2B commerce, the other executing a high-margin pivot in digital content.

🎪 Emerald Holding (EEX) – The Reopening Trade With Upside
✔ 140+ B2B events fueling strong revenue growth
✔ Share repurchase plan extended through 2025
✔ Strong analyst confidence with 70%+ projected upside
➤ Best for: Investors looking to ride the cyclical rebound in business travel and in-person commerce—with digital upside.

📱 Zedge (ZDGE) – A Niche App Turning Into an AI-Driven Subscription Machine
✔ Back to GAAP profitability, with subscriber growth hitting all-time highs
✔ Gen AI tools (pAInt, Tapedeck) tapping into the creator economy
✔ Initiated dividend and repurchases—signaling financial confidence
➤ Best for: Tech investors seeking a low-float digital turnaround story with recurring revenue momentum and AI tailwinds.

Investor Insight:

📈 Want a high-growth recovery play with institutional backing and event-driven upside? → EEX​
📲 Want a small-cap tech stock successfully pivoting to subscriptions and AI? → ZDGE

Both stocks trade under $5, yet both are set to punch well above their weight if Q4 results confirm the turnaround. With analyst price targets signaling 40–70% upside, these may be two of the most overlooked earnings season plays in the small-cap universe.

We’ll be back with our next report soon, bringing you fresh insights on the market and new opportunities to watch. In the meantime, we’d love to hear from you—let us know how you found this report, what niche sectors you’d like us to cover next, and don’t forget to share your top stock holdings with us. Your feedback helps us deliver reports that matter most to your investing journey.

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Happy Trading
​— Team Premium Stock Alerts