Category: Technology Stocks

Tech stocks refer to any stock involved in the technology sector, from semiconductor producers to software providers. Tech stocks are often a leading indicator for the economy and the stock market. Technology stocks generally follow the pattern of more innovation in the market & new development of product.

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Technology Stocks

Etsy Inc : Major e-commerce marketplace operator sets sights on encouraging repeat purchase behaviour

Business Strategy and Outlook

Etsy has carved out an interesting competitive niche, jockeying for e-commerce wallet share across a variety of heterogeneous verticals in the long tail of unbranded products. The firm’s four marketplace properties–Etsy, Reverb, Depop, and Elo7–all target non-commoditized inventories (artisanal crafts, used musical instruments, and vintage clothing resale), generate commissions on third-party, peer to peer sales, and strive to create a “treasure hunt” experience around a unique, customizable, and consequently less price elastic product suite.  

Etsy’s competitive strategy is viewed sound, with the quickly growing firm capitalizing on a surge of COVID-19 induced demand, providing one of only a handful of outlets through which customers could purchase facemasks during the nadir of the pandemic. Though mask sales have dwindled, the platform has remained sticky, with Etsy seeing its active buyer base swell to 96 million (up 18% annually) through 2021 despite lapping a halcyon 2020 in which it netted 36 million customers (75% growth from 2019). Experts claim 171% two-year stacked growth reflects investments made well in advance of the demand surge–from moving its marketplace operations to the cloud (through a partnership with Google), to investing heavily in search engine optimization efforts, and tinkering with performance and brand marketing to boost unaided awareness. 

Moving forward, Etsy is expected to continue to add unique inventory (recently onboarding a number of Indian sellers), to expand its burgeoning international operations (44% of fourth-quarter GMV), to continue to improve search functionality and to expand its suite of seller tools and advertising options, while periodically targeting competitively advantaged tuck-in acquisitions that offer exposure to similarly differentiated end markets. Particularly important will be efforts to increase repeat purchase behavior, with the long-term driver of GMV growth likely be increased average revenue per user in lieu of buyer acquisition after the firm achieves saturation in its six key markets–getting buyers to go to Etsy “not just for the cushions, but for the couch.”

Financial Strength

Etsy’s financial position is viewed sound. While the firm’s gross leverage looks high for an e-commerce company (averaging 5.2 times through 2024, according to analyst forecasts), main concerns are alleviated by a highly cash generative business, with free cash flow to the firm clocking in at 25% of sales in 2022, an operating model that requires minimal maintenance capital expenditure, and access to a $200 million credit facility. Moreover, a net debt position of only $1.3 billion as of the end of 2021 (1.6 turns) suggests only modest underlying leverage. Etsy’s convertible debt structure adds an interesting twist to financial statement analysis. The company has three outstanding series of convertible issuances–$1 billion in 0.25% 2021 notes (due in 2028), $650 million in 0.125% 2020 notes (due in 2026), and $650 million in 0.125% 2019 notes. The structure is common among technology firms, and offers a few key benefits; fewer restrictions, choice of cash or share settlement, cheap capital, and the ability to raise straight debt through subsequent issuance, which strikes us as reasonable (and aligns with practices at technology peers like Twitter and Wayfair). Etsy limits potential dilution with a capped call derivative strategy, with subsequent series that have been utilized to prepay outstanding balances. While the principal value of these notes is accounted for in long-term debt, the equity portion (option value) is accounted for as additional paid-in-capital, with premiums amortized as noncash interest expense over the option’s life. Finally, Etsy is expected to maintain substantial financial flexibility in order to meet its allocation priorities–investments in the business, strategic acquisitions, and share repurchases. Consistent with management commentary, any near-term cash dividend is not anticipated (2026 at the earliest, barring acquisitions), with management preferring the flexibility associated with buybacks.

Bulls Say’s

  • E-commerce trial amidst COVID-19 likely pulled forward e-commerce adoption by two to three years, benefiting digital native platforms like Etsy. 
  • After more than doubling its 2019 buyer base, Etsy has likely reached a demand tipping point, with high teens active buyer penetration across its core six markets heightening barriers to success for new entrants. 
  • The offsite advertisements offer a nice vehicle to increase platform take rates, GMV growth, and seller inventory turnover.

