What happened
Blucora Inc. (AVTA) saw its stock price surge higher this week, up 10.6% from last Friday's close through 11:15 a.m. EST on Friday, according to S&P Global Market Intelligence. The financial stock has been one of the best performers in the sector this year, up about 44% year-to-date (YTD), trading at around $25 per share.
In an otherwise flat week, Blucora had a good week as the Dow Jones Industrial Average was up just 0.4%, but both the S&P 500 (-0.8%) and the Nasdaq Composite (- 2.6%) were down as of 11:15 a.m. EST Friday.
So what
There was one main catalyst for Blucora this week: the closing of the sale of its TaxAct business on Monday, Dec. 19. The stock price shot up upon the announcement Monday that the deal had closed, and it remained up all week. Its price topped out at over $26 per share on Wednesday, up about 13.2%, and then settled back down a bit but remained at around $25 per share by the week's end.
The market reacted favorably to the news for a few reasons. One, the sale of the tax accounting business to Cinven for $720 million in cash brings in after-tax net cash proceeds of approximately $620 million. Further, Blucora will return between $400 million to $450 million of that to shareholders through stock repurchases, starting with a modified Dutch auction tender offer in the first quarter of 2023.
In addition, the TaxAct sale transitions Blucora into a pure-play wealth management and financial planning company through its Avantax businesses. And to make that clear in the market, it is currently rebranding to Avantax. The company plans to roll out the new Avantax brand officially in January.
Now what
Blucora has been one of the top-performing financial stocks this year, and this transition to tax-focused wealth management and financial planning should help. In a difficult market overall, the company has posted revenue and earnings gains this year and raised its full-year 2022 outlook, now expecting revenues of between $909 million and $915 million.
The stock is priced reasonably with a forward price-to-earnings ratio of 9.4, and with a renewed focus on its tax-efficient wealth management business, it should be a steady grower.
