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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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.

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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.

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Technology Stocks

Box Is Successfully Targeting a Niche in the Enterprise Content Management Space

Business Strategy and Outlook

Box has sought to differentiate its offerings using a two-step strategy. First, the company has pivoted away from cloud storage, an area where price competition can be fierce, especially for smaller players such as Box. Instead, the firm has focused on redesigning its platform as a collaboration ecosystem. With features such as Box Sign, Relay, and Governance, the firm is creating an open garden where users can interact with native Box features, along with more than 1,500 integrations from various software vendors, to manage their daily workflows. 

First, some other key competitors in the enterprise collaboration space include the likes of Microsoft and Google. These players have access to significantly more capital than Box, creating a tough competitive environment. Second, the legacy solutions that businesses often use for collaboration or document sharing are well entrenched, leading to high switching costs for businesses adopting Box’s solution.

Financial Strength

Box’s financial health to be in good shape. Although the company remains unprofitable in GAAP terms, we are encouraged by the firm’s positive free cash flow, or FCF, which we expect to trend upward as the firm is able to trim operating costs while maintaining solid top-line growth. The firm’s balance sheet is also in good shape, with cash and equivalents well above $500 million at the end of fiscal 2022. While Box has long-term debt, we do not foresee the firm encountering any difficulties in paying its obligations via its strong cash reserves and forecast FCF generation. With a strong net cash balance and cash flow generation profile, it is expected that management to pursue further M&A coupled with continued share repurchases. Management has been active on both of these fronts recently with tuck-in acquisitions of SignRequest and Cloud FastPath and significant share repurchase programs.

Fourth-quarter revenue of $233 million, buoyed by product stickiness and larger deal wins, was up 17% year over year. Much like other software-as-a-service companies, Box can grow its revenue in two ways: increasing average revenue per user, or ARPU, and/or increasing its number of paid users. Box has increased its ARPU by upselling its product to existing clients and increasing large deal sizes, with $100,000-plus deals growing 25% year over year. Management provided revenue guidance between $233 million and $235 million for the first quarter in fiscal year 2023, with adjusted EPS between negative $0.05 and negative $0.04. Full-year guidance was $990 million to $996 million for revenue with adjusted EPS landing between negative $0.07 and negative $0.03.

Bulls Say’s

  • Box’s revenue is buoyed by secular tailwinds as enterprise workflow collaboration tools remain in hot demand. 
  • With the firm’s focus on the enterprise space, clients are typically sticky, leading to more certainty around revenue. 
  • Box’s large install base and go-to-market motion will allow the firm to drive top-line growth while also enacting operating efficiencies leading to better free cash flow generation.

Company Profile 

Box is a cloud-based content services platform that provides cloud-based storage and workflow collaboration services for enterprise customers. The firm was founded in 2005 as a file sync and sharing provider. More recently, however, the company has focused on bolstering its product portfolio by adding tools such as governance and e-signature that enhance workflow management and collaboration.

(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

Veeva’s CRM Application Propelled It to Become Leading Solution Of It’s Niche Market

Business Strategy and Outlook

Veeva is the leading provider of cloud-based software solutions tailored to the life sciences industry, providing an ecosystem of products to address the operating challenges and regulatory requirements that these companies face. Its highly specialized offerings for the life science industry allow companies to improve operational efficiency to get products to market faster while ensuring regulatory compliance and ultimately sell more effectively. Its effective technology and dominant position enable Veeva to generate excess returns commensurate with a wide-moat company. Its strong retention, continued development of new applications, increasing penetration with existing customers, addition of new customers, and expansion into industries outside of life sciences should allow the company to extend its market leadership, in Analysts view. 

The company operates in two categories. Commercial solutions entail vertically integrated customer relationship management services and end-market data and analytics solutions. R&D solutions is a horizontally integrated content and data manager. Veeva’s CRM application supports real-time collaboration and regulatory oversight and enables incremental add-on solutions. The incremental functionality is critical to improving marketing programs while remaining in compliance with mandated antikickback laws and statutes. This service has been well received by the life sciences industry and has propelled Veeva to become the leading solution with the lion’s share (approximately 80%) of this niche market. As a follow-on to the initial introduction of CRM, management introduced R&D solutions to broaden the portfolio that addresses the largely unmet needs of the life sciences industry outside of CRM. Each module offers features and functionality targeting four key areas in life sciences: clinical (trial management), regulatory (compliance), quality of manufacturing, and safety.

Financial Strength

It is held Veeva enjoys a position of financial strength arising from its strong balance sheet (no debt) and leading position in a growing market. As of fiscal 2022, Veeva had over $2.4 billion in cash and short-term investments and no debt. It is likely the company will continue to use the cash it generates from operations to fund future growth opportunities. From Analysts perspective, management has been disciplined about M&A and taking on debt. The 2019 acquisition of Crossix was the firm’s largest to date, at approximately $430 million. It is anticipated the company will continue make small tuck-in acquisitions and fund them through available cash and cash flow from operations. Even in this scenario, increasing liquidity is foreseen, as the firm’s reserve of cash should continue to increase.