Company Profile 

Etsy operates a top-10 e-commerce marketplace operator in the U.S. and the U.K., with sizable operations in France, Germany, Australia, and Canada. The firm dominates an interesting niche, connecting buyers and sellers through its online market to exchange vintage and craft goods. With $13.5 billion in 2021 consolidated gross merchandise volume, the firm has cemented itself as one of the largest players in a quickly growing space, generating revenue from listing fees, commissions on sold items, advertising services, payment processing, and shipping labels. As of the fourth quarter of 2021, the firm connected more than 96 million buyers and more than 7.5 million sellers on its marketplace properties: Etsy, Reverb (musical equipment), Elo7 (crafts in Brazil), and Depop (clothing resale).

(Source: MorningStar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Technology Stocks

Pro Medicus Ltd – reported strong 1H22 results reflecting earnings of $20.68m, up +52.7% relative to the pcp.

Investment Thesis:

  • The stock is trading below our valuation and represents >10% upside to the current share price. 
  • Proven and market leading technology (management believes they are 24 months ahead of competitors), with PME’s product commanding a price premium. 
  • New contract wins (more win rates plus higher value per contract) and increasing usage by existing clients. 
  • New product launches – Enterprise Imaging solutions and moving into other “ologies” such as cardiology and ophthalmology. Developing artificial intelligence (AI) capabilities. 
  • Leveraged to the digital health data thematic and industry’s transition to cloud. 
  • Expansion into new geographies.
  • Potential M&A activity.

Key Risks: 

  • High valuation which subjects the stock price to more volatility.
  • Timing (long lead time to close contracts) and scale of new contract wins disappoints relative to market expectations. 
  • Contract renewals (pricing pressure) and potential budget cuts at hospitals leading to the delay of software upgrades / investment. 
  • Increasing competitive pressures (from large scale players and new entrants with innovative technology). 
  • Systems reliability – data breach or drop in quality. 
  • Regulatory / funding changes – reimbursement changes leading to lower imaging volumes. 

Key Highlights:

  • Pro Medicus Ltd (PME) reported strong 1H22 results reflecting earnings (net profit) of $20.68m, up +52.7% relative to the pcp.
  • Revenue was up +40.3% to $44.33m driven by contract wins and renewals in the U.S. and an extension of a European contract to cover new regions.
  • Underlying profit before tax $28.8m, up +53.5%
  • Net profit of $20.68m, up +52.7%.
  • PME retained a strong balance sheet with cash reserves of $76.17m, up $14.91m and remains debt-free.
  • PME reported key contract wins which bodes well for future earnings: Novant Health (A$40m, 7-year contract), a community-based integrated delivery network that spans three U.S. states; Contract renewal with Allegheny Health (A$12m, 5-year), a health network in Pittsburgh, Pennsylvania; and extension of German government hospital to a fourth site.
  • Management also highlighted PME made progress with all key implementations being on or ahead of schedule, including Intermountain and UCSF.
  • The Board declared a fully franked interim dividend of 10c per share, up +42.9%.

Company Description:

Pro Medicus Ltd (PME) was founded in 1983 and provides a full range of radiology IT software and services to hospitals, imaging centers and health care groups globally. In Jan-09, PME purchased Visage Imaging, which has become a global provider of leading-edge enterprise imaging solutions, pioneering the best-of-breed, or Deconstructed PACSSM enterprise imaging strategy. Visage 7 technology delivers fast, multi-dimensional images streamed via an intelligent thin-client viewer. The company offers a leading suite of RIS, PACS and e-health solutions constituting one of the most comprehensive end-to-end offerings in radiology. Pro Medicus has global offices in Melbourne, Berlin (R&D) and San Diego (Sales).

(Source: Banyantree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Technology Stocks

JD.com Inc : JD logistics and the Supermarket Category to hold back margin gains partially

Business Strategy and Outlook

JD.com has emerged as a leading disruptive force in China’s retail industry by offering authentic products online at competitive prices with speedy and high-quality delivery service. JD’s mobile shopping market share has increased from 21% in 2016 to 27% in 2020 on our estimate. JD adopted an asset-heavy model with self-owned inventory and self-built logistics, while Alibaba has more of an asset-light model. 

