Tag: US Market
Squarespace(ticker: SQSP), a website builder, was the most high-profile listing in May. . Although the corporation’s initial public offering (IPO) was technically a direct listing rather than a typical IPO, the shares began trading on May 19. Squarespace’s price has risen approximately 17% so far.
The IPO boom is anticipated to remain in June and beyond, according to investors. Here are five initial public offerings to keep an eye on:
- dLocal (DLO)
- Krispy Kreme (DNUT)
- Authentic Brands
- Couchbase
- Robinhood
dLocal (DLO)
dLocal, a payments startup, is part of a wave of digital payments companies that are going public. In late May, Paymentus Holdings (PAY) and Flywire Corp. (FLYW) completed their first public offerings. In addition, Marqeta (MQ) has filed to go public next week.
dLocal reported $104.1 million in revenue in 2020 in its IPO filings, up 89 percent over 2019. It also made a profit of $28.2 million last year, in stark contrast to many IPO growth stocks, which are losing money.On June 3, shares began trading on the Nasdaq. The payment startup raised $617.7 million in its initial public offering, which opened at $31 per share.
Krispy Kreme (DNUT)
Krispy Kreme, a doughnut company, said on May 4 that it has filed secret documents to execute an IPO. Krispy Kreme is aiming to re-enter the public market after its initial public offering (IPO) in 2000 ended in a Chapter 11 bankruptcy barely five years later.
Investors are hoping that the value of Krispy Kreme has increased since 2016. Dunkin’ Brands, a competitor, was taken private in 2020 for $8.76 billion.
Authentic Brands
Authentic Brands filed for an IPO in secret on May 26 and is aiming for a $10 billion valuation, according to Women’s Wear Daily. The data appears to back up an earlier Bloomberg report claiming that Authentic Brands is considering an IPO.
According to CNBC, Authentic Brands was estimated at between $4 billion and $5 billion in its most recent fundraising round in 2019.
Couchbase
According to insiders acquainted with the situation, Couchbase might be worth up to $3 billion. Cisco Systems (CSCO), Intuit (INTU), and PayPal Holdings are among the company’s high-profile customers, generating more than $100 million in annual revenue (PYPL).
Couchbase has been planning an initial public offering (IPO) since 2016. The company has been quiet about its anticipated IPO in recent months, but the March filing indicates that a formal announcement might happen at any time.
Robinhood
The past few years have been tremendously profitable for Robinhood, but they have also been marred by controversy. After the Reddit WallStreetBets community staged targeted short squeezes, Robinhood briefly suspended trading in GameStop Corp. (GME) and other so-called “meme” stocks, CEO Vlad Tenev was called to testify before Congress.
Tenev stated in his statement that Robinhood has over 13 million consumers. In 2020 and early 2021, a retail stock trading boom fueled Robinhood’s exponential growth. According to TechCrunch, the company’s payment for order flow revenue climbed from around $90 million in the first quarter of 2020 to around $220 million in the fourth quarter.
Source: money.usnews.com
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.
Nevertheless, while not capable of sustaining the frothy valuation of yesteryear, the firm produced record results (largely in line with our expectations on both the top and bottom lines) that continue to inspire confidence in the sustenance of its growth profile and brand equity. We don’t plan to materially change our $48.50 fair value estimate, as time value and better-than-expected commercial execution should be offset by higher taxes, as we incorporate Morningstar’s probability-weighted house expectation of an increase in the U.S. statutory rate to 26%. Despite being well off their highs, we don’t see a sufficiently compelling margin of safety in the shares at current levels, and suggest prospective investors remain on the sidelines.
Revenue for the fiscal year came in at $1.1 billion, up 7% year over year. Anchor brand La Croix remained the preeminent driver of growth, though we suspect the firm’s energy and carbonated soft drinks brands also grew nicely. As pandemic-besieged sales channels where LaCroix is underindexed–like food-service and vending–continue to rebound, we don’t see much adverse impact manifesting on the top line; if anything, there could be incremental upside given management’s ambition to broaden the aperture of its sales and consumption occasions. These efforts, together with attractive sparkling water category dynamics, should facilitate mid-single-digit growth longer term, supported by ongoing reinvestment in innovation
Operating margins were stellar, up 460 basis points to 21.2%. While operating leverage always plays a role in quarters with top-line strength (given that it owns most of its production/distribution apparatus), lower advertising and corporate expenses remain anomalous contributors that should become headwinds longer term as the competitive landscape re-intensifies post-pandemic.
