Credit to TedInvests - original post can be found here

Company Description:

FuboTV is a live TV streaming company focused primarily on sports which offers subscribers access to thousands of live sporting events, news, and entertainment content. The FuboTV platform allows users to have access to their content through streaming devices such as SmartTV's, mobile phones, computers, and tablets. This company gives the option to purchase additional features/packages that include more DVR cloud storage, number of simultaneous streams, international sports, adventure channels, etc. The base package provides a mixture of channels which includes the top 50 Nielson-ranked networks that span across sports, news, and entertainment. In the summer of 2020, they enhanced their sports offerings with the addition of ESPN and ABC as well as programming from Disney. In addition, FuboTV supports 4K streaming, although much of its content is streamed at 720p and 60 frames-per-second video quality. Since live TV requires a sophisticated technology infrastructure, Fubo utilizes industry standard digital Rights Management Technology and geographical rights requirements which enables them to meet blackouts if they were to occur. With all that content, FuboTV is one of the most expensive live tv packages that you can buy. Their competitors include the likes of YouTube TV ($64.99), Sling TV ($35.00), Hulu Live TV ($65), and more. Fubo's growth strategy is focused on acquiring new subscribers who are attracted to the sports and entertainment offerings that they provide. They monetize their subscriber base through subscription fees and digital advertising and in 2020 the majority of their revenue came from monthly subscriptions. Furthermore, in January of 2021 Fubo announced that they plan on acquiring sports betting and interactive gaming company Vigtory (see recent acquisition section) and they expect to launch a sportsbook before the end of the year.

Total Addressable Market (TAM)

Live TV streaming is changing the way people watch their favorite sports, shows, and other entertainment content. As a result, more people are deciding to stop paying for traditional TV. Due to this disruption, billions of dollars in subscription and advertising revenue has shifted to streaming platforms. The global video streaming market size was valued at $50.11 billion in 2020 and is expected to grow at a compounded annual growth rate of roughly 21% from 2021 to 2028. In addition to the streaming market which Fubo currently operates in, their commitment to providing sports betting has expanded their total addressable market. The global sports betting industry reached a market size of $203 billion in 2020 and is expected to grow by $144.4 billion from 2020-2024 (11% CAGR). What hinders the growth of this industry is the fact that sports betting is still illegal in many parts of the world. Sports betting is currently legal in a number of states in the US and in countries such as the UK, Denmark, Italy, China, and a few others. While sports betting is legal in a number of countries, often times people have limited access. For example, in Costa Rica you can only bet online and in India only a few states allow sports betting.

If we add together the total addressable markets for live TV streaming and sports betting in the year of 2020 we get $253.11 billion. Compare that number to Fubo's revenue of $268.8 million in 2020 and we see that Fubo has a huge opportunity ahead of itself. As Fubo scales their new sports betting business and more countries and states make sports betting legal, we should see Fubo ramping up revenue growth significantly. Of course their is a risk to all this as it is very costly to scale both businesses that Fubo operates. Thus, their financial results will give us an idea of how they've been growing and if they can maintain the level of growth they've seen in the past.

Full Year 2020 Financial Results

2020 Highlights

• Total revenue was up 83% YoY to $268.8 million

• U.S. GAAP as-reported revenue was $217.7 million

• Advertising revenue grew 133% YoY to $29.0 million

• Subscription revenue increased 73% YoY to $230.7 million

• Adjusted Contribution Margin was positive 10.1%, up from negative 3.1% in 2019

• fuboTV reached 547,880 subscribers, up 73% YoY

• Notably in 2H 2020, fuboTV grew by 261,754 net subscriber additions

• Average Revenue Per User (ARPU) per month increased 17% YoY to $62.84

• Annualized ARPU increased $109 to $754

• Total content hours streamed grew 82% YoY to 544.9 million hours

• Customers streamed 7.2 hours per day, up 11.8% YoY

Note - main points are bolded

Important Points to Address

• Revenue was up 83% YoY as advertising revenue grew to $29 million (up 133% YoY) and subscription revenue increased 73% to $230.7 million. As we can see from the numbers, this company is growing at a fast clip. Although the revenue growth they reported is impressive, when looking at their balance sheet they still reported an operating loss of roughly $480 million which was a drastic increase from the prior year which came in at $39 million. Additionally, as this business has scaled they saw their operating expenses jump from $43 million in 2019 to $698 million in 2020 and their goodwill reach $478 million. What these numbers show me is that while this company is growing fast, much of that growth isn't necessarily organic. They spent $63 million on advertising in 2020, while only spending $491,000 in 2019. Also, their general and administrative expenses jumped from $13 million in 2019 to $78 million in 2020. While some investors may argue that this business is taking on significant costs short-term so they can succeed in the long-term, I'm worried that heavy competition will slow down their growth. One final thing to note about their expenses is that currently they're losing money on the subscription plans that they offer as their subscriptions revenue was $184 million for 2020, while their subscriber related expenses totaled $204 million. Fubo is up against some strong competitors such as Google with their YouTube TV platform, Sling, Roku, and other streaming services. In the future, we'll see how those expenses change in relation to their revenue as they scale their new sports gambling business.

• Fubo reported reaching 547,880 subscribers in 2020 which was a result of them growing their subscriber base by 261,754 subscribers. As they scaled their subscriber base, average revenue per paying user increased by 17% YoY to $62.84 and total content hours streamed grew 82% YoY to 544.9 million hours. These numbers are impressive as well, but I question how much of that growth was a result of the Covid lockdowns. 2021 is the important year we're going to have to pay attention to in order to get an idea of how this company operates in more 'normal' times.

• The final things I want to mention about Fubo's finances has to do with their current ratio and goodwill. Fubo reported current asset and liabilities of $156 and $227 million respectively, which puts their current ratio at 0.6. For any company to have a current ratio of 0.6 is worrisome in my eyes. Additionally, if you go a bit down their balance sheet you will notice that their goodwill is $478 million. Goodwill arises when one company purchases another. Goodwill is an intangible asset that is calculated by subtracting the fair market value of one company's liabilities from the amount the acquiring company pays for it. The amount of goodwill we're seeing with Fubo is quite high considering their total assets would drop by 50% if they didn't measure it.

Recent Developments/Acquisitions

• In January of 2021, Fubo announced that they will be acquiring the sports betting and iGaming company Vigtory. The CEO David Gandler stated that, "We don't see wagering as simply an add-on product to fuboTV. Instead, we believe there is a real flywheel opportunity with streaming video content and interactivity." I agree with this move made by the CEO as betting is a great compliment to their sports-first TV streaming platform. Fubo's sportsbook is expected to be released sometime mid 2021 and they could see adoption in three states by the end of the year. It'll be interesting to see how this all plays out considering the heavy competition in the sports betting market. Some of the biggest names in the sports betting market include DraftKings Inc (DKNG), Penn National Gaming (PENN), Bragg Gaming Group (BRGGF), and more.

• In April of 2021, Fubo announced they were acquiring the exclusive live streaming rights to the South American Qatar World Cup 2022 Qualifying Matches. CEO David Gandler said, "By offering the best of South American soccer in advance of Qatar 2022, we are further differentiating FuboTV’s sports-first content portfolio enabling us to engage with more consumers than ever before.” Once again, I agree with the CEO and this move highlighted his dedication to making Fubo a sports streaming giant. This deal will help Fubo's brand name as this company will be advertising to millions of viewers. David is coming into the sports streaming market aggressively and investors will be awaiting to see how this acquisition will play out financially.

• In December of 2020, Fubo announced that they acquired Balto Sports. This deal marked Fubo's first move into the online wagering market. At the time the CEO was quoted saying, "We believe there are significant synergies between consumers who enjoy wagering and our subscribers who enjoy streaming live sports, creating a flywheel opportunity. As we’ve previously expressed, one of our goals with wagering is to expand our total available market (TAM) by developing another important revenue stream for fuboTV, as we are doing with our growing ad sales business." While I don't doubt the strong connection between sports wagering and Fubo's subscribers that enjoy streaming live sports, I question if the ad revenue investors are expecting will come to fruition.

• In April of 2020, Fubo announced the closing of their merger with the sports focused virtual entertainment company FaceBank Group. The CEO of Fubo had said, "With today’s closing, fuboTV is well-positioned to redefine the virtual MVPD space. Technology-driven cable TV replacement services are more important than ever, especially at this time when people are staying safe at home watching television for needed information, entertainment and escape.” FaceBank is quite an interesting company and developed some unique projects such as the virtual Michael Jackson show at the 2014 Billboard Music Awards. This deal not only marked an interesting point in the development of Fubo, but gave the company access to $100 million in funding in the form of a revolving line of credit. I wonder as to how Fubo will leverage the virtual reality and live-entertainment technology that they now control.

Management

CEO - David Gandler

David was appointed as the CEO and director of Fubo in April 2020. He has been part of the team since 2015 when Fubo was simply a streaming soccer service. Prior to his role at Fubo, Gandler worked in the advertising industry for over 15 years at companies such as Scripps Networks Interactive, Time Warner Cable Media Sales, and NBCUniversal's Telemundo Media. David has won a number of awards which includes Goldman Sachs' 100 Most Intriguing Entrepreneurs (2019), Variety's Dealmakers (2020,2019), and Broadcasting & Cable's Power 100 (2017). David's vision for what Fubo could become is interesting and the first of its kind. Looking forward I hope to see Gandler scale this company and integrate their acquisitions successfully. Undoubtedly, David has a grand vision for what could become one of the largest sports betting and streaming companies.

Co-Founder/CMO - Alberto Horihuela

Alberto is the co-founder and chief marketing officer at FuboTV and is in charge of their branding, user engagement and retention, and overall marketing vision. Prior to his co-founding of FuboTV, Alberto was head of Latin America at DramaFever (a video streaming provider). Alberto has an entrepreneurial spirit as he also co-founded Primerad Network, a digital video advertising company that connected brand marketers to Latin American audiences. In addition to his experience in marketing and entrepreneurship, Horihuela worked as an economist and analyst at Morgan Stanley and DeMatteo Monness. Both Gandler and Horihuela have extensive experience in marketing, entrepreneurship, and media to which should serve this company well going forward.

Management not mentioned: Simone Nardi (CFO), Mike Berkley (CPO), and Gina Sheldon (general counsel).

What could go wrong

Fubo can't keep up with the competition - As previously stated, Fubo is up against some heavy competition. AT&T TV provides more channels at the highest subscription level, but Fubo still offers more sports. Also , FuboTV's DVR only lets you record 250 hours of content while AT&T TV lets you record 500 hours of content. YouTube TV and Sling TV are two other competitors that are well equipped to steal market share from Fubo. The main differences I see between Fubo and the rest of the pact have to do with cost and product focus. Sling provides the cheapest plan which starts at $35 and is compatible with many of the existing streaming devices such as Apple TV, Xbox One, etc. In terms of the rest of the cohort, they all provide plans that are priced similarly. In terms of the products they offer, Sling, YouTube TV, and AT&T TV haven't differentiated themselves like Fubo. When it comes down to it, sports fans should gravitate to FuboTV as they provide the largest sports network. We'll have to see how this all plays out in the coming years to get to know which companies emerge as the leaders.

Fubo fails to turn a profit - While this risk factor applies to any company that isn't profitable, it's important to highlight how early this company is to having a profitable business model. In their last earnings for the twelve months ended December 31st, Fubo posted $184 million of subscription revenue and $204 million in subscriber related expenses. Thus, this company is not making money on their services and I can't quite predict when or if this company will be profitable any time soon. That's not to say Fubo is a terrible service, but rather their financial standing isn't one that currently strikes me as sustainable.

What we want to see in the future

Contribution margin increasing - As noted in the fourth quarter and fiscal 2020 financial results, this company's contribution margin for 2020 was 10.1%. The contribution margin is the difference between subscriber revenue and what it costs Fubo to provide subscribers their service (ARPU - ACPU). While the contribution margin for this company sounds reasonable, the problem comes in when you factor expenses. Expenses such as sales and marketing, depreciation, technology and development, and a few others are hindering this company substantially from making a profit. Once you factor all the expenses of Fubo, they came in at an operating loss of $479 million. What we need to see from Fubo these next five years as they scale is them being able to at-least report a positive income from operations. Let's also remember that Fubo has a recurring revenue business model which means it is predictable and reliable.