JD is a long-term margin expansion story driven by increasing scale from JD direct sales and marketplace, partially offset by the push into JD logistics in the medium term. JD is the largest retailer in China by revenue. Among listed Chinese peers, JD’s net product revenue in 2020 was two to three times higher than for Suning, the second-largest listed retailer. JD’s increasing scale in each category will allow it to garner bargaining power toward the suppliers and volume-based rebates. Since 2016, JD no longer fully reinvests its gains from improving scale and is committed to delivering annual margin expansion in the long run. Gross margin improved yearly from 5.5% in 2011 to 15.2% in 2016, and following the consolidation of JD Finance in second-quarter 2017, gross margin improved year over year from 13.7% in 2016 to 14.6% in 2020. 

In the medium term, it is likely to see the investment into community group purchase, JD logistics and the supermarket category will hold back some of the margin gains. JD is unlikely to have non-GAAP net margin increase in 2021. Starting in April 2017, the logistics business became an independent business unit that will open its services to third parties. Management is squarely focused on gaining market share instead of profitability at this point, and to do so, it has invested heavily in supply chain management, integrated warehouse, and delivery services to penetrate into less developed areas. As the logistics business gains scale and reaches higher capacity utilization, gross profit margin improvement can be seen. Management believes it is not time to turn profitable in the supermarket category in order to be a category leader in China.

Financial Strength

JD.com had a net cash position of CNY 135 billion at the end of 2020. Its free cash flow to the firm has continued to generate positive FCFF at CNY 8.1 billion in 2020. JD has not paid dividends.JD.com has invested heavily in fulfilment infrastructure and technology in recent years, leading to concerns about its free cash flow profile and margin improvement story. It is held management will put more emphasis on growing revenue per user, expansion into lower-tier cities and the businesses’ profitability. Therefore, JD will not invest in new areas as aggressively as before, so it is likely JD will be able to maintain positive non-GAAP net margin versus being unprofitable before. its financial strength will improve in future. Most of the initial investments in the third-party logistics business have been carried out, and utilization of the warehouses has picked up. Its technology team is already in place without the need to add substantial headcounts. JD will also be cautious in its investment in the group-buying business and new retail, given a profitable business model has not been established in the market. JD has tried to improve its asset-heavy model by transferring a portfolio of warehouses to establish a CNY 10.9 billion logistics property core fund in partnership with the sovereign wealth fund of Singapore, GIC. JD will own 20% of the fund, lease back the logistics facilities and receive management fees for managing the facilities. The deal will be completed in phases with the majority of them completed in 2019.

Bulls Say’s

  • JD.com’s nationwide distribution network and fulfilment capacity will be extremely difficult for competitors to replicate. 
  • The partnership with Tencent could allow JD.com to gain significant user traffic from Tencent’s dominant social-networking products in China. 
  • JD is now the largest supermarket in China, the high frequency FMCG categories have attracted new customers from less developed areas and can drive purchase of other categories.

Company Profile 

JD.com is China’s second-largest e-commerce company after Alibaba in terms of transaction volume, offering a wide selection of authentic products at competitive prices, with speedy and reliable delivery. The company has built its own nationwide fulfilment infrastructure and last-mile delivery network, staffed by its own employees, which supports both its online direct sales, its online marketplace and omnichannel businesses. JD.com launched its online marketplace business in 2010. 

(Source: MorningStar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Expert Insights Technology Stocks

DocuSign Inc. Sales Execution & Post Covid-19 Normalization Drive Light Guidance; FVE Down to $130

Business Strategy & Outlook:

As the leader in electronic signatures and contract life cycle management software, DocuSign has a long runway for growth through viral adoption in greenfield opportunities. The existing customers adopting more use cases and expanding seats over time, and also moving to the Agreement Cloud platform. DocuSign’s vision is to modernize the contracting process by taking it from a disjointed and paper-based manual sequence of steps to an automated digital and collaborative system. The company has mastered the “sign” step of the process and has used it to build the Agreement Cloud around, but there’s more to DocuSign than just e-signatures. The Agreement Cloud is a platform that includes tools to help users prepare contracts using intuitive drag and drop forms, negotiate, e-sign using a variety of enhanced security and identification means, automate agreement workflows for satisfying contract elements post-execution, allow for payment collections, and centralize account management.

