Fundstrat's 2 SMid-Cap Tech Ways To Play Jobs Market

In a report published Wednesday, Fundstrat analyst Sam Doctor said that the jobs market was improving, while adding GrubHub Inc (NYSE: GRUB) and Sabre Corp (NASDAQ: SABR) to the Actionable Ideas list.

In the report Fundstrat noted, "The US economy still underinvests by about $1T annually, including a $280B Capex gap relative to long term average, but so far in 2015, investors are rewarding companies raising capex, a positive signal in our view. We are also bullish on the US consumer amid strong labor market indicators, and focus on two Tech stocks that could benefit from consumer spending and the jobs market."

Since hitting a bottom in March 2009, Technology shares have outperformed slightly, driven by robust revenue growth and margin expansion. Despite this, "multiple expansion is still lagging the broader Russell 3000," analyst Sam Doctor wrote.

Grubhub operates Seamless and other online and mobile platforms for restaurant delivery and pickup, connecting over 30k restaurants with customers and businesses. The company recorded 27 percent FCF margins and 70 percent incremental margins. Given these and its US-centric exposure, Grubhub is poised to benefit from an improving job market "that drives corporate benefits for lateworking professional employees."

Sabre's shares are currently trading at a discount to its peer group. Doctor expects SaaS platforms to deliver "low-mid-double-digit growth in Airline and Hospitality solutions, and low-mid-single-digit in the Travel Network."

Sabre's management aims at expanding the company's adjusted FCF margin from the current 10 percent, with FCF growing from 20-25 percent of EBITDA to 45 percent, over the next couple of years.