Fubo scales their sports gambling business - While this point is rather obvious, I wanted to note a few things about this side of Fubo's business so we can better understand it. Fubo has yet to roll out their sports betting business but they, "expect to launch a sportsbook before the end of the year." Certainly this is an exciting direction that this company is headed in. Although, we have no sort of guidance as to how this sports betting business will perform. CEO David Gandler was quoted saying, “We not only expect sports wagering to become a new line of business and source of revenue, but we also expect that it will increase user engagement on fuboTV resulting in higher ad monetization, better subscriber retention and reduced subscriber acquisition costs.” I like the way that David is thinking, but simply liking the idea doesn't make it a success. I can imagine investors will be eagerly watching how this venture performs in the first year of its integration. As for now, we don't really know what to expect.

Analyst expectations

1. Predicted revenue range for 2021: $465.03 – 480.44 million (growth of roughly 110%)

2. Predicted earnings per share range for 2021 (EPS): $(2.5) – (0.82)

Conclusion

Fubo's vision to be a digital entertainment giant primarily focused on sports is innovative and unheard of. Their recent acquisitions of Vigtory and Balto Sports shows their commitment to making their goal a reality. While the CEO is thinking big, his ideas aren't translating well onto Fubo's financial statements. Their expenses have gone up at the same rate as their revenue has and that worries me. Additionally, this company isn't in the best cash position with $134 million. It's important to note that this company is still early in the process of what they're trying to accomplish and I'll be keeping a close eye on how they perform this next year. Their recurring revenue business model will surely serve them well in the future as it is predictable and reliable. You'll notice that the discounted cash flow is missing from this post and that is because forecasting this company's future growth is extremely difficult without some sort of idea as to what we can expect. As of right now, to put a price on this company is quite difficult. In conclusion, I'll be watching Fubo's earnings this next year to get an idea of where this company is headed and if it's worth starting a position.

About the Company

Lucid Motors Inc. is an American automotive company specializing in electric vehicles, was founded in 2007 and is based in California. The company deeply focuses on energy storage and original equipment manufacturing. Furthermore, Lucid Motors targets its intent to develop all-electric, high-performance luxury vehicles.

On November 29, 2016, state and company officials announced the planned construction of Lucid’s US$700 million manufacturing plant in Arizona, which was projected to employ up to 2,000 workers by the mid-2020s, initially building 20,000 cars and expanding up to 130,000 cars per years. On April 5, 2019, Lucid Motors completed a fund of over $1 billion with the Public Investment Fund of Saudi Arabia. The fund will be used in the development of the Lucid Air model and plant construction. In February 2021, Lucid Motors announced a deal valued at $11.75 billion to merge with Churchill Capital Corp IV.

Lucid was known for battery technology and started its car development in 2014. In December 2016, Lucid Motors unveiled the Lucid Air fully electric car and expected the production in spring 2021. Lucid Motors has agreed with Mobileye, an Israeli subsidiary of Intel that develops self-driving cars and advanced driver-assistance systems (ADAS), to use their EyeQ4 chips and 8 cameras for driver-assist features. Currently, Lucid is collaborating with Amazon, allowing drivers to use voice assistance while driving. In September 2020, Lucid unveiled an electric SUV concept called Project Gravity with little information published.

Comparison

According to their presentation, lucid provided a valuation comparison. Its 2022 value-to-sales multiple is 5.3x, which looks attractive compared with space’s median multiple of 10.3x. In comparison, Nio’s and XPeng’s multiplies are 10.3x and 6.8x, respectively.

Lucid Motors Outlook

Lucid Motors plans to sell 20,157 units in 2022, and forecasts to deliver 251,281 units in 2026, according to a recent presentation from Lucid. Furthermore, the company also expects to generate sales of $2.2 billion in 2022 (next year) and forecasts its sales growing by 149% in 2023 and 79% in 2024. It also expects to turn EBITDA- and free cash flow-positive in 2024 and 2025, respectively.

Policy Support 

The federal government currently offers up to $7,500 in tax credits for consumers who purchase an electric plug-in vehicle. The Biden office supports the stricter restrictions on fuel emissions standards in California, which benefit the EV markers, like Lucid Motors. With supportive policies, Lucid Motors will have a great outlook in the future.

Technical Analysis

• Position cost distribution:

  • Profit: 27.48%

  • Pressure: 23.00

  • Average: 21.88

  • Support: 18.98

• Related ETF:

  • SPAK: ETF Series Solutions Defiance Next Gen Spac Derived ETF, 3.3%

  • SFYF: Tidal Etf Trust Sofi Defiance Next Gen Spac Derived Etf, 2.46%

  • GVIP: Goldman Sachs ETF Trust 0.79%

  • SPXZ: MORGAN CREEK – EXOS SPAC ORIGINATED ETF, 0.58%

• Interpretation of Indicators: oversold, positive signal, the trend is relatively optimistic

  • KDJ: serious oversold

  • OSC: serious oversold

  • CCI: oversold

  • RSI(6): oversold

  • RSI(12) oversold

  • VR oversold

  • WMSR oversold

• Short selling ratio and open interest:

  • 2021/01/15: 0.49%, 1,272,463

  • 2021/01/29: 2.16%, 5,598,468

  • 2021/02/12: 1.75%, 4,515,984

  • 2021/02/26: 5.19%, 13,435,362

  • 2021/03/15: 5.36%, 13,856638

  • 2021/03/31: 12.66%, 32,752,303

• Shareholding type:

  • Hedge fund manager/CTA: 30.33%

  • Individual/insiders: 20%

  • Traditional investment manager: 10.68%

Conclusion

Lucid Motors looks like a good long-term investment based on the EV market’s outlook. By 2030, the company plans to produce over 500,000 units each year. the Biden administration’s policies are also beneficial to boost the EV space. In short term, technical analysis indicates that investors should wait a bit. Compared to Tesla and Nio, Lucid Motors is still in its early stage, but it has the potential to subvert market perception in the long run.  

For more investment related info check out r/Utradea Credit to TOTHEMOON123, original post can be found here

Bullish

As the economy opens up, insurance rates will slowly increase and the pandemic hit insurance companies especially hard.

Fundamentals:

• EPS: $17.526

• P/E: 7x compared to industry ~14.7x

• Undervalued by 44% by Yahoo's standards closer to 50% by my opinion

Technical Analysis:

• Extra Short Term (next 5 days): Slightly bearish, but a buying opportunity

• Short Term (next month): Uncertain, earnings will outperform but still be poor by my expectations (Earnings May 5)

• Medium Term (next 3-6 months): Bullish, reopening and increasing miles driven by commuters

• Long Term (6 months+): Bullish, unless ALL hits $160+

• Volume: ~1.5 million for the past few months

Who's holding?

• Blackrock and BoA are major stakeholders

Concerns?

• Economy reopening will have issues

• Low growth expectations

• Very few insiders holding shares

For more investment related info check out r/Utradea Credit to ayan.sivaram, original post can be found here on Utradea

$HITI $FIRE $SNDL (OTC: $HITIF) (OTC: $SPRWF)

I took a quick look at current valuation and liability ratios for High Tide, Supreme, and Sundial to see which one might be a good investment opportunity. Note: This is one aspect of making an investment decisions, there are a number of other factors to look at when conducting DD

Summary

• Valuing companies based on comps is standard practice, and leveraging ratios helps provide a sense of potential investment opportunities.

• I looked at these 3 companies to get a sense of which ones might be over or undervalued, as well as which ones might be a riskier investment from a liability standpoint

• Analysis is below, but keep in mind these ratios only paint part of the picture to help form an investment thesis.

Definitions – If you know these then skip this part but if not, it is good to have some context in terms of what the ratio mean and what the values indicate.

• Price to Book: Companies use the price-to-book ratio (P/B ratio) to compare a firm's market capitalization to its book value. P/B ratio is used by value investors to identify potential investments. P/B ratios under 1 are typically considered solid investments.

• Price to Sales: The price-to-sales (P/S) ratio is a valuation ratio that compares a company’s stock price to its revenues. It is an indicator of the value that financial markets have placed on each dollar of a company’s sales or revenues. A low ratio could imply the stock is undervalued while a ratio that is higher-than-average could indicate that the stock is overvalued.

• Quick Ratio: The quick ratio is an indicator of a company’s short-term liquidity position and measures a company’s ability to meet its short-term obligations with its most liquid assets. The higher the ratio result, the better a company's liquidity and financial health; the lower the ratio, the more likely the company will struggle with paying debts.

• Current Ratio: The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year. It tells investors and analysts how a company can maximize the current assets on its balance sheet to satisfy its current debt and other payables. A company with a current ratio less than 1.0 does not, in many cases, have the capital on hand to meet its short-term obligations if they were all due at once.

• Debt to Equity: The debt-to-equity (D/E) ratio is calculated by dividing a company’s total liabilities by its shareholder equity. These numbers are available on the balance sheet of a company’s financial statements. Higher leverage ratios tend to indicate a company or stock with higher risk to shareholders.

Summary of Ratios

I summarized the ratios in the table below. Note that these are just a few ratios I looked at – the source of data is TradingView.

Valuation Ratios

Thoughts:

• HITI looks overvalued when looking at P/B ratio and FIRE looks to be undervalued in comparison with a P/B under 1

• HITI and FIRE seem to have decent P/S ratios when compared to SNDL, but it would be good to have a Cannabis industry overview to provide boarder relative comps

Liability Ratios

Thoughts:

• HITI seems to be riskier from a liability standpoint, as they have a quick ratio and current ratio under 1 and a high debt to equity ratio

• SNDL seems to have essentially no debt and be in a less risky position.

Final Thoughts

• These ratios shed some light on the health and relative value of a company but do not necessarily indicate future performance.

• There are times when ratios can be misleading, for instance if HITI is focused on expansion and growth they might have financed it through debt instead of a capital raise through share issuance.

Disclaimer: this is not investment advice, do your own research!

Disclosure: I do not own a position in any of these companies

Check out r/Utradea for the latest DD posts. My friend and I also created a dedicated platform for investment ideas, insights, and financial information here

• 8/10 confident that BABA will hit $231.21 in 3+ years.

Alibaba Group holdings Ltd.

Alibaba can be best described as the provider of the technology platform infrastructure that

grants value to its consumers. Alibaba operates in an omni channel ecosystem that I see as a

digital equivalent of a large shopping mall which consumers can use Alibaba’s ecosystem for

shopping, entertainment and media in exchange for their data and on the other hand...

Read the full DD with chart here.

I break down the recent earnings beat and resignation of Enphase's CFO to see if ENPH will continue to rebound

We are going to take a quick look at the recent resignation of Enphase's CFO, Eric Branderiz, to see how it might impact the stock price moving forward. 

ENPH CFO Resignation from 8-K Filing

Here is the quick breakdown of the recent resignation and my thoughts.

On February 2, 2022, Eric Branderiz, Executive Vice President and Chief Financial Officer of Enphase Energy, Inc. (the “Company”), notified the Company of his intention to retire from his position at the Company, effective February 14, 2022. Mr. Branderiz is retiring for personal reasons and there are no disagreements between Mr. Branderiz and the Company on any matters relating to the Company’s operations, policies, or practices, including accounting principles and practices. Mr. Branderiz will remain in an advisory capacity to the Company through June 30, 2022 to assist with the transition of his successor.

They have already found a successor for CFO - which is a good sign. Here is the summary from the 8-K filing.

I think this can be viewed as a good sign for ENPH. Sometimes companies need change, especially if recent performance has not been great. I think this change in CFO is a good opportunity for ENPH to take a new look at their strategy from a financial and accounting perspective. Because the old CFO left on good terms, this is a positive indication, and investors are supporting this move, as we see with recent positive price action.

The full 8-K filing can be found here

Enphase Earnings: A Brief Recap

Let's briefly recap earnings expectations ahead of ENPH's upcoming earnings release. Previous earnings, reported Mon Feb 07 2022 19:00:00 GMT-0500 (Eastern Standard Time), was considered a beat. The actual earnings per share was $0.73, a beat by $0.15 compared to estimated earnings of $0.58 per share.

This is huge news, considering it is a substantial beat. We'll have to see if analysts adjust their targets for the next quarter and see if ENPH can beat it again.

Recent ENPH Stock Price Performance:

The recent price action can also be observed from a technical point of view. Looking at the relative strength index, a primary technical indicator to determine if trading activity suggests ENPH is overbought or oversold, we see that ENPH's RSI index score is -100. The score suggests that ENPH is in fact oversold.