As use cases expand, it is expected that the current primary driver of growth, the e-signature solution, to continue to grow rapidly thanks to the company’s entrenched leadership position and the more unpenetrated market. Underlying the larger picture is that the company still offers free trials and self-service for pain-free test drives. There’s visibility of strong adoption in more than one million paid customers, with 88% involving a sales rep, and hundreds of customers already driving annual contract value in excess of $300,000 annually. In the meantime, net dollar retention rates have been strong, about 120%, which is very good and is in line with other self-service, viral adoption models in our coverage. Based on a bottom-up analysis, management estimates that DocuSign has a total addressable market of $50 billion, half of which is e-signatures alone, while Agreement Cloud is the next largest piece, with other services making up a smaller opportunity. 

Financial Strengths:

DocuSign is a financially sound company with a solid balance sheet, improving margins, and rapidly growing revenue. Capital is generally allocated to growth efforts and acquisitions, with no dividends or buybacks on the horizon. As of fiscal 2022, DocuSign had $803 million in cash and marketable securities, compared with $718 million in long-term debt. The company generated non-GAAP EBITDA of $593 million in fiscal 2022, representing gross leverage of 1.2 times. DocuSign generated free cash margins of 15% in fiscal 2021 and 21% in fiscal 2022. It is expected that free cash flow margins to continue to expand during the next five years. The debt relates to convertible notes due in 2024. DocuSign can satisfy its obligations while continuing to fund normal operations.

The company has made a variety of relatively small acquisitions, including Seal, totaling in excess of $400 million over the last several years. Company view these as feature additions or product extensions that are additive to the company’s product development efforts. While it is acknowledge the timing and size of potential future acquisitions may vary, nonetheless model a modest level of acquisitions annually.

Bull Says:

  • DocuSign is the market leader in e-signatures and is expanding to a broader contract life cycle management solution.
  • The free trial, easier implementation, and rapid return on investment for DocuSign customers make for a compelling sales pitch. The company is also enjoying success moving upstream to larger customers.
  • DocuSign’s market consists of considerably more greenfield space than is typical within software.

Company Profile:

DocuSign offers the Agreement Cloud, a broad cloud-based software suite that enables users to automate the agreement process and provide legally binding e-signatures from nearly any device. The company was founded in 2003 and completed its IPO in May 2018.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Shares Technology Stocks

Whispir Ltd reported strong 1H22 results ; Focus on increasing platform usage and onboarding new customers

85215903 - attractive businessman using mobile phone while having lunch

Investment Thesis 

  • Sizeable market opportunity – in the U.S. alone WSP TAM is US$4.7bn (WSP North American target markets) vs total U.S. CPaaS TAM of US$98bn.
  • Established a solid foundation to build from – the Company has over 800 customers worldwide with leading brand names.  
  • Structural tailwinds – ongoing automation and digitization. 
  • Increasing direct sales penetration.
  • Attractive recurring revenue base via subscriptions. 
  • Investment in R&D to continue developing the Company’s competitive position and enhance value proposition with customers

Key Risks

  • Rising competitive pressures.
  • Growth disappoints the market, given the company trades on high valuation multiples – growth in subscriptions, new customers and penetration of existing clients. 
  • Product innovation stalls and fails to resonate with customers. 
  • Emergence of new competitors and technology.
  • Key channel partnerships breakdown. 

1H22 Results Highlights. Relative to the pcp: 

  • Revenues of $39.4m, up +70.4% (CAGR of +37.7% since 1H19). Annualised Recurring Revenue (ARR) at $60.0m, up +26.6% (CAGR of +29.4% since 1H19). WSP saw significant contract wins in ANZ, Asia and North America which bodes well for future revenue growth. 
  •  WSP achieved gross profit of $23.0m, up +64.9%. Gross margin declined from 60.4% to 58.4% due to a surge in transactional revenues, which grew from 66.6% to 80.6% of total revenue. 
  • Operating expenses jumped +75.0% to $29.9m, as WSP grew head count from 169 to 270 to service the growing business. 
  •  WSP reported an EBITDA loss of $(4.6)m versus $(1.8)m in the pcp. 
  •  WSP remains well-funded, with no debt and line of sight to cash flow breakeven. 
  • WSP remains on track to deliver on upgraded guidance for FY22.
  • WSP remains well-funded, with no debt and line of sight to cash flow breakeven

Company Profile

Whispir Ltd (WSP), founded in 2001, is a global enterprise software-as-a-service (SasS) company. WSP provides a communications workflow platform that automates interactions between businesses and people. The Company has over 800 customers, operates in 60 countries and more than 200 staff globally. WSP operates in an emerging subset of the enterprise communications SaaS market known as Workflow Communications-as-a-Service (WCaaS). WSP currently solves two communication problems: (1) Operational Messaging – engaging with employees; and (2) External Messaging – engaging with customers. WSP operates in 3 key markets – Operational messaging (size $8bn), API messaging (size $32bn) and Marketing messages (size $66bn). 

(Source: Banyantree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Technology Stocks

Nanosonics Ltd. reflecting a strong rebound in growth compared to 1H21

Investment Thesis

  • Requirement for ultrasound disinfection. Ultrasound transducers must be disinfected between patients to prevent cross-infection. Trophon EPR is a significant improvement above traditional methods (soak, spray, wipe or other manual reprocessing/disinfection method). For instance, traditional soaking takes ~25 minutes versus Trophon which takes ~7-8 minutes to disinfect ultrasound probes.
  • Potential addressable installed base of ~120,000 Trophon EPR units globally (~40,000 in the US, Europe and Rest of World each).
  • New guidelines and regulation drive pathways to reinforce requirements for high level disinfection. For instance, new guidelines in Australia and New Zealand setting Trophon as the standard in high level disinfection.
  • Continued growth in North America to be driven by its direct sales team with adoption remaining strong and Trophon becoming the standard of care.
  • Large and credible distribution partner is retained in GE Healthcare with demand for safety inventory.
  • Managed Equipment Service business model (MES) in the UK overcoming capital budget constraints by clients.
  • Progress with geographic expansion. 
  • Strong balance sheet to support growth strategy.

Key Risks 

  • Competitive pressures as potential entrants enter the market. 
  • Non-receptive markets where NAN’s product is considered overkill compared to traditional disinfection methods such as using sterilised wipes.
  • Key customer risk as one customer is NAN’s largest customer 
  • Product faults or incidents where recalls are required.
  • Adverse foreign currency movements in AUD/USD.
  • Poor execution of R&D with no progress.
  • Nature of business makes it prone to easily reaching a natural penetration rate, where growth becomes subdued.  

1H22 Results Highlight

  • Revenue of $60.6m, up +41%, driven by strong growth with capital revenue of $19.0m, up +102%, and consumables and service revenue of $41.6m, up +23%.
  • Global installed base up +12%.
  • Continued investment in the strategic growth agenda resulted in operating expenses of $42.7m, up +29%.
  • Operating profit before tax of $3.3m, significantly improved from the $0.2m in the pcp.
  • NAN has no debt and its cash position continues to provide a strong foundation to support its growth plans – 1H22 free cash flow reflects net outflow of $3.8m with Cash and cash equivalents of $92.0m at 31 December 2021.
  • R&D investment of $10.7m, up +41%, with a focus on NAN’s new endoscope reprocessing product platform, Nanosonics Coris.

Company Profile 

Nanosonics Ltd (NAN) is an ASX-listed company which focuses on developing and commercialising infection control devices. NAN’s first device, the trophon® EPR is a proprietary automated device for low temperature, high level disinfection of ultrasound probes. The device is approved for sale across major markets including, Australia and New Zealand, US, Europe, Japan, Hong Kong, and South Korea. The trophon® EPR is sold through distributors including GE Healthcare, Philips, Samsung, Siemens Toshiba and Miele Professional.

(Source: BanyanTree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Technology Stocks

CrowdStrike in the early stages of becoming a market mainstay

Business Strategy and Outlook

CrowdStrike is a leader in endpoint security, a necessity that aids in protecting devices and networks, and its threat hunting and breach remediation services are topnotch. While nefarious threat actors are continually upping their attack methodology to create zero-day attacks and are using the rise in entities using cloud-based resources to their advantage, CrowdStrike developed a methodology to turn any entities’ weak-point into better protection for all of its clients. CrowdStrike’s cloud-delivered endpoint protection platform continuously ingests data from all of its installed agents to enhance its protection solutions while keeping all users up to date against the latest threats. It is anticipated that CrowdStrike’s customer base, revenue, and margins will experience profound growth throughout the 2020s as customers update their endpoint and workload security requirements in a hybrid-cloud world. 

CrowdStrike’s endpoint protection platform melded the needs of next-generation antivirus, threat intelligence, endpoint detection and response, and other features like managed threat hunting into a consolidated management plane. The lightweight agents, installed on physical devices like servers and laptops, or in virtual machines and cloud environments, are continually improving through its cloud database algorithms, becoming more capable as more data is received. In analysts view, CrowdStrike’s solutions establish customer switching costs and its network effect makes changing vendors a challenge as clients rely on having the latest threat protection. 

Alongside a persistent talent shortage in cybersecurity and firms attempting to manage disparate toolsets for various parts of endpoint security, entities are challenged to stay secure in networking environments without distinct security perimeters. CrowdStrike’s experts supplement these overwhelmed or short-staffed teams, and the firm also offers breach remediation and proactive testing services. It is likely that CrowdStrike is in the early stages of becoming a market mainstay as businesses and governments rapidly adopt cloud-based endpoint protection platforms.

Financial Strength

It is seen CrowdStrike as a financially sound company that will be able to generate solid free cash flow and expand its margin profile throughout the 2020s. CrowdStrike had its initial public offering in June 2019 and has historically operated at a loss on a GAAP basis. It is viewed CrowdStrike’s capital deployment efforts true to a land-and-expand strategy, whereby CrowdStrike initially has elevated sales and marketing expenses to gain a customer cohort before expanding its revenue per customer while lowering its operating costs per customer (on a revenue percentage basis). In analysts view, CrowdStrike can benefit from cross-selling and up-selling tangential products to its existing base and new clients, while also converting breach remediation service clients to be product customers. As of the end of fiscal 2022, CrowdStrike had $2.0 billion of cash, cash equivalents, and marketable securities and $740 million of debt. With a strong balance sheet and free cash flow generation, it is anticipated CrowdStrike to pay its obligations on time.

Bulls Say’s

  • CrowdStrike’s innovative endpoint security solutions, delivered as a platform, are quickly attracting customers as clients want to consolidate their myriad legacy security tools. Its threat remediation services are a powerful tool in landing new subscription clients. 
  • After landing a client, CrowdStrike can gain significant margin leverage via the cross-selling and up-selling of additional security modules. 
  • CrowdStrike’s products become more capable as new clients are added, and its threat intelligence and hunting can become a core part of customer’s cybercrime defense.

Company Profile 

CrowdStrike Holdings provides cybersecurity products and services aimed at protecting organizations from cyberthreats. It offers cloud-delivered protection across endpoints, cloud workloads, identity and data, and threat intelligence, managed security services, IT operations management, threat hunting, identity protection, and log management. CrowdStrike went public in 2019 and serves customers worldwide 

(Source: MorningStar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Technology Stocks

MongoDB is well set to grow at a robust pace

Business Strategy and Outlook

Since 2007, MongoDB has amassed millions of users of its document-based database, as workload shifts to the cloud has accelerated data collection growth as a whole and thus the need for architectures to store such data (particularly NoSQL variants like document-based databases). MongoDB appears to be doing anything but losing steam, as its database technology has remained the most desirable database (both SQL and NoSQL included) for professional developers to learn globally over the last four years, according to Stack Overflow. It is seen such interest will persist as MongoDB’s more recent cloud database-as-a-service and data lake offerings help ensure MongoDB’s rich features transform to meet new technological needs. 

The database market is booming–growing exponentially as a result of migrations to the cloud. Once enterprise workloads are on the cloud, scaling, collecting, and analyzing data becomes easier because of how effortless it is to scale data storage in the cloud. As a result, it is likely that the amount of data collected and analytical computations on such data in the cloud will continue to dramatically increase, in turn, benefiting many database providers, particularly MongoDB. It is anticipated MongoDB is considered the premier document-based DB, with extremely rich features–from in-database data transformation to instant interoperability on multiple cloud platforms. It is alleged the majority of this net new data to be stored is largely for hefty analysis, thus requiring a NoSQL database, like MongoDB, due to its ability to store unindexed or “unknown categories” of data. 

With significantly more opportunity to go in converting customers to its cloud database-as-a-service product, Atlas, which represents 50% of all revenue and brand new opportunity for the company’s just-released data lake offering, it is likely MongoDB is well set to grow at a robust pace and profit from such scale. It is held also believe that MongoDB has a sticky customer base and could eventually merit a moat down the road.

Financial Strength

It is alleged MongoDB is financially stable given the early stages of the company, as analysts are confident the company will generate positive free cash flow in the long term. MongoDB had cash and cash equivalents of $1.83 billion at the end of fiscal 2022 with $1.14 billion in convertible debt on its balance sheet–due in both 2024 and 2026. It is foresee that MongoDB will become free cash flow positive in fiscal 2026 after which is believed MongoDB will continue to invest heavily back into its business rather than distributing dividends or completing major repurchases of its stock. Analysts model minor acquisitions in analysts explicit 10-year forecast, though it is held MongoDB will continue to focus primarily on in-house R&D.

Bulls Say’s

  • MDB’s document-based database is best equipped to remove fear of vendor lock-in and is poised for a strong future. 
  • MongoDB’s new data lake could gain significant traction, making MongoDB even stickier, as it is alleged data lakes have even greater switching costs than databases. In turn, this could further boost returns on invested capital. 
  • MongoDB could eventually launch its own data warehouse offering, which would further increase customer switching costs.

Company Profile 

Founded in 2007, MongoDB is a document-oriented database with nearly 33,000 paying customers and well past 1.5 million free users. MongoDB provides both licenses as well as subscriptions as a service for its NoSQL database. MongoDB’s database is compatible with all major programming languages and is capable of being deployed for a variety of use cases. 

(Source: MorningStar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Technology Stocks

Ford Is Focusing Its People Better by Separating the Combustion and Electric Vehicle Businesses

Business Strategy and Outlook

Ford is also focused on spending on the most profitable vehicles and the March 2022 split of combustion and BEV into their own segments (Ford Blue and Ford Model e) allows talent to focus on combustion hits like Bronco and F-Series as well as build on the success of the F-150 Lightning BEV and Mustang Mach-E. Restructuring in foreign markets is underway and as of year-end 2021, Ford projects up to $2.4 billion of EBIT charges in 2022, bringing total costs for its Global Redesign program to about $11 billion since 2018. Up to about $7 billion of cash may be spent to fund the restructuring, which includes downsizing in markets like Europe and Brazil, but all but about $1 billion of this cash will be spent across 2018-22. Ford Blue seeks about $3 billion in cost reductions.

Ford is building more models on common platforms, which should improve economies of scale. In 2007, Ford had 27 platforms but now has five flexible architectures across unibody, body on frame, and battery electric vehicles. This move allows Ford to switch production faster to meet changing demand while cutting costs via better economies of scale. In the past, Ford had a different platform in each segment for each part of the world, which wasted billions. Lincoln also entered China in fall 2014 and the Mustang Mach-E EV is bringing new customers in U.S. coastal markets, with 70% of its early buyers new to Ford. The F-150 Lightning BEV pickup has over 75% of its reservation holders new to Ford and it and the Transit BEV are on sale in 2022.

Financial Strength

Year-end 2021 global pension underfunding totaled only about $326 million compared with about $8.2 billion at year-end 2015, while salaried employee retiree healthcare added another $6 billion of shortfall. The entire pension underfunding is from pay-as-you-go plans (mostly from Germany and U.S. senior management plans) that are always unfunded and pay benefits paid from general corporate cash. Management guides funded plan contributions to be limited to annual service cost. 2022 contributions are guided at $600 million to $800 million, plus $390 million of benefits for unfunded plans. Unfunded plan benefit payments will likely be around $300 million to $400 million annually.

Automotive debt excluding legacy obligations at year-end 2021 was $20.4 billion, down from $34.4 billion at the end of 2009, but Ford did issue $8 billion in bonds in April 2020 to deal with the coronavirus fallout and we like that Ford redeemed $7.6 billion of expensive bond debt for $9.3 billion in December 2021. At the end of 2021, Ford had available automotive liquidity of $41.8 billion, excluding its 12% stake in Rivian, with $25.9 billion of that amount in cash and securities. In September 2021, Ford amended its credit lines to have a $10.1 billion line through September 2026, a $3.4 billion line in September 2024, and a $2 billion supplemental line also in September 2024. The lines have their rate partially tied to ESG metrics around the environment.

Bulls Say’s

  • Ford’s turnaround will take lots of time due to many restructuring projects around the world but so far the international business seems to be getting better. 
  • Ford is focusing its investments where it gets the best return, which is why mostly exiting North American car segments and production in South America, is the right move, in our opinion. 
  • Ford has tried to remove some administrative layers, and we like CEO Farley’s aggressive moves into electric vehicles, something Ford had been slow to do in the past.

Company Profile 

Ford Motor Co. manufactures automobiles under its Ford and Lincoln brands. In March 2022 the company announced that it will run its combustion engine business, Ford Blue, and its BEV business, Ford Model e, as separate businesses but still all under Ford Motor Company. The company has about 12.5% market share in the United States, about 6.5% share in Europe, and about 2.4% share in China including unconsolidated affiliates. We expect market share increases as inventory improves coming out of the chip shortage. Sales in the U.S. made up about 64% of 2021 total company revenue. Ford has about 183,000 employees, including about 56,000 UAW employees, and is based in Dearborn, Michigan.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
Technology Stocks

PointsBet Holdings Ltd (PBH) reported 1H22 reflecting mixed results – on a statutory basis, revenue of $139.1m is up +85%

Sydney, Australia - March 14, 2013: The Australia Stock Exchange big board viewed from the sidewalk in front of the exchange building in Sydney. The ASX board displays real-time stock information for companies listed on the exchange.

Investment Thesis:

  • U.S. growth opportunity – the U.S. online sports betting market continues to open following the 2018 supreme court ruling which legalizes the industry. Market growth estimates forecast the industry to grow to US$51bn by 2033.
  • Strong management team with a solid track record – the ability to grow market share in a competitive and mature market of Australia gives us some confidence the management team has the right strategy in place to build share in the U.S. 
  • Proprietary technology stack – The speed and useability are key differentiating factors. PBH operates proprietary technology, which it developed inhouse. This means new modifications and updates are easier to implement (i.e., more control) with inhouse tech versus outsourced.
  • Cross sell opportunities with iGaming – PBH’s recently launched iGaming product (online casino) is already highlighting cross-sell opportunities to its customers.

Key Risks:

  • Rising competitive pressures.
  • Adverse regulatory change in key operating jurisdictions (Australia / U.S.).
  • Loss of market share in key regions or growth rate fails to meet market expectations.
  • Higher than expected costs – especially around investment in sales & marketing to drive market share.
  • Trading on high PE-multiples / valuations means the Company is more prone to share price volatility. 
  • Cyber-attack on PBH’s platform.
  • Deeply discounted capital raising. 

Key Highlights:

  • PointsBet Holdings Ltd (PBH) reported 1H22 reflecting mixed results – on a statutory basis, revenue of $139.1m is up +85%, driven by Australia Trading and U.S Trading. EBITDA loss of -$130.6m, is -83% weaker than the pcp, with Australia Trading seeing a loss of -$16.1m versus $8.0m in the pcp.
  • On a normalised basis, net revenue of $139.1, and gross profit of $54.7m, are significant increases from $75.1m and $54.7m, in the pcp. Operating expenses increased to $180.8m, up from $95.1m in 1H21. EBITDA loss of $126.0m is significantly weaker than the loss of $69.0m in 1H21.
  • Australia continues to go from strength to strength. Canada is on the verge of an exciting hard launch, which will leverage our global capabilities with a brilliant local strategy and the U.S. is now gaining scale being live in 10 states.  As it relates to North America, PointsBet has positioned itself as an indispensable significant player in the market.
  • The operators that own their technology and can execute a national strategy will be the operators that can maximize profit margins and maximize the huge North American opportunity”. The rating is given as buy because PBH offers attractive risk reward at these levels.

Company Description:

PointsBet Holdings Ltd (PBH), founded in 2015, is a corporate bookmaker with operations in Australia and the United States (New Jersey, Iowa, Illinois and Indiana). PointsBet has developed a scalable cloud-based wagering platform which offers customers sports and racing wagering products. PBH’s key products include fixed odds sports, fixed odds racing and PointsBetting. 

(Source: Banyantree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.