Company Profile
National Beverage is one of the top 10 non-alcoholic beverage companies in the U.S. Its portfolio skews toward functional drinks (i.e. those purporting to offer health benefits) and is anchored by the popular LaCroix sparkling water trademark. Other offerings include Rip It energy drinks, Ever fresh juices, and soda brands like Shasta and Faygo. The firm controls most of its production and distribution apparatus, with very little outsourcing. In terms of go-to-market, it uses warehouse distribution for big-box retailers, direct-store-delivery for convenience stores and other small outlets, and food-service distributors for the food-service channel (schools, hospitals, restaurants). It is controlled by chairman and CEO Nick Caporella, who owns over 73% of the common stock.
(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.
Celanese produces the chemical in its core acetyl chain segment (roughly 50% of EBITDA), which primarily serves the automotive, cigarette, coatings, building and construction, and medical end markets. It produces acetic acid from carbon monoxide and methanol, a natural gas derivative. Celanese produces its own methanol at its Clear Lake, Texas, plant, which benefits from access to low-cost U.S. natural gas. The company recently announced that it will expand acetic acid production capacity at Clear Lake by roughly 50%, which should benefit segment margins thanks to lower average unit production costs.
The engineered materials segment (around 40% of EBITDA) produces specialty polymers for a wide variety of end markets. This segment uses acetic acid, methanol, and ethylene to produce specialty polymers. Celanese and other specialty polymer producers have benefited in recent years from automakers lighweighting vehicles, or replacing small metal pieces with lighter plastic pieces. Celanese should also benefit from increasing electric vehicle and hybrid adoption, as then company makes battery separator components. By 2030, we forecast two thirds of all new global auto sales will be EVs or hybrids. Additionally, Celanese sells products used in electronics and “Internet of Things” technologies, which provides another area of growth for the company.
With growing EV adoption and increased sales of Internet of things technologies, Celanese is well positioned for outsize engineered materials’ volume growth over the next several years. Acetate tow, which is Celanese’s smallest segment, produces acetate tow primarily for cigarette filters. Cigarette sales are in secular decline across most countries, and so we expect Celanese’s acetate tow sales will slightly decline over the long term.
Financial Strength
Celanese is in good financial health. As of March 31, 2021, the company had $3.6 billion in debt and around $0.8 billion in cash. A net debt/operating EBITDA ratio of 1.8 times. Celanese is undergoing a portfolio transformation, exiting legacy joint venture deals and acquiring new assets to increase the company’s engineered materials portfolio, such as the Santoprene business from ExxonMobil. The company will increase its debt as a part of this acquisition. However, we generally expect the company’s balance sheet and leverage ratios to remain healthy as Celanese should generate enough free cash flow to meet its financial obligations. The cyclical nature of the chemicals business could cause coverage ratios to fluctuate from year to year. However, Celanese should still generate positive free cash flow well in excess of dividends in 2021.
Core Acetic Acid Production
- Celanese built out its core acetic acid production facilities at significantly lower capital cost per ton than its competitors thanks to the scale of its facilities (1.8 million tons versus average 0.5 million tons).
- Celanese should benefit from producing an increasing proportion of its acetic acid in the U.S. to take advantage of low-cost natural gas.
- The engineered materials’ auto business should grow more quickly than global auto production because of greater use of these products in each vehicle.
Company Profile
Celanese is one of the world’s largest producers of acetic acid and its downstream derivative chemicals, which are used in various end markets, including coatings and adhesives. The company also produces specialty polymers used in the automotive, electronics, medical, and consumer end markets as well as cellulose derivatives used in cigarette filters.
(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.
While the competitive nature of these markets makes incremental share gain somewhat difficult, we see opportunity for organic growth and share gains in product inspection, industrial, and food retail. Mettler places an intense focus on sales and marketing and has leveraged its Spinnaker and Stern Drive programs to operate with high efficiency and maintain strong customer retention.
Despite relatively slow market growth in weighing instrumentation, Mettler has achieved steady above-market share gains and has established a niche in high-end laboratory balances. Impressively, the firm has posted consistent pricing and margin gains over the past decade, even during the great financial crisis, 2015-16 industrial downturn and COVID-19 pandemic. Tepid industry growth holds potential competitors at bay, given that new entrants would find it difficult to take meaningful share, and the reward for doing so would be relatively small.
Higher inflation could limit earnings growth because Mettler may find it difficult to pass on pricing increases to clients that are more than the customary 2 percent to 3 percent range. Nonetheless, because the company works in established, stable markets, the long-term picture for the company appears positive.
Despite shareholder pressure on financial allocation, Mettler has taken a methodical approach to acquisitions.
Financial Strength
Mettler-Toledo has good financial strength and has consistently maintained solid levels of free cash flow and reasonable debt, which stood at 1.5 times EBITDA in December 2020. Mettler has generated increasing levels of free cash flow in each of the past four years, with $240 million of cash flow in 2016 increasing to nearly $650 million in 2020. Mettler has typically used much of this cash flow on share buybacks, which have totaled nearly $2.8 billion over the last five years. Apart from repurchases, Mettler has occasionally made moderately sized acquisitions, such as the $105 million purchase of pipette consumable vendor Biotix in 2017, and the $96 million acquisition of lab equipment company Henry Troemner in 2016.