Bulls Say’s

  • Veeva’s best-of-breed vertical addressing unmet needs provides opportunities to further penetrate a highly fragmented market. 
  • The rapid adoption of the company’s new modules continues to entrench Veeva in mission-critical operations of customers, making it increasingly challenging for competitors to gain a foothold. 
  • Veeva’s institutional knowledge and codevelopment partnerships with customers enable the company to develop robust offerings addressing market needs.

Company Profile 

Veeva is a leading supplier of software solutions for the life sciences industry. The company’s best-of-breed offering addresses operating and regulatory requirements for customers ranging from small, emerging biotechnology companies to departments of global pharmaceutical manufacturers. The company leverages its domain expertise and cloud-based platform to improve the efficiency and compliance of the underserved life sciences industry, displacing large, highly customized and dated enterprise resource planning systems that have limited flexibility. As the vertical leader, Veeva innovates, increases wallet share at existing customers, and expands into other industries with similar regulations, protocols, and procedures, such as consumer goods, chemicals, and cosmetics. 

(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

More Than 90% Of Fortune 100 Firms Could Be Using Splunk’s Offerings As A Vote Of Confidence In Its Enterprise Product Lineup

Business Strategy and Outlook

Splunk is a leader in ingesting, indexing, and analyzing machine generated data, and it alleged the company will maintain its leadership status for the foreseeable future. It is held machine data to become more pervasive, impacting every part of an enterprise’s operations. With more data to ingest, index, and analyze, it is foreseeen narrow-moat Splunk has a long runway for growth as it seeks to continue to dominate the enterprise market. Splunk’s offerings primarily target two broad use cases: security and full-stack monitoring & analysis (FSMA). On the security front, Splunk’s SIEM, or security information and event management, operates as a well-refined alert system, putting out alerts if any nefarious activity appears on a client’s network. Splunk’s security orchestration, automation, and response, or SOAR, software is geared toward triaging these issues automatically. SIEM and SOAR software, working in tandem, allow an enterprise’s IT team a reprieve by using artificial intelligence to triage security issues, thereby leading to a substantially lower number of alerts that need to be manually dealt with. 

The FSMA space is nascent, springing into existence as a method of unifying and coalescing disparate parts of an enterprise’s monitoring framework. Splunk’s FSMA offering seeks to give enterprises a one-stop shop to monitor their entire IT stack, ranging from application performance to logs to end user experience. Splunk’s offering allows enterprise customers to remove these data silos and monitor the entire IT stack from one consolidated platform. 

It is held Splunk warrants a narrow economic moat thanks to high customer switching costs. It is foreseen more than 90% of Fortune 100 firms using Splunk’s offerings as a vote of confidence in its enterprise product lineup. Further, it is impressing, Splunk’s strong cloud dollar-based net retention (DBNR) that has consistently remained above 120%. With the ability to land big customers and consistently upsell them, analysts remain confident in Splunk’s long-term growth prospects.

Financial Strength

It is anticipated Splunk’s financial position is healthy. Splunk ended fiscal 2022 with $1.43 billion in cash and current investments. This is juxtaposed with the company’s convertible senior notes of $3.14 billion at the end of fiscal 2022. While debt exceeds cash-in-hand currently, it is likely Splunk’s cash and cash generation over the next five years will far outstrip its commitments over the same time period. As the company undergoes the cloud transition, its effect on free cash flow has been evident. The company’s FCFE (free cash flow to equity) margins from 2014 to 2019 were comfortably in the double-digits. However, with the cloud transition dampening revenue and increasing operating spend, free cash flow margins have been significantly lower than before. However, it is alleged these transitory costs to allay and project that Splunk will achieve consistent double-digit FCFE margins starting fiscal 2025. It isn’t likely for any major shifts in Splunk’s capital structure. It is foreseen the company raising capital in the future by issuing more equity or taking advantage of low interest rates and issuing debt.

Bulls Say’s

  • Splunk has secular tailwinds behind its back as the security and FSMA markets are expected to grow rapidly. 
  • Splunk’s products are incredibly sticky, offering the company an opportunity to increase cross-selling velocity as customers increase their usage of Splunk’s platform. 
  • Many of Splunk’s enterprise customers are undergoing digital transformations. This shift should bode well for Splunk as these efforts typically include leveraging technology such as Splunk’s for efficiency gains.

Company Profile 

Splunk is a cloud-first software company that focuses on analyzing machine data. The company is a major player in two markets: security and full-stack monitoring & analysis. Splunk is currently undergoing a cloud transition as the company weans its on-premises customers over to its cloud products that are delivered as software-as-a-service. The firm’s top line consists of the sale of software licenses, cloud subscriptions, and maintenance and support. 

(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.