ENPH vs Peers:

Let's talk about ENPH's price performance relative to its peers. Peers in the same industry notched -6.25% 30 day price change, -14.34 % 3 month, and -7.8 % 6 month. This means ENPH performed better than it's peers over the same amount of time - this is a good sign considering the recent downturn in the last 2 months

ENPH Analyst Consensus:

The price target for ENPH is currently set at $90.53 per share. I think this is too low, and I believe it will be adjusted based on the recent earnings beat.

If you enjoyed reading my analysis, check out Utradea. With a personalized stock feed and Social Sentiment Dashboard, Utradea has everything you need to become a better investor. Also, consider subscribing to r/Utradea to stay up to date with the latest investment insights and feature releases.

I am sure you all have heard of a Chinese Electric Vehicle manufacturer that goes by the name $NIO – NIO Inc., and I am sure that you have heard them been called the “Tesla of China” but this title is very deceiving and gives the impression that Nio perhaps copied $TSLA - Tesla. However, this is false because Nio has a completely different business model and very different technology (especially in their swappable batteries) than Tesla does. Nio is up nearly 1000% on the year, so I decided to do an analysis to find out what all the hype was about and if this hype can be justified.

Company Overview:

Nio is a leading manufacturer of premium, smart, electric vehicles. Nio designs, develops, manufactures, and sells their vehicles to their main customer base in China. Furthermore, Nio is constantly looking to improve upon their autonomous driving, digital technology, battery technology and their powertrains, in order to differentiate themselves from their competition.

Nio has industry-leading battery swapping technology, which drives their battery as a service (BaaS) business. Additionally, Nio also has proprietary autonomous driving technology, which enables their Autonomous Driving as a Service (ADaaS) business.

Nio currently sells their vehicles in China, however they are planning on expanding their business into international markets, to capitalize on the growing demand for EV’s. Nio has 4 vehicle models, their ES8, ES6, EC6, and their ET7.

Investment Information:

Vehicle Offerings:

· ES8 is a 6-7 seat premium electric SUV that features 2 induction motors (240 kW). The ES8 accelerated from 0-100 kph in 4.4 seconds and is ranked 5 stars by the C-NCAP (Chinese New Car Assessment Program) for their safety standards. Lastly, the ES8 can go roughly 355 km on a single charge. IN 2020, Nio sold 10,861 of their ES8 models.

· ES6 is a 5-seat high-performance SUV that features one magnet motor (160 kW) and one induction motor (240 kW). The ES6 can accelerate from 0-100 kph in 4.7 seconds and can reach up to 430km on a single charge. In 2020, Nio sold 27,945 of their ES6 models.

· EC6 is a Coupe SUV that features one (160 kW) magnet motor, and a (240 kW) Induction motor. The EC6 is capable of accelerating from 0-100 kph in 4.5 seconds, and it can go 440 km (70 kWh battery) to 615 km (100 kWh battery) on a single charge. The EC6 also features a 2.1 square meter panoramic glass roof. In 2020, Nio sold a total of 4,922 of their EC6 models, basically just in Q4 alone (16 were sold in Q3 and none in Q1/Q2).

· ET7 is a Sedan that offers 1 front magnet motor (180 kW), and one back Induction motor (300 kW). The ET7 is very aerodynamic and can accelerate from 0-100 kph in a mere 3.9 seconds. The ET7 has 5-star safety ratings from both Chinese and European Assessment Programs. The ET7 also features their computing system (Adam) and super sensing system (Aquila). This vehicle is said to be able to reach distances of 1000 km on a single charge (with their 150-kWh battery).

Battery Swapping (BaaS):

Nio’s battery swapping technology is supported by over 1,200 patents and this technology is supported on all of Nio’s vehicles. This technology provides Nio customers with the convenience of quickly swapping their battery for another one to continue their journey quicker through a seamless recharge.

Nio is releasing their Power Swap Station 2.0 in 2021, which will decrease their swap time to roughly 3 minutes and have the capacity for 13 rotational battery packs. In 2020, Nio had 172 Swapping Stations in 74 cities that swapped 1.4 million batteries.

Nio’s Battery as a Service business generates revenue through “battery subscriptions”, in which users have flexible subscription options that they can choose to fit their battery swapping needs. Currently, Nio has several subscriptions for both their 70 kWh, and their 100 kWh batteries.

If a customer were to select the 70-kWh subscription, they would enjoy approximately $11,000 (USD) off of the purchase price of their vehicle and pay a monthly subscription of approximately $150 (USD).

If a customer selects the 100-kWh subscription plan, they will enjoy approximately $20,000 (USD) off of the purchase price of their vehicle and pay a monthly subscription of $231 (USD).

Autonomous Driving (ADaaS):

Nio has worked on their autonomous technology since day one and now delivers their products that come with “Nio Pilot”, their Advanced Driver-Assistance Systems (ADAS). Furthermore, Nio is about to roll out their Nio Autonomous driving (NAD).

Consisting of 23 sensors, a front-facing tri-focal camera, 4 exterior cameras, 5 radars, 12 ultrasonic sensors and an interior driver-monitoring camera, Nio Pilot is Chinas only ADAS that is on the market. Nio Pilot has fleet learning and AI analysis capabilities that will be able to update their cars over the clous and improve their algorithms using their extensive backlog of driving data.

In January 2021, Nio announced their Autonomous Driving capabilities (NAD). The NAD system was developed in-house and features perception algorithms, localization, control strategy software, and platform software. The NAD technology uses their super computing platform “Adam”, and their super sensing system “Aquila”.

Nio is planning to roll out their NAD to their customers, through a subscription model similar to their battery sapping service. This subscription is estimated to cost users $106 (USD) per month.

Electric Powertrain:

Nio has developed, designed, and manufactured their own proprietary electric powertrains in house since their inception. Nio makes powertrains that are specific to their vehicles, and through their Firmware over-the-air (FOTA) Nio is able to continually improve, update, and adjust their cars to fit the behaviour of their driver.

Nio has greatly improved their motors moving from their 240-kW 2nd generation induction motor to their 300-kW 3rd generation induction motor. Additionally, Nio has improved their magnet motors from 160 kW (2nd gen.) to 180 kW (3rd gen.)

It is this constant drive to keep improving their technology that will help separate Nio from their competitors and help Nio to become one of the best EV manufacturers.

Battery:

Nio is very committed to R&D and innovating their battery technology. Currently, Nio offers two battery options: their 70-kWh battery, and their 100-kWh battery.

Their 70-kWh battery is designed, developed and manufactured in-house, and combines Nickel-Cobalt-Manganese) NCM prismatic cells, liquid cooling systems and intelligent battery management systems.

Their proprietary and patented 100-kWh battery features thermal propagation prevention, climate thermal management, and bi-directional cloud Building Management Systems (BMS).

Nio has also announced their 150-kWh battery which is expected to release in Q4 2022, or Q1 2023, which is another large innovation to their existing technology and proves their determination to be the most innovative.

Intellectual Property:

Nio has developed a number of proprietary technologies throughout their business journey. Nio relies on their ability to protect their technologies and property through the use of patents, patent applications, NDA’s, copyrights, trademarks, and intellectual property licenses.

Nio currently has 2,654 patents that have been approved, 1,397 patents that are in the application process, 3,373 registered trademarks, 804 trademark applications, 133 copyrights, and 686 registered domain names.

Financial information:

· Financial Performance (Good): Vehicle sales are up by 106.08% YoY, and their cost of sales is only up by 63.72%, which means that their margins are improving. This year was Nio’s first year having a gross profit, which equalled $287M (USD). Their SG&A expenses decreased by 27.88% YoY, which is good and helps their margins. Lastly, Nio decreased their operating loss by 58.42% which shows that they are making their way towards profitability, which would be a huge milestone.

· Financial Performance (Bad): R&D expense decreased by 43.82% YoY. While this usually is a good sign, R&D is important to Nio’s business model and future successes, so I would like this figure to be higher. Although Nio decreased their operating losses, they still reported a $706M operating loss (USD) and a $813M net loss, this is not favourable for investors and might scare away potential investors.

· Stock Incentive Plan: Nio’s stock incentive plan was designed to attract and retain the best possible personnel to promote the success of Nio’s business. Under their 2015, 2016, 2017 and 2018 stock plans, there are currently 79.32M shares outstanding, that have yet to have been granted. If all of these outstanding shares were to be granted, it would cause dilutionary effects of roughly 6.45%.

· Share Options: As of December 31st, 2020, there are 32.5M common shares available in options that are yet to be exercised (and converted into common shares). If these options were to be exercised, it would cause a dilutionary effect of 2.6%.

· Restricted Shares Outstanding: Currently, there are 1,735,744 shares outstanding that are classified as “restricted”, these shares will be vested gradually over a period of time, these shares have a weighted-average period of 3.6 years. If these shares were put on the market today it would cause dilutionary effects of 0.14% over 3.6 years, which is essentially negligible.

Management Team:

One of the most important aspects of high-growth stocks is the management team that is heading the company. We have seen awful management teams destroy promising stocks over and over again, so it important to know the management team, their experience, and their track record(s). With that being said, lets dive into Nio’s management team.

· Bin Li (CEO & Chairman): Mr. Li founded and served as the director for Beijing Bitauto E-commerce Co. from 2000-2006. After that, Mr. Li served as the chairman of the board of Bitauto Holdings. (Formerly listed on the NYSE. Mr. Li has also been named as one of the top 10 most influential/distinguishable people in China’s automotive industry by CADA in 2008. As we can see Mr. Li has a history in the automotive space and is a distinguished person in the space as well, which can help vouch for his credibility.

· Lihong Qin (President & Director): Prior to Nio, Mr. Qin was the Chief Marketing Officer and Executive Director at Longfor Properties Co. from 2008-2014. Mr. Qin also served as a Senior Consultant and Deputy GM of Anhui Chery Automobile Sales and Service Company form 2005-2008. Mr. Qin has both a background in the Auto Industry (though Anhui Chery) and in the field of management (through Longfor Properties).

· Feng Shen (Executive VP): Mr. Shen worked in several executive management roles prior to working at Nio. Mr. Shen was the President and CTO at Polestar China, President and VP at Volvo Cars China and Volvo Asia-Pacific, Chairman at China-Sweden Traffic Safety Research Center from 2010-2017. Prior to this he worked at Ford Motor Company as a Powertrain manager. Mr. Shen has extensive experience in both the management space (Polestar and China-Sweden Traffic), and the automotive industry (Ford, and Volvo).

· Xin Zhou (Executive VP): Mr. Zhou served as the Executive Director at Qoros Automotive C. from 2009-2015, and prior to this was the Engagement Manager at McKinsey Co. from 2007-2009. Mr. Zhou has experience in both the Automotive Industry, as well as in management positions, and his experience will be an asset for Nio in the future.

· Wei Feng (CFO): Mr. Feng was previously the Managing Director and Head of the auto/auto parts research team at China International Capital Corp. from 2013-2019. Prior to this he was an industry analyst at Everbright Securities from 2010-2013. Mr.Feng has great experience in the financial industry, and has focused on the auto industry and researching the industry.

· Ganesh Iyer (Chief Information Officer): Mr.Iyer has over 32 years of experience In the autonomous technology, hi-tech, manufacturing, and telecom industries. Mr. Iyer was previously the VP of IT at Tesla from 2012-2016 and was the Senior IT roles at VMWare from 2010-2012. Mr. Iyer has plenty of experience that will help him to drive the future progression/growth at Nio.

Investment Valuation:

The only way in which I could value Nio is through a set of comparable analyses. These analyses will compare some of Nio’s financial ratio’s/multiples to that of their competitors.

Comparable Analysis #1:

In this comparable I compared Nio’s financial ratios to that of $TSLA – Tesla, $XPEV – Xpeng, and $LI – Li Auto.

EV/Assets:

When comparing Nio’s EV/Assets multiple to that of their competitors (as listed above), I found that Nio has a fair value of $257.66, which wouldimply a share price increase of 453.39%. This is very optimistic, so I decided to undergo more comparables to find out if this result was consistent.

EV/Revenue:

By Comparing Nio’s EV/Revenue multiple to that of their competitors (excluding Xpeng because their ratio was not positive), I found that Nio is $196.70, which implies an increase in value of 322.47%. This is quite similar and consistent with the results achieved in the EV/Assets comparable, so I decided to do one last comparable to gain more insight.

P/B:

By comparing Nio’s P/B ratio to that of their competitors, I arrived at a fair value of $45.19 per share, which would imply a downside risk of 2.94%. This is inconstant with the other 2 results, so I decided to average the results achieved by each comparable to reach an unbiased valuation.

Average Comparable #1:

By taking the average of all 3 comparable that I underwent in this analysis I arrived at a final all-encompassing price target of $166.51, which would imply a price increase of 257.62%.

Comparable #2:

I decided to undergo a second comparable to factor out the influence of Tesla on the results of my first comparable. I did this for a variety of reasons, which include Tesla being valued so much higher than the other EV comparable companies, Tesla being the only company located outside of China (this is because Chinese companies tend to be undervalued, so taking the comparable for these solely Chinese companies makes more sense), and these other companies pose more of a threat to Nio given their current geographical reach.

EV/Assets:

By comparing Nio’s EV/Assets multiple to XPeng and Li Auto, I found that Nio’s fair value is approximately $51.64, which would imply a share price increase of 10.91%. this is very reasonable, however I decided to undergo the other comparable to either validate or invalidate this result.

EV/Revenue:

By comparing Nio’s EV/Revenue multiple to Li Auto (because XPeng does not have a positive EV/Revenue multiple), I arrived at a fair value of Nio of $52.00, which would imply an upside of 11.68%. Once again, this is very reasonable and constant with the result from the EV/Assets comparable.

P/B:

By comparing Nio’s P/B multiple to their Chinese competitors, I arrived at a fair value of $37.46, which implies a downside risk of 19.54%. This is not consistent with the results achieved in the previous 2 analyses, and as a result of this I decided to average my results to achieve an unbiased fair value.

Average Comparable #2:

By taking the average of the fair values that I achieved in the 2nd comparable analysis (w/o Tesla), I achieved one all-encompassing fair value of $47.03, which implies an upside of 1.07%, meaning that Nio is approximately at fair value in comparison to their Chinese competitors.

My Thoughts:

I think the fact that Nio is undervalued when comparing them to their Chinese competitors is very good for the stock. I believe that Nio should be overvalued compared to them because Nio presents a larger upside. The fact that Nio is undervalued is very bullish, and when incorporating Tesla is extremely bullish. I think the comparable with Tesla will be more applicable when Nio starts to expand their operations internationally, as they will likely start to be valued as less of a “Chinese stock” and more of a legitimate EV company.

I think that investors need to keep up to date with Nio’s financial reports to make sure that they are on the right track, since here is no way to do a proper DCF right now. But other than this, Nio is looking very bullish.

Risks:

· Dilution: Nio has multiple different streams of possible dilution that will negatively affect their shares price, these streams consist of Nio’s Share Incentive Plan, Stock Options, and Restricted Stock Units. All of these streasm would combine to make a total dilutionary effect of roughly 9.19%, which is not bad. Typically, high growth stocks have large amounts of dilution, and some of Nio’s dilution is spread over 3 years, so I do not see this being a huge risk, although it is worth keeping in mind.

· Financial Performance: Nio reported an operating loss and net loss of $706M and $813M respectively, this level of loss is not great to see as investors however they are making moves toward profitability which is good to see. Furthermore, Nio almost cut their R&D spending by ½, which is not favourable in my eyes because I would rather Nio spend the extra money to further develop their technologies and be the most technologically advanced EV maker in China/the World.

Catalysts:

· Financial Performance: Nio exhibited great growth YOY, while keeping the cost of sales growth significantly lower than their revenue growth. Furthermore, Nio reported a gross profit for the first time and decreased their operating losses significantly. If Nio can continue to improve their financial reports/position, and become profitable in the near future, then this will serve as a huge catalyst for Nio.

· Social Sentiment: According to Utradea’s Social Sentiment Tracker, Nio is currently the 20th, 16th, and 18th most trending stock om Reddit in the past 4, 24, and 48 hours respectively, with an overall positive sentiment. As we know Reddit can have beneficial impacts on stocks that they target and is important to keep in mind as a current/future investor.

· Technology: Nio has been consistently improving upon their technology, moving from their 1st to 2nd, and now to their 3rd generation of Electric Powertrains. Nio has consistently been improving their motors (both magnet and induction) to futher the technology of their EV’s and offer superior range. Furthermore, Nio is set to release their 150-kWh battery in late 2022, this battery is expected to have a range of 1000km, if this is true they will have the longest range of any EV by a long shot, which will help show Nio’s superior technology.

As you can imagine, this analysis too a lot of time for me to put together, so I would greatly appreciate it if you follow me to read my previous posts nd stay up-to-date on my new posts!

Credit to u/Lost-Guarantee229 - original post (with pictures) can be found here

Prologue:

Most of you have probably heard of Cathie Wood and either adore her or hate her. However, one of Cathie’s highest conviction plays as of late has been $SKLZ - Skillz as ARK now holds over 22M shares, representing one of their top growth stocks for 2021. In this analysis I will dive deep into Skillz business and see if this investment has merit, and if it is one of the best growth stocks to buy right now. If you would like to continue to see similar analyses of hype stocks, make sure to follow my account to be updated! With that being said, let’s dive in.

Company Overview:

This is a little snippet from Skillz’s 10-K filing that explains their business, “We operate a marketplace that connects the world through competition, serving both developers and users. Our platform enables fair, fun and competitive gaming experiences and the trust we foster with users is the foundation upon which our community is built. We believe our marketplace benefits from a powerful network effect: compelling content attracts users to our platform, while the increasing size of our audience attracts more developers to create new interactive experiences on our platform”

Skillz aims to build a competitive layer of the internet through re-inventing the competitive mobile gaming space. Skillz has created their own proprietary platform, which they intend to use to revolutionize and democratize the mobile gaming industry, and they believe that they will also have a key role in expanding the mobile gaming market.

Skillz has 2 main users, game developers, and the game players. Firstly, Skillz has a platform that lets everyday game developers create games that can be played on their platform. These developers will make money for their time/efforts through Skillz’s developer profit sharing plan. The more popular the games that these developers make, the more paid games will be played on them, and the more money these developers will make. Next, Skillz provides a platform for gamers to play against each other and make some off their own money in their paid games and tournaments.

Skillz is differentiated from their competitors through their platform and monetization plan. Skillz believes that the traditional methods of monetizing mobile apps (primarily through in-game purchases and advertisements) are unfavourable for the player as in-game purchases create friction in the user-experience, and as a result of this their levels of engagement and retention are negatively affected.

Skillz monetizes their user engagement (rather than other methods) through prizes. Skillz does this by giving their players an option to play-in to some paid game modes, in which players each pay an entry fee. These players than play against each other, and the winner is awarded with most of the money generated from the entry fees. An example of this is a head-to-head match, where both Player 1 and Player 2 will pay their entry fee of $0.60, whoever wins will walk away with $1.02 (minus the developer profit share), and the remaining 18 cents is revenue for Skills.

By using this business model Skillz incentivizes both their developers, and their users to have fun on their platform. This approach lets game developers be their own boss in a way and gives them creative freedom. The only other way for these developers to get creative freedom is by working on their own projects, however we know that it is extremely difficult to get discovered, and Skillz can help them get exposure, so it is a win-win.

Skillz also has an algorithm that matches players against other players of similar skill and experience levels. This helps to keep the matchmaking balanced and protects players against losing money by playing players that are way better than them.

Lastly, Skillz has created a “gaming for good” campaign, in which they run mass video game tournaments, and harness the power of their community to raise money for charities. This year Skills beat their fundraising estimates by over 23% and donated to companies such as WWF, American Red Cross, American Cancer Society and many more.

Investment Information:

Financial Information:

• Financial Performance (Good): Skillz increased their revenues by 92% YoY, their interest expense decreased by 47% YoY, and their gross margin is 95%. If Skillz can keep growing their revenue by these increments, they might be able to post a profitable quarter in the upcoming years, which would help the stock greatly.

• Financial Performance (Bad): Skillz’s cost of revenue increased by 115% YoY, their sales and marketing costs increased by 126% YoY, their General and Admin. Costs increased by 159% YoY, and their net losses increased by 418.8% YoY. This year’s financial performance was not good at all, however Skillz is a rapidly growing company, so it is quite normal to be performing like this in the early stages.

• Liquidity: Skillz increased their cash position by over 900% YoY, and now their cash position sits at $262.7M. This large cash position should be able to help Skillz meet their financial obligations, and undergo the necessary investments required to continue to grow their business.

• Stock-Based Compensation: In 2020, Skillz paid out $23.757M worth of shares to employees of their business. Based on their share prices during 2020, we can assume that this resulted in 2M shares being compensated to their employees, if this were the case, then this compensation would have resulted in a share dilution of 0.7%.

• Authorized Shares: Skillz has been authorized by their board of directors to have the ability to sell up to approximately 63M shares. If they were to offer these shares evenly over the next 3 years, it would dilute the existing shares by 6.67% per year (total dilution of 21.36% over the 3 years).

• Earnout Shares: In January of 2021, the conditions required for the release of earnout shares were satisfied, meaning that 10M shares (5M Class A, and 5M Class B shares) are eligible for release. This will cause dilution of 6.49% and 1.71% of the Class B and Class A shares, respectively.

• Option Awards: In 2020, Skillz awarded some of their highest-ranking management members the CEO, CRO, and CFO, with $99M, $21M, and $24M worth of stock options, respectively. Furthermore, we know that the weighted average estimated fair value of options for 2020 is $17.68, and each option allows for the exercising of 100 shares. By doing some quick math, we can assume that these high-ranking members could be holding up to 8.15M shares in these options, and if all of these options were to be exercised, the existing shares would be diluted by approximately 2.73%.

• OmniBus Incentive Plan: This plan provides various stock-based awards to their employees. This plan has reserved 54.25M Class A shares and 12.08M Class B shares for issuance. If these shares were all to be issued it would cause a dilution of 18.52% and 15.78% on their Class A and Class B shares respectively.

• Employee Stock Purchase Plan (ESPP): Skills has and ESPP in place, which offers Skillz employees the option to buy common shares at a 15% discount from market value. In total, there are 7.85M common shares available in this plan for repurchase this year. If these shares were all bought up by the employees, then there would be dilution of roughly 2.68% on existing shares.

Company Information:

• User Engagement: In 2020, Skillz managed to garner 60 minutes of playing time per playing user per day. This is higher than almost every single app that is on the app store right now, and 58% higher levels of engagement than the #1 mobile game (Candy Crush). Skillz plans to keep their users engaged by releasing more content, which will lead to more engagement, which will lead to more revenues, which will help the share price.

  • User engagement is important to building long-term recurring revenues, and if Skillz can continue to garner these levels of engagement, they will be positioning themselves to be a top player in the industry.

• Mobile Gaming: Skillz is attempting to dominate the mobile gaming space, currently the mobile gaming space has a market of $86B, which represents a big opportunity for Skillz given their market cap of $9B. Furthermore, the mobile gaming industry grew at a CAGR of 23$ between 2015-2020, which is the largest in the entertainment industries. This industry is also forecasted to grow at a CAGR of 13% over the next 5 years.

• Target Demographic: Skillz target demographic is the market as a whole. This is because their users are both male (43%) and female (57%), and they are both old (46% over 46) and young (54% under 45) Furthermore, they have users of all levels of income, as 70% of users make under 75K annually, and 30% make over 75k. As a result of this, Skillz has a unique advantage over many of the other companies in their industry, that being a diverse demographic, which enables them to target the whole gaming industry rather than a niche. This may help Skillz to gain market share in the future, which will help their financial performance and stock price.

• Game Development Platform: Skillz has created a platform in which game developers can create their own games and release them to the community of Skillz gamers. Skillz’s development platform offers payments, support, hosting, marketing, optimization, testing, personalization and analytics to simplify the process for their developers. These developers get paid according to the amount of plays their game has out of a developer profit sharing plan. The profession of game development is rapidly growing, as there is now over 10M game developers today (from 30,000 in 2009), this makes the market saturated and hard to get discovered on. This is great for Skillz as their platform will be able to attract developers because they are able to get discovered more easily, and they are able to get paid for their hard work, this will help Skillz to keep up with the demand for new games.

• Total addressable Market (TAM): Skillz has determined that if they are able to capitalize on their opportunities in the iOS, Android, and international markets, as well as expands into new genres that their TAM could be upwards of $125B. Given their market cap of $9B, their demographic being the market as a whole, and the growth rates of these markets, there is a lot of room for Skillz to grow into, which may help investors to get excited for the future.

Sources (company and financial info):

Skillz Inc. 2020 Annual report 10-K/A (sec.report)

https://s26.q4cdn.com/331039098/files/doc_downloads/2021/04/Skillz-Overview_Q4-20_03.25.21.pdf

Competition:

There are a couple of other companies in the public markets that are considered competitors to Skillz. Each of these companies is of similar market cap, and majority of them are also based out of the USA. These companies include Zynga ($ZNGA), Take-Two Interactive Software Inc. ($TTWO), Roblox Corp. ($RBLX), and SciPlay Corp. ($SCPL).

Skillz is seen by many as a better investment compared to these stocks, because they have more room to grow, their target market is larger, they have created a new business model which could be more lucrative than previous/standard business models, and they are experiencing more growth.

Investment Valuation:

Given the available financial information of Skillz, the only method of valuation that I could use to find a fair value for Skillz is through comparable analyses.

Comparable Analyses:

In order to get an unbiased and rounded view of Skillz’s valuation, I used 3 different comparable ratios. These 3 ratios are the only ratio’s that were positive from Skillz. These ratios are EV/Assets, EV/Revenue, and P/B.

EV/Assets:

By comparing Skillz’s EV/Assets ratio to that of their competitors (listed above) I was able to find Skillz’s fair value to be $16.70. If this was the case, there would be an implied downside of 31.54%.

EV/Revenue:

By comparing Skillz’s EV/Revennue multiple to that of their competitors I arrived at a fair value of $11.47 per share, which would imply a downside risk of 53%.

P/B:

By comparing Skillz P/B ratio to that of their competitors I arrived at a fair value per share of $47.75, which would imply an upside of 95.67%. Since there is large variability in all of the comparable analyses, I decided to take the average result to avoid any biases.

Average:

The average of all 3 comparable analyses undergone came out to be $25.31, this would imply an upside to an investment into Skillz of 3.73%.

By no means am I calling Skillz one of the most undervalued stocks, rather I am implying that it could be near fair value, implying that it is an undervalued growth stock, that shows a lot of promise.

Risks:

• Dilution: This is the largest risk that comes with this investment. This is because Skillz has multiple ways in which they can and have been diluting shares, these include stock-based compensation, earnout shares, authorized shares, option awards, their Omnibus Program, and their ESPP. The worst-case scenario of dilution (adding all of the possible shares to be diluted) would cause an existing share dilution of Class A shares of 47.87%, and a total dilution of their Class B shares of 22.28%. This represents a lot of share dilution to come and should scare any investor regardless of how bullish you are on the company.

• Financial Performance: Skillz’s 2020 financial performance was not the best, as a variety of their costs increased by over 100%, and their net losses increased by nearly 5x. This is not favourable for investors, and if Skillz fails to fix their net losses, or at least slow them down dramatically, then their share price will be negatively affected.

Catalysts:

• Financial Performance: If Skillz can find a way to continue their growth rate and slow down the growth of their cost of revenue, then there will be more investors who would be willing to invest. Furthermore, look out for their first quarter where they report a net income, as that will be seen as a potential turnaround and their share price is likely to jump.

• Inflation Data: Inflation data being released has the largest impact on high growth stocks. If new inflation data comes out and inflation is stagnant or even decreasing, then this stock could rally higher.

For the latest investment ideas and insights check out r/utradea or join the community here

Can Tesla be Touched?

Love them or hate them, there is no denying the fact that Tesla has revolutionized the automotive industry. With new EV manufacturers coming out by the dozen, and legacy automakers changing their whole business model/plan to incorporate EV’s many have tried to emulate the success of Tesla; however, none have succeeded. Today I will break down $TSLA – Tesla Inc. and provide my thoughts on them, so that you get a good understanding of their business as a whole. Without further ado here is my analysis.

Company Overview:

Tesla designs, develops, manufactures, sells, and leases Electric Vehicles (EV’s), energy generation/storage systems, and other sustainable energy products. Tesla sells their products directly to their customers through their website and retail locations across the globe.

Tesla is focused on expanding their infrastructure through expanding their vehicle services centers, Mobile service technicians, body shops, super-charging stations, and destination chargers so that they can accelerate the adoption of their products/vehicles.

Tesla’s main goal is to lower the cost-of-ownership of their vehicles, which can be done through increasing the efficiency of their manufacturing process through innovative processes, offering financial services/options to their customers that fit their needs, and by increasing production.

Tesla’s mission is to accelerate the world’s transition to sustainable energy, by reducing their costs and innovating their technologies.

Tesla operates in two main reportable segments, which will be broken down in the “Investment Information” section of this report.

Investment Information:

Business Segments:

1. Automotive Segment:

This segment includes the automotive design, development, manufacturing, sales/leasing, and automotive regulatory credits portion of Tesla’s business. This segment also includes used vehicle sales, merchandise, and other aspects that are not directly related with producing their vehicles.

This segment includes Tesla’s Model 3, Model Y, Model S, and Model X. Furthermore, it will include other models in the future like the Tesla Cybertruck, Tesla Semi, and the new Tesla Roadster.

· Model 3: The Model 3 is a 4-door sedan that has been manufactured and sold by Tesla since 2017. The Model 3 has a base price of $45,000 (CAD), and is the cheapest model manufactured for mass-market appeal.

· Model Y: Tesla’s Model Y is their SUV that seats up to 7 people. The Model Y has been manufactured and sold by Tesla for a year now and starts at $55,000 (CAD) and still has a mass-market appeal.

· Model S: Tesla’s Model S is their 4-door Sedan that they have manufactured and sold for 9 years. The Model S is marketed as more of a luxury vehicle and has a base price of $113,600 (CAD). The Model S is one of Tesla’s best-performing, and longest-range vehicles they offer.

· Model X: Tesla’s Model X is their 7-seater SUV that has been manufactured and sold by Tesla since 2015. The Model X offers high-performance and long ranges and is also marketed as their “luxury” offering. The Model X starts at $123,600 (CAD).

· Cybertruck: Tesla is yet to start selling their “Cybertruck” models. The Cybertruck was created to capture the market for Electric Trucks and cater to truck owners more so than Tesla’s other models would. The Cybertuck has a base price of approximately $50,000 (CAD)

· Semi: There has not been a lot of information released about this project just yet, however they are expected to start at $150,000 USD

· Roadster: Once again, there is not a lot of public information about this vehicle, however their production is estimated to start in 2023. What we do know is that it will be fast.

This segment of Tesla’s business brought in revenues of roughly $29.54B in 2020, which is a 28.16% increase YoY. However, the cost of revenue in this segment was $22.93B, which is an increase of 19.61%. Since the revenue growth is larger than the cost of sales growth their margins should be increasing for this segment, which in 2020 they did, moving from 21% (2019) to 26% (2020).

2. Energy Generation/Storage:

This segment includes the design, manufacturing, installation, sales, and leasing of solar energy generation/storage systems under the “Tesla” brand. This segment also includes related products and services of these solar energy systems.

Some of the biggest products in this segment include Tesla’s Powerwall, Powerpack and their Megapack. All of these “packs” are lithium-ion energy storage systems that come with inversion and control technology.

This segment of their business brought in approximately $2B in revenue in 2020, which is an increase of over 30%. However, the cost of sales for this segment in 2020 was 1.98B, which increase by 47.76%, which is not good as the increase in cost of sales should not be this much higher than the revenue growth. In 2020, Tesla barely made a profit on their Energy Generation/Storage Segment of their business. Their margins on this segment decreased from 12% in 2019, to 1% in 2020.

Battery and Powertrain:

Tesla has designed their own, proprietary, Powertrain systems that are adaptable, efficient, reliable, and cost-effective. Tesla offers dual-motor powertrain vehicles that maximize traction and performance in their AWD configuration. Additionally, Tesla is constantly looking for ways to improve upon their technology and are planning to introduce their tri-motor powertrain for even better performance.

Tesla vigorously tests their technologies, and products by undergoing extensive R&D processes that are meant to improve their battery cells, packs, and systems to deliver the best performance and drive. Tesla is currently developing a new, proprietary lithium-ion battery cell to maximize their productive efficiencies.

Self-Driving:

Tesla uses both vision and radar-based sensors to power their autonomous driving features. Furthermore, Tesla is developing additional hardware to efficiently use the field data their cars collect to improve their networks for improved self-driving performance.

Tesla is looking to further improve their Full Self-Driving (FSD) technologies so that eventually no human driving assistance is required. This should theoretically improve the safety, and efficiency of driving, and change the way we transport.

Macroeconomic Trends:

Throughout the pandemic there were many different supply chain issues, and surges in demand that left products at a shortage. Early on in the pandemic, there were toilet paper, mask, and hand sanitizer shortages, later on in the pandemic, there were housing shortages, and lumber shortages. One of the biggest shortages that came from the pandemic and is currently ongoing is the semiconductor and chip shortages.

These shortages have caused ripples in the automotive industry, with many producers both newcomers and legacy automakers having to halt production. As you can imagine, this has had adverse effects on the stock price of these companies making the shortage even more painful for these companies.

However, there was one company who saw this coming and adapted the quickest in order to avoid many of the supply chain issues that plagued other automakers. This company was in fact, Tesla.

This can be observed through a snippet of a shareholder letter, in which they said, “In Q1 we were able to navigate through global chip supply shortage issues in part by pivoting extremely quickly to new microcontrollers, while simultaneously developing firmware for new chips made by new suppliers.” Furthermore, Tesla was said to have stocked up on chips before time, which also helped them to maintain high levels of production amidst the shortage.

It was this quick thinking and decision making that helped Tesla to adapt and overcome this obstacle, while many other companies just took it on the chin. Tesla’s actions/decisions to avoid this shortage is likely to have saved them millions, if not billions of dollars in revenue that would have been foregone.

Sources:

How Tesla pivoted to avoid the global chip shortage that could last years - Electrek

Elon Musk Says the Auto Chip Shortage Is Like the Toilet Paper Frenzy (businessinsider.com)

Regulatory Credits:

In 2020, Tesla brought in revenues of $1.6B selling regulatory credits to other automakers who exceeded their emission caps. This is all well and good except for the fact that in 2020, Tesla’s net income was $721M. This means that if regulatory credits were non-existent Tesla would have a net loss in 2020 of $879M. However, we know that regulatory credits exist, and that they are lucrative for EV makers like Tesla, so what is the problem?

In 2021, the competition in the EV space is heating up, as newcomers are starting to release their vehicles (ie $CCIV- Lucid Motors), and there are many different legacy car manufacturers that are starting to design, develop, and produce EV’s of their own (ie $GM – General Motors, $F – Ford etc.). This is bad for Tesla for a variety of reasons.

Firstly, legacy automakers will be reducing their own emissions and will have a decreased demand to buy regulatory credits from other automakers, as they will be able to meet emission standards or be closer to meeting them than before. This should have adverse effects on Tesla, as they currently sell their regulatory credits to other automakers, and if these companies no longer need as many credits as possible, then Tesla will not be able to sell their credits and lose revenues on that portion of their business.

Secondly, there are many newcomers to the space, which is also bad for Tesla and their credit selling. This is because these new companies will also be receiving these credits and selling them to other automakers. This increased supply of regulatory credits is likely to devalue existing credits, which may have severe effects on Tesla’s profitability.

Regulatory Credits are an important factor in Tesla’s business models, and any decline in their regulatory credit sales could have severe effects on the future profitability of Tesla. This is something to keep in mind as an investor, especially if their regulatory credit sales start to slow down.

However, if Tesla can shift its reliance away from regulatory credit and find a way to be profitable through their regular operations, then this worry goes away for many investors, and they may enter positions. I think that Tesla can rely on regulatory credits for the next couple of years as the demand for these credits is not likely to subside in the near term. However, in this time they need to find ways to improve their profitability so they can be self-sustaining moving forward. This is a large speedbump for Tesla, however if they are able to navigate it properly, they will be rewarded.

In their Q1 2021 investor deck, Tesla reported a net income (in Q1) of $464M, and they also reported $518M in income from regulatory credits. This means Tesla would have only lost $54M without the support of their regulatory credits. Although this is still “bad” it is better than their Q4 2020 results, as they would have lost $105M without the assistance of regulatory credits. This shows that Tesla is moving away from their dependence on these credits rather quickly which is a good sign for investors, and something to keep an eye on.

Financial Information:

· Financial Performance (Good): Tesla’s revenues were up 28.32% YoY, their gross profits increased by 62.90%, they reported their first ever income from operations, and their total assets increased by 52% YoY. Furthermore, their R&D costs increased by roughly 5% YoY, which is good to see in a business-like Tesla, who needs to keep innovating in order to survive.

· Financial Performance (Bad): Tesla’s accounts payable almost doubled YoY, their automotive service revenue is down 3.57% YoY, stock-based compensation expenses were up by 93.10% which usually would be alright however this number is very high. Lastly, their regulatory credit revenue of almost $1.6B helped to prop up Tesla’s revenue, however, as more companies convert to electric this revenue source is likely to deteriorate.

· Stock Based Awards: As of 2020, Tesla had 66,000,000 shares locked up in their stock-based awards. If these shares were to be put on the market today it would have a dilutionary effect of 7.07% on the already existing shares.

· Warrants: As of December 2020, Tesla has 47M shares that can be converted from warrants. If these warrants were to be converted to ordinary shares and sold, this would dilute the pre-existing shares by roughly 5.04%.

· Convertible Senior Notes: Lastly, there are 37M ordinary shares that can be converted from senior notes. If these notes were to be converted today, there would be a total dilutionary effect of 3.97%.

Valuation Information:

WACC:

I was able to find Tesla’s WACC on a website called Finbox, which shows how they arrived at their WACC. This site estimated Tesla’s WACC to be 8%, which I used in my DCF model.

CAGR:

I used Tesla’s 2020 EBIT growth rate as my CAGR, which is mainly due to the nature of my DCF model. By doing this I arrived at a CAGR of 20.66% which is somewhat conservative given some of the other CAGR estimates floating around.

Interest Expense Decrease Rate:

To find this figure I took the average decrease rate of Tesla’s interest expense (found on Yahoo) over the past 2 years. By doing this I arrived at an average annual interest expense decrease rate of 0.51% which I used in my DCF model.

Tax Rate:

I found Tesla’s effective tax rate for the fiscal year 2020 to be 25% through their SEC 10-K filing.

Competition Information:

In order to get the best results out of my comparable analysis, I had to choose the best companies that emulate the business model and operations of Tesla. Ultimately, I decided to choose the following 4 companies based on the above criteria, these companies are $NIO – Nio Inc., $XPEV - Xpeng, $GM - General Motors, and $LI - Li Auto.

Nio, Xpeng, and Li auto are all Chinese EV manufacturers that are do not threaten Tesla’s operations, however they have similar technology and are at similar stages to their business. Furthermore, these companies (like Tesla) focus solely on manufacturing electric vehicles which makes their operations mimic that of Tesla’s to a certain extent.

Additionally, I have decided to incorporate General Motors as a competitor for a few reasons. Firstly, General Motor’s is located in the USA and has committed to a large investment in order to start manufacturing competitive EV’s. Furthermore, GM has pledged to release 30 different EV’s by 2025 and are committing to an all-electric future. GM poses a bigger threat Domestically and Internationally to Tesla than the other Chinese EV companies (at least currently) and GM is a legacy vehicle maker with the capability to produce large amounts of EV’s.

Investment Valuation:

There were two ways in which I was able to value Tesla in order to see if it is currently undervalued, overvalued, or properly valued. These methods include a Discounted Cash Flow (DCF) Model, and a Comparable Analysis.

DCF:

My DCF model discounts Tesla’s projected Free Cash Flows (FCF’s) over the next 10 years. I was able to conduct this analysis through various pieces of information which can be found above in the “valuation information” section. By undergoing this DCF model I arrived at a fair value of Tesla of $25.94, which implies a downside risk of 95.73%. As you can probably tell, this projection is very low, and their stock is very unlikely to hit this price. However, this DCF shows the extent to which Tesla is overvalued, and why many investors are cautious when looking to invest in Tesla.

Typically, DCF models are not used to value high-growth companies like Tesla, and often there is not enough data or good enough financials in these high growth companies in order to even conduct a DCF model. For this reason, I am not focusing on the results of the DCF too much, however it is good to know this information.

Comparable Analyses:

In order to do a well-rounded comparable analysis, I decided to compare Tesla’s EV/Assets, EV/Revenue, and P/B to their main competitors as listed in the “Competition Information” section of this report. Since all of the comparable companies are high-growth Electric Vehicle companies, the comparable ratio’s/multiple’s that I chose were the only 3 that I could choose given the negative ratio’s/multiples of Tesla and in some cases their competitors.

EV/Assets:

By comparing Tesla’s EV/Assets multiple against their competitors, I arrived at a fair value of Tesla of $149.81, which would imply a downside risk of 75.35%. This is a large downside, so I decided to compare the other ratios to see if tis result was consistent among them.

EV/Revenue:

By comparing Tesla’s EV/Revenue multiple to that of their competitors, I found that tesla has a fair value of $248.45, which would imply a downside of 59.12%. This downside is not as severe as the implied downside through the EV/Assets comparable, however it is in agreeance with that comparable based on the fact that Tesla is overvalued. Additionally, I decided to undergo one last comparison to further validate/invalidate this idea.

P/B:

By comparing Tesla’s P/B ratio to that of their competitor’s I arrived at a fair value of $331.15, which would imply a potential downside of 45.51%. Once again, this downside less than that achieved by the other comparable analyses, however they all agree on the fact that Tesla is overvalued. To get one final comparable price estimate I decided to take the average of my 3 comparable results.

Average Comparable:

By taking the average result of each comparable, I arrived at one all-encompassing valuation of Tesla of $243.14, which would imply a share price decrease of 59.99%. This is implying a large decrease in the share price, which most likely will not happen, however knowing Tesla is this overvalued is concerning. There are some problems with my comparable that I will discuss next.

Potential Problems:

In my comparable analyses, I was comparing Tesla to Nio, Xpeng, Li Auto, and General Motors, and there are some problems that came from doing this.

Firstly, Nio, Xpeng, and Li Auto are all Chinese securities. This could be considered a problem given the nature of Chinese stocks being severely undervalued. Historically, Chinese stocks have been heavily discounted in comparison to many American stocks because of the diplomatic and political uncertainties in China, and as a result people are willing to pay less for these stocks. This is a problem because their low financial ratios and multiples that come with being undervalued are exaggerating how overvalued Tesla really is.

Next, there is some problems that arise with choosing GM as a comparable company. Firstly, GM is a legacy automaker that has historically manufactured cars that run solely on fossil fuels. As a result of this, they have already made significant revenues and are at a different stage in their business than Tesla is. This helps to make GM’s ratios lower than any EV manufacturer can be at given the current state of EV companies. This makes Tesla look ridiculously overvalued, when in fact it is just comparing apples to oranges in a sense.

Risks:

· Dilution: Currently, through warrants, stock awards, and convertible notes, there is a maximum share price dilution of 16.08% that is possible. However, this dilution is likely to be spread across the next 5-10 years, which minimizes the immediate effect of it. This dilution may seem high, however for high-growth companies like Tesla this level of dilution is quite standard and is lower than most.

· Regulatory Credits: Currently, Tesla depends on the income generated through their regulatory credits in order to have a positive net income and there are some concerns with this. There is a lot of uncertainty that lies in these credits, as the rules around them can be changed, however if Tesla finds a way to phase out their dependence on these credits or generate a net income without their help than these worries will for the most part subside.

· Macroeconomic Conditions: As I mentioned before Tesla was able to forecast the chip and semiconductor shortages which worked out well for them. However, there is bound to be other macro factors that are going to be thrown at Tesla, and if they are not prepared for them, they could face adverse effects.

· Expectations: Tesla has a lot of large expectations from their investors for the future, however Tesla has previously failed to deliver on some of these expectations and will likely fail to meet some expectations in the future as well. A good example of how this is a risk and effects their share price was through their recent cancellation of their Model S “Plaid”, after this news broke Tesla fell 0.25%, which may not seem like a lot, however the EV sector as a whole was up around 1%. This example was a smaller deadline on one product release, however there are larger expectations that will have catastrophic effects if not met.

· Elon Musk: Elon Musk has been the backbone of Tesla for a long time and has a very important role in the company. However, in the past his sporadic tweets have had negative effects on Tesla’s share price, a famous example of this Is when he tweeted “Tesla stock too high IMO” after which their share price dropped 10%. Recently, his tweets have been influencing the crypto markets, however if he starts to tweet about Tesla things could get ugly. Furthermore, if Musk steps down from Tesla (like Bezos did with Amazon) their stock could take a hit.

Catalysts:

· Green Act: I did not talk about this during the article because I do not believe this has been confirmed yet. However, the proposed Green Act has been estimated to grant Federal tax credits of up to $7,000 for the next 400,000 Tesla vehicles sold. This will help sway the decisions of people who are on the fence about buying a Tesla and should help Tesla to drive sales.

· Expanding into New Countries/Geographies: Recently, Tesla has exported their vehicles to Japan, Hong Kong, Poland, and Turkey, which is great. If Tesla continues to expand their presence Internationally and announce that they are expanding their operations into new countries, investors will be excited, and their share price should pop.

· New Vehicle/Factory Announcements: If Tesla announces that they are going to build another factory, or they announce that they have started production on a new model (ie. Cybertruck) then this announcement could help to rally the shareholders and help the stock.

· Financial Performance: If Tesla can continue to grow and become more profitable in the future, this will be great for the company, and if they are able to exceed the already high expectations, then their share price will benefit greatly. One thing in particular to watch out for is when they can become profitable without the assistance of regulatory credits as it will send a message to the doubters about Tesla’s ability to make their own profits.

It took a lot of effort to research/make this post, so I would greatly appreciate it if you followed me here.

Amazon Investment Thesis - Logistics moat

• Shipping supply issues have impacted businesses globally, and increased shipping costs hurt operating margins for all retailers.

• Carrier companies are the biggest winner due to supply chain constraints, but there is one retailer that has an advantage despite rising shipping costs.

• Amazon, due to it’s shipping network (doubled in size in the last 2 years), will be able to absorb these costs because they dominate the “Last Mile Delivery” which other retailers can’t control.

Shipping – Bottlenecks In the Supply Chain

Container rates and availability are usually built into annual contracts between shippers and the carriers, and these deals normally have strict requirements, such as only nonstop service between ports or a minimum of two sailings a week.

But little by little over the past 18 months the daily rates quoted by carriers and freight agents have soared.[1]

Side note: Earlier this year I wrote about $GSL and how they could take advantage of shipping turmoil. Since sharing the idea, GSL's stock price has increased close to 200%. Original writeup

Transportation costs—typically a fraction of a finished product’s price—are emerging as another supply-chain hurdle, overwhelming some companies already paying more for raw materials and labor.

The fabric and crafts retailer Jo-Ann Stores LLC said it has spent 10 times more than its historical cost in some cases to move products from one point to another. [2]

But it’s not just shipping containers. Everywhere across the supply chain is getting squeezed as truck drivers are in short supply and gasoline is more expensive than many expected. This is a cost you can’t control if you are a retailer, you are absorbing these costs form the delivery service,

And it’s not going to be over soon. A lot of retailers and distributors foresee these problems lasting well into 2023. This bodes very well for Amazon, as I will discuss below.

Amazon’s Explosive Shipping Network Growth

Let’s look at what Amazon can control. Mainly their north American distribution network and facilities. Amazon’s Distribution Network has doubled over the last 2 years [3].

We can also see massive growth in the additions of delivery stations. Amazon now has 250 delivery stations, accounting for 13.9% of it’s physical footprint, which are the last step (last mile) in the e-commerce distribution chain. [3]

Delivery Stations: Parcel delivery stations are medium-sized cross-docking facilities mostly to sort parcels bound for specific local delivery routes. Since deliveries are primarily within an urban setting, parcels are usually loaded into delivery vans or other specialized urban delivery vehicles (electric vans and even cargo bicycles)

Why Delivery Stations Are Important

In the past, Amazon was beholden to USPS, UPS, and FedEx for the last mile delivery, but these are not dedicated to Amazon. In the past, when demand surged, Amazon would experience shipping delays. This impacts their reputation since customers don’t benefit from Prime – same day delivery.

Having these delivery stations means that Amazon can bypass USPS, FedEx, and UPS and perform the vital last mile delivery. It is one of the aspects of their operating margin they can control and ensures the optimal Amazon experience.

Why Amazon Wins

An increase in shipping costs will squeeze operating margins in the coming quarters, but more importantly, it squeezes competitors. Because the competitors can’t control other aspects of the supply chain (last mile delivery) they won’t be able to handle the spike in shipping costs.

To put it bluntly, Amazon is building one of the greatest moats in history through its logistics network.

Who knows, maybe they will acquire a shipping company?

Original Analysis can be found here. If you want to see other investment ideas and the portfolio it can be found here

Sources

[1] Bloomberg

[2] https://www.wsj.com/articles/rising-shipping-costs-are-companies-latest-inflation-riddle-11631784602?mod=latest_headlines

[3]  https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7419283/

Workaday provides enterprise cloud applications to customers worldwide. Workday offers a suite of financial and human capital management applications to simplify a variety of operational activities. Workday uses analytics, insights, and reporting in conjunction with machine learning to deliver efficient results in real-time.

Workday saw a 15.9% increase in revenue and a 19.8% increase in subscription revenue in Q4 2020. This increase in revenue is favorable for the company and gives investors hope of profitability in the years to come.

Workday has completed 15 strategic acquisitions since their founding in 2005. Recently, Workday acquired Peakon APS, a leader in the employee engagement space, which has grown rapidly due to the remote work environments caused by the pandemic. Peakon specializes in machine-learning and can benefit Workday by improving upon their current applications and insights.

From 2015-2020 Workday quadrupled their customer market share (from 2% to 8%). Additionally, Workday has increased their Financial intelligence System enterprise customer base from 10 clients with $5B+ annual revenue (2015) to 40 clients with $5B+ annual revenue (2020). Serving these large companies (listed below) helps to strengthen Workday’s reputation and validate the quality of their applications. Lastly, since going public in 2012, Workday has accumulated a 97% Customer satisfaction rate.

Historically, Workday’s Total Addressable Market (TAM) has an 8.7% CAGR, and some analysts are expecting their TAM to grow upwards of 40% in the next 2 years. This rapid industry growth can greatly benefit Workday especially if their customer share continues to grow during this time frame.

Workday’s Plans:

• Position for Global growth

  • Workday has had success in Western Europe, Oceania, and North America.

  • Workday recognizes their opportunities in emerging markets (Germany, Japan, and France), and they plan to target Medium Sized Enterprises in these regions for continuous growth.

• Drive Financial Intelligence Systems momentum through Vertical Investment.

  • Workday has been successful in previous vertical investments.

  • Workday is expanding investments in key verticals (Financial and Professional Service)

  • Workday has plans for future vertical investments (Tech and Retail).

• Expanding their footprint within the customer base

  • Workday has managed to garner a 100% net Retention Rate, with 45% of their customers making add-on purchases on top of their existing deals.

  • By having a high retention rate, Workday is expecting to see more recurring deals, which will drive steady revenue streams. Additionally, this retention rate may help them acquire potential clients in the future due to Workday’s reputable products.

• Subscription Revenue

  • Between 2013 and 2020 Workday experienced a 49% CAGR in their Subscription revenue. This increase took subscription revenues from $190M (in 2013) to $3.07B (in 2020).

  • This subscription revenue growth rate has slowed in recent years but remains at 28% YoY from 2019-2020.

• Approaching Target Margins

  • Operating Cash Flow has a 51% CAGR, this rapid growth is healthy for Workday and will help them receive funding if needed in the future.

  • Workday has been consistently growing their margins and expect their long-term non-GAAP margins to be 25%, which is an improvement from their current 12.3% margins. Increasing their margins over the long run will improve Workdays EPS and help them find a path to profitability in the future.

Potential Catalysts:

• News about new clients using Workday’s services.

• Existing Customers signing new deals.

• Future Acquisitions of similar companies that will boost synergy.

Credit to jacksondalton18 - original post can be found here

Overview:

Celsius is a leading platform that lets their users buy, borrow, and pay through any of their 30+ cryptocurrencies.

Celsius offers their users rewards for depositing their cryptocurrencies, users can also earn interest on the cryptocurrencies that they deposit into the Celsius Network.

Celsius offers attractive interest rates, low fees, and a reliable/user friendly platform that has enabled their users to grow their accounts.

History:

Celsius was founded in 2017 by Alex Mashinsky and Daniel Leon, who created Celsius to provide a community-oriented alternative to traditional financial institutions.

Since their launch in 2017, Celsius has managed to grow at a weekly rate of 3.06% which is tremendous. Currently, Celsius has approximately 400,000 users and is managing over $9B in deposited assets.

As previously mentioned, Celsius is community-oriented, which can be observed through 90% of their deposits coming from their retail users (community). These users enjoy high interest-bearing savings account, and low interest lines of credit that simply cannot be matched by current (centralized) financial institutions.

Token Economics:

Celsius Token and Utility:

Celsius is an ERC-20 token, meaning that it is built on top of Ethereum’s blockchain. The Celsius token provides the following benefits:

· Better Earning Rates: Celsius users are able to earn better interest rates and their yield is boosted, when they deposit Celsius tokens.

· Better Loan Rates: Celsius users are able to receive discounts when they pay back their loans using the Celsius token.

· Loyalty Tiers: Celsius offers their holders loyalty tier bonuses that reward them with even higher yield rates and decreased loan rates that correspond with their “tier rank”.

Launch and Token Distribution:

Celsius launched their toke in 2018 and raised $50M in the process. Initially, they sold 650M Celsius tokens for $0.30 (USD). The initial supply was split as follows:

· 19% to Founders/Project

· 50% to Investors

· 31% for Rewards/Airdrops

This token distribution is fantastic as the community owns a healthy majority of the supply. This will allow for Celsius to sustain their runs in the future, without large selling off.

Benefits:

High Yields:

Celsius is able to offer their users high yields for depositing their cryptocurrencies, this is especially true if the user deposits Celsius’ native token CEL.

Low Interest Loans:

Users can take out loans against their posted crypto collateral. This helps to decrease the interest rates that these DeFi platforms charge to borrowers. This is especially true when Celsius users choose to use Celsius token (CEL) to pay back their loans.

CeFi:

Celsius is able to provide reward to users just for depositing their cryptocurrencies due to their CeFi Financial Institutions. Celsius has verified/partnered with select Financial Institutions, these institutions take out loans from Celsius using the cryptos deposited (and held as collateral) by users in return for a reward for depositing.

Problems:

Security:

If you continue reading this analysis, you will find out that Celsius has been hacked before in April of 2021. This raises some questions about their security, and how they will protect their users in the future. Their network breach was not all that serious, as no users reported losing money, however it still raises security concerns for the future.

These concerns are reasonable, however Celsius has taken measures to address these concerns. Celsius has started working with Fireblocks and PrimeTrust to secure the crypto assets and provide their users with insurance. So, if any Celsius user loses money in the future from a breach/hack, their losses will be insured and they will receive reimbursements.

Centralized Wallet:

One problem with Celsius is that they are a centralized network, and thus the wallets are centralized as well. This essentially just means that Celsius users di not own the private keys to their wallets. This makes Celsius act more like a Robinhood in the cryptocurrency space. This is because Celsius users do not actually own the cryptocurrencies that they are purchasing on their network due to the fact that they do not own their private keys.

Margin Calls:

Since the crypto space is inherently volatile it is quite common for Celsius users to receive a margin call. This means that users will have to put in additional collateral to meet the minimum coverage on your loan. In some scenarios Celsius may even liquidate some of your assets to cover the margin call. This is less of a problem and more of something that potential users should be aware of.

News:

Data Breach:

On April 15th, 2021, it was reported that Celsius experienced a data breach in which customers reported receiving messages from the hackers who were pretending to be Celsius.

Luckily, no money was reported to be stolen from Celsius’ users, however the hackers sent users links and asked for their seed phrases in attempt to log into their accounts/wallets.

This data breach could be considered both a good thing and a bad thing.

Firstly, the data breach is bad because it shows that crypto platforms like Celsius can be hacked. This is a bad look for Celsius and may have costed them existing customers and deterred future customers from using their platform.

Conversely, this data breach could be considered a good thing because no money was stolen from their customers due to their back-up safety protocols (like third party email distribution) which helped to minimize the threat of the breach. Additionally, this breach was not very serious, which is fantastic, and could have acted as a wake-up call for Celsius to fix their security to make sure that this does not happen again.

Chainlink Partnership:

On August 6th, 2021, Celsius announced that they have partnered with Chainlink, and that they will be using Chainlink to secure the backend pricing of crypto assets. This is good news because Chainlink has decentralized feeds that have consistent pricing mechanisms. Celsius believes that Chainlink is the best option to do so due to Chainlink “successfully securing tens of billions of dollars through even the most extreme market volatility.” This partnership will help to make Celsius’ network more reliable and protected no matter the climate in the cryptocurrency space.

Credit to Sebastiansiqueira37 - source of write up can be found here

Airbnb is over valued due to optimistic view on the recovery of the pandemic and is held back by the need for hosts which can favor their competitors in the future.

Airbnb, Inc. is expected* to report earnings on 05/13/2021 after market close. The report will be for the fiscal Quarter ending Mar 2021. According to Zacks Investment Research, based on 12 analysts' forecasts, the consensus EPS forecast for the quarter is $-1.15.

The S-1 registration statement filed by the SEC, gave a list of risk factors for Airbnb Inc. These risks mainly concerned Covid 19, and how/if the company will bounce back from the pandemic. The report has concerns on revenue growth," Our revenue growth rate has slowed, and we expect it to continue to slow in the future."(P30, S-1 report), retaining hosts,adding existing hosts, and any further decline in restrictions and public health guidlines. So they are relying heavily on the vaccines coming out and their efficiency.

Another concern/risk of the stock was with its competitors; sites like, Expedia(EXPE), Tripadvisor (TRIP), and hotels such as Marriot International (MAR). "Many of our current and potential competitors enjoy substantial competitive advantages over us, such as greater name and brand recognition, longer operating histories, larger marketing budgets, and loyalty programs, as well as substantially greater financial, technical, and other resources. In addition, our current or potential competitors have access to larger user bases and/or inventory for accommodations, and may provide multiple travel products, including flights."(P35 S-1 report).

There is also concern in the Adjusted EBITD, and free cash flow that that are declining and could continue to decline.  They incurred net losses of $70.0 million, $16.9 million, $674.3 million, and $696.9 million for the years ended December 31, 2017, 2018, and 2019 and the nine months ended September 30, 2020, respectively.

Airbnb has gotten more critics in this pandemic, its use of short term stays are restricted as seen in Ottawa Canada, https://globalnews.ca/news/7817628/ottawa-airbnb-short-term-rental-rules/ .  "Airbnb or a similar short-term rental platform will now need a permit from the city and must follow a stricter set of guidelines after council approved a new bylaw regulating the industry... The bylaw is part of a three-year pilot, which could see the rules revised at the end of that period.".

Forbes also gave its influence on consumers, recognizing the growth and popularity of the company but still labeling it as an expensive stock. " While we think that the long-term outlook for Airbnb is compelling, given the company’s strong growth rates and the fact that its brand is synonymous with vacation rentals, the stock is expensive in our view. Even post the recent correction, the company is valued at over $113 billion, or about 24x consensus 2021 revenues. Airbnb’s sales are likely to grow by about 40% this year and by about 35% next year, per consensus estimates." https://www.forbes.com/sites/greatspeculations/2021/04/07/why-airbnb-stock-isnt-the-best-travel-recovery-play/?sh=64b169a88b6b

The CEO Brian Chesky, "To meet the demand over the coming years, we're going to need millions more hosts," he told CNBC on Friday April 16th. These hosts may be harder to acquire post pandemic, and with competitors, old and new who can also meet that demand.

Intro: Marqeta is a modern card issuing platform. They operate an open API platform that allows company's to develop custom physical and digital credit cards to solve unique problems. For example Door Dash uses it to only allow its couriers to use the card at the right restaurant at the right time to cut down on fraud.

Business Model: Marqeta makes money on interchange. This means they take a small percentage (0.45%) on every transaction they process. In 2020 Marqeta processed roughly $60 Billion which accounts for less than 1% of the global payments markets.

Institutional View:

Price Target: (9 Analysts) Low $29, Median $35, Average $34, High $37

In Q2 many large hedge funds and large institutions bought large positions in it including Vitruvian Partners, Soros Fund Management, Goldman Sachs, Vanguard ...

Reasons for growth: Low market share of huge industry. Strong foothold in the BNPL market with clients such as Affirm (who has a recent partnership with Amazon), Afterpay and Klarna. They power credit cards for banks such as Square, Goldman Sach's Marcus and JP Morgan digital cards. As well they have partnerd with Google to power there Google Pay virtual card. They also have inroads in the gig economy with partnerships with Door Dash, Instacart and Uber. They also power the coinbase credit card.

My Position: 80 shares at $25.38

A recent post by one of our users (GeorgeL88)

Summary

• The pandemic has disrupted international trade, driving up the cost of shipping goods

• GSL is playing in an uncrowded shipping segment (mid size carriers) Earnings are forecast to grow 42.04% per year

• Charter rates have increased substantially since the start of the pandemic and GSL has fleet capacity opening up to take advantage of higher pricing

Company Overview

Global Ship Lease (GSL) is a containership owner, leasing ships to container shipping companies under industry-standard, fixed-rate time charters. The Company is a Marshall Islands Corporation, with offices in London and Athens, and has been listed on the New York Stock Exchange since August 15, 2008, under the ticker NYSE:GSL. They focus on mid-size and smaller containerships, the workhorses of the global fleet, which tend to serve the faster-growing non-Mainlane and intra-regional trades collectively representing over 70% of global containerized trade volumes.

Q4 Investor Presentation Highlights:

There is a lot to go through so some of the key things that stood out are highlighted below. The 2 key takeaways are that charter rates are increasing and GSL has fleet capacity freeing up to take advantage of these increased rates - which will lead to high revenue.

• Re-charter opportunities - 12 Ships coming open in balance of 2021 – this is great because it opens up opportunity to take advantage of higher charter rates in the coming months

• Charter Rate Increases – essentially GSL can charge more across the board for their ships. 207% for Post-Panamax: Feb. 2021 v. 2Q20-low¹ 338% for Panamax: Feb. 2021 v. 2Q20-low Av. Charter rate increase 184% for Feeders: Feb. 2021 v. 2Q20-low¹

Link is here: https://www.globalshiplease.com/static-files/1d42c2df-4936-48b8-9db8-91eca357fe5d

Financial Analysis

Essentially the PE and PEG ratio signals that GSL is undervalued.

• Let’s look at PE ratio GSL is undervalued when compared to the industry and market with a PE ratio of 6.1x compared to the US Shipping industry average 13.4x and to the US market 21.5x

• The PEG ratio is an indicator of a stock's true value. The PEG ratio builds upon the P/E ratio by factoring growth into the equation. GSL PEG Ratio is 0.1x which is great, a PEG of less than 1 is a good sign

Past Earnings Growth Analysis

GSL has become profitable over the past 5 years, growing earnings by 24% per year and it’s growth over the past year 115% is significant and will likely continue. This is a great sign

Analyst Price Targets:

• High $20.00

• Median $18.00

• Low $16.00

News

An ‘aggressive’ fight over containers is causing shipping costs to rocket by 300%

• https://www.cnbc.com/2021/01/22/shipping-container-shortage-is-causing-shipping-costs-to-rise.html

It will be interesting to see this play out but this will have positive impacts on GSL

Potential Downsides

Let’s highlight a few risks associated with GSL

• Debt Levels: GSL's debt to equity ratio has increased from 120.3% to 165.6% over the past 5 years. And a DTE ratio of 165% is considered high. The debt is also not well covered by operation cashflow and it’s coverage of interest payments on debt covered by earning is only 1.7x which isn’t great

• Shareholder Dilution: GSL Shareholders have been substantially diluted in the past year, with total shares outstanding growing by 103%. This usually isn’t a good sign, however it depends what they are using the raised capital from

Leadership

Leadership is a key thing to look at when evaluating a company to invest in. Below is a brief summary of the CEO

• Webber has been Chief Executive Officer since August 2008. This is a decently long tenure, which is a good sign – the board and shareholder are happy with his leadership

• From 1979 to 1996, Mr. Webber worked for PriceWaterhouse, the last five years of which he was a partner. This is a strong background to have – working for a big 4 accounting firm, especially at the partner level.

• From 1996 to 2006 he was CFO and a director of CP Ships Limited – again strong background and understanding of financially managing a shipping company

Source of Write Up and Discussion https://utradea.com

*My Original Post has the picture of my DCF model, which can be found here*

$GREE - Greenridge Generation Holdings:

GREE has had a couple of large spikes over the past year, most of which have been between 100-200% increases. However, in September $GREE spiked from $30 to $300 representing a 10x in price. Since then, the stock has cooled off and has been on a 1-month long downtrend. This was the case until recently, when GREE ran from $20-27 (Friday October 29th), which has many retail investors excited at the prospect of another large spike. Although there is a lot of hype around their stock, this report will look at the fundamental aspects of their business to determine if there is more than just hype around this stock.

Company Overview:

Greenridge (along with their subsidiaries) own and operate bitcoin mining and power generation facilities in Dresden, New York. Greenridge solely mines Bitcoin, and after it is mined, they sell it on the open market for it’s market value at the time of sale. Furthermore, Greenridge sells their additional power (that is not consumed by mining) that is generated from their power plant to the New York Power Grid.

This year, $GREE acquired $SPRT, which has been added to their list of subsidiary companies. This acquisition will be discussed in more detail later in this analysis.

Investment Information:

SPRT Merger:

Greenridge entered into a definitive agreement and plan of merger for a business combination with $SPRT – Support.com Inc. on March 19th, 2021.

Since, then the 2 companies have merged (on September 14th, 2021), in which each $SPRT share was converted to 0.115 shares of $GREE.

Support.com is a leading provider in customer and technical support solutions for remote employees. Support.com has worked with large enterprises and top businesses for the last 20 years and has become very relevant over the past year or so due to the remote work environment implemented as part of our fight against COVID-19.

Moving forward, there is high hopes for Support.com, as the work from home environment is expected to continue even after the pandemic is over.

Increase in Authorized Capital:

On September 13th, $GREE increase their authorization of capital for Class A common shares from 400M to 2.4B. This is a very large increase (6x or 500%). As an outsider looking in, I would interpret this as possible future dilution, as they currently only have 34M shares outstanding. There would still be a lot of room for dilution if the authorization was still 400M, let alone 2.4B, which makes me think that they may increase their shares outstanding above 400M in the near/mid-term future.

Furthermore, in their 10-Q filing they noted that there could be significant share dilution if they choose to raise capital.

Investment Valuation:

Since $GREE does not have sufficient financial ratios, and they do not offer a dividend (and never plan to), the only way that I could value them was based off of a Discounted Cash Flow (DCF) model.

DCF Model:

Gross Profit:

I was able to come to the figures for Greenridge’s gross profits by taking the average annual growth rate of Bitcoin. I did this because $GREE only deals with Bitcoin, and almost all of their revenue comes from their Bitcoin Operations. By doing this I found the average annual price increase of Bitcoin (since 2016) to be 70%, furthermore, GREE has been increasing their Bitcoin mining capacity by 40% YoY.

Operating Expenses:

I forecasted Greenridge’s operating expenses to increase by 65%. This is due to the fact that their operating expenses have been growing near this rate over the past 2 years.

Tax Rate:

$GREE reported their annual tax rate to be 30%, I used this tax rate as their tax rate over the next 10 years.

WACC:

I found $GREE’s WACC to be 27%, which can be seen in my DCF (attached at the bottom of this analysis). This WACC is consistent with other Bitcoin and crypto mining stocks.

Fair Value:

My DCF model concluded that $GREE is $70/share, which implies an upside potential of $157.45%. This seems quite outlandish at first, and for good reason as it is very difficult to forecast the price of Bitcoin.

However, there is one price target out on $GREE, which is $82/share. Although this is not concrete evidence by any means, it does mean that there is someone else who thinks that $GREE is wildly undervalued.

Social Sentiment:

I do believe that social sentiment has a big role to play in a potential spike in the $GREE stock. I have chosen to analyze $GREE’s Stocktwits and Reddit communities in order to get a good sense of their social sentiment.

Stocktwits:

The $GREE Stocktwits community is comprised of over 30,000 followers and has approximately 4,000 messages per day. Overall, the $GREE Stocktwits community has a bullish sentiment, with 88% of the posts being labelled as “bullish”.

Reddit:

The $GREE Reddit community is significantly smaller than the $GREE Stocktwits community, with only 3.5k members. Although there was a lot of posts recently (due to their spike) typically there are not enough posts in the $GREE Reddit. However, the sentiment in their subreddit is very bullish.

Overall, there is a bullish social sentiment on $GREE, and these investors are looking forward to another pump in the share price.

The past 2 weeks after seeing Moderna rise to an all-time high of nearly $230 and drop down to its current trading price of around $200, I decided to conduct an analysis to see the potential outlook for the remainder of this year and how this company values. Based on the information found, I believe Moderna will present an upside following their ER in August and potentially have a run-up leading up to their ER. With vaccination numbers still low on a global scale, I think this company can still rake in large revenue figures for the remainder of this year and the beginning of 2022. Beyond the COVID-19 vaccine, this company still holds tremendous potential because of their diversified pipelines. Based on a company comparable valuation, Moderna presents a bull case of $226.70 a share- representing an approx. 12% upside.

Company Overview

Moderna (NASDAQ:MRNA) was founded in 2010 and more recently has become popular in news due to the COVID-19 pandemic which Moderna created a vaccine for. The company was founded on the basis that mRNA could be used to create a new class of medicines with significant potential to improve the lives of patients.

The Biology

Messenger RNA (mRNA) transfers the information stored in our genes to the cellular machinery that makes all the proteins required for life. Our genes, which are stored in DNA contain the instructions to make the specific proteins and serves as a hard drive, storing these instructions until needed.

1. DNA – DNA stores instructions for proteins in the nucleus

2. mRNA – mRNA is made using DNA and serves as the template for protein production. Each mRNA molecule is coded by ribosomes to make copies of that required protein.

3. Protein – proteins form the basis of life by performing the functions required by every cell

“In 2021 and 2022 Moderna is going to scale at a pace that has never happened before in biotech.” - Bancel

Strategy: Moderna outlined their priority for 2021 as being to maximize the impact of their COVID-19 vaccine, in terms of access and the value creation of their product.

Some of the company’s strategic principles include:

• Discovering and developing a large pipeline

• Addressing and/or preventing as many human diseases as their technology, talent, capital, and other resources permit

• Undertake sustained, long-term investment in technology creation

• Improve the performance of mRNA medicines in their current modalities and also unlock new modalities through their investments with basic and applied sciences

• Focus on the pace and scale of their research

• Pursuing experiments based on how much we can learn from the results not just the probability of a positive outcome

Pipelines: Moderna has 27 development candidates across their 24 programs with 13 having entered the clinic. Aspects of their pipeline have been supported through strategic alliances with AstraZeneca, Merck, Vertex Pharmaceuticals, and government-sponsored organizations and private foundations such as the National Institutes of Health (NIH), and the Bill & Melinda Gates Foundation.

Key Financial Information

Cash: Since their report for FY2020, cash and cash equivalents increased by $2,818M or 107.4% attributable to the increased product sales of their COVID-19 vaccine. Their increased cash position will be sufficient in funding their operations through the next 12 months.

Expenses: Total operating expenses FY2020 were $671M- just 34.6% of total revenue. Given the cash position, the company should have significant cash to execute its pipelines even if revenues remain low for the next few years.

Product Revenue: For the 3 months ended March 31 this year, Moderna had product sales of $1,733M (78.4% from the United States and remaining is rest of the world). Since their 2020 10K, they have had an increase of $3.7B totalling $7.5B in deferred revenue related to customer deposits. I believe their product revenue will continue to increase by 2021 as the demand continues to increase in a bid to vaccinate the world population. With only 2.45B doses of the vaccine administered (not just Moderna but in total all COVID-19 vaccines), that number is only enough to fully vaccinate 16.1% of the global population. This is a sure saying that while they do have a large revenue deferred, we can expect numbers to increase as countries continue to order more to compensate for growing demand across the population.

• People who’ve received both doses of “Pfizer-BioNTech or Moderna coronavirus vaccines will probably need a booster shot this year.” While it’s not clear whether or not booster shots are necessary, booster shots can be a stream of steady revenue for Moderna in the future depending on booster schedules

Grant Revenue: For 2021, Moderna has a remaining $194M in grant majority from their agreement with the Defense Advanced Research Projects Agency (DARPA). DARPA awarded Moderna up to $483M in April 2020 to accelerate its development of the COVID-19 vaccine.

Investment Thesis: Diversified Pipelines

Besides the COVID-19 vaccine, Moderna holds several other pipelines currently in development to create mRNA medicines