Bulls Say
- Despite the slow market growth of balances, Mettler has consistently exceeded analyst expectations, and the company has unmatched operating efficiency.
- Mettler has shown impressive cost discipline during the COVID-19 pandemic. With a flexible cost structure and healthy balance sheet, Mettler is poised to benefit from a post-crisis economic rebound.
- Though details of the programs remain somewhat opaque, the Spinnaker and Stern Drive initiatives appear to be significant contributors to the firm’s consistent market-beating results, and these programs are set to continue.
Company Profile
Mettler-Toledo supplies weighing and precision instruments to customers in the life sciences (54% of 2020 sales), industrial (40%), and food retail industries (6%). Its products include laboratory and retail scales, pipettes, pH meters, thermal analysis equipment, titrators, metal detectors, and X-ray analyzers. Mettler leads the market for weighing instrumentation and controls more than 50% of the market for lab balances. The business is geographically diversified, with sales distribution roughly as follows: the United States around 30% of sales, Europe around 30%, China around 20%, and the rest of the world around 20%.
(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.
Tesla also invests around 6% of its sales into R&D, focusing on improving its market-leading technology and reducing its manufacturing costs. The company will also move upstream into battery production, with a goal to reduce costs by over 50%. Tesla also sells solar panels and batteries used for energy storage to consumers and utilities.
After taking a fresh look at Tesla, we are raising our fair value estimate to $550 per share from $354. The increased fair value estimate comes from our outlook for higher long-term profitability in the automotive segment. We maintain our narrow moat rating but downgrade our moat trend rating to stable from positive. At current prices, shares as slightly overvalued, with the stock trading above our fair value estimate but within 25% of our fair value estimate, which is the upper end of the range for 3-star territory based on our uncertainty rating. A little over 5.1 million vehicles sold in 2030, up from 4.3 million, due to a greater number of affordable vehicles, which Tesla nicknamed the $25,000 car.
Management’s cost reduction initiatives driving long-term gross margin expansion. In its September Battery Day event, Tesla unveiled plans to reduce battery costs by 56%. Tesla will be able to achieve these cost reductions, without reducing prices, which will reduce vehicle unit costs and increase gross profit per vehicle. In addition to cost reductions, the mix shift to the Model Y will also increase automotive gross profit margins. The Model Y is built on the Model 3 platform, and management says the cost of production for a Model Y is not that much more than the Model 3. Given that the Model Y’s entry level price is $12,500, or roughly 30%, more expensive than the Model 3, we see gross profit margins expanding as a greater proportion of Model Y vehicles are sold.
Tesla’s EV prices will remain at or above the price of a comparable internal combustion engine or hybrid vehicle. This should lead to Tesla’s cost reduction efforts driving profit margin expansion. Tesla’s second largest vehicle platform over the next decade, with the two platforms generating nearly 90% of total volumes. Similar to Tesla starting with the Model 3 and then transitioning to sell more Model Ys, we expect Tesla will start with a $25,000 car and then transition to produce a greater proportion of SUVs from the platform.
Financial Strength
Tesla is in solid financial health as cash and cash equivalents exceeded total debt as of March 31, 2021. Total debt was roughly $10.9 billion, with about $5.1 billion of that amount nonrecourse debt mostly backed by asset-backed security issuances for the auto and energy businesses, China debt, and a warehouse line secured by cash flows from vehicle leasing contracts. To fund its growth plans, Tesla has used convertible debt financing as well as equity offerings and credit lines to raise capital. As of March 31, 2021, the company has $2.15 billion in unused committed amounts under credit lines and financing funds. In 2020, the company raised $12.3 billion in three equity issuances.
Tesla‘s Unique Supercharger Network
- Tesla has the potential to disrupt the automotive and power generation industries with its technology for EVs, AVs, batteries, and solar generation systems.
- Tesla will see higher profit margins as the company achieves its plan to reduce battery costs by 56% over the next several years.
- Through the combination of its industry-leading technology and unique Supercharger network, Tesla offers the best function of any EV on the market, which will result in the company maintaining its market leader status as EV adoption increases.
Company Profile
Founded in 2003 and based in Palo Alto, California, Tesla is a vertically integrated sustainable energy company that also aims to transition the world to electric mobility by making electric vehicles. The company sells solar panels and solar roofs for energy generation plus batteries for stationary storage for residential and commercial properties including utilities. Tesla has multiple vehicles in its fleet, which include luxury and mid-size sedans and crossover SUVs. The company also plans to begin selling more affordable sedans and small SUVs, a light-truck, semi-truck, and a sports car. Global deliveries in 2020 were roughly 500,000 units.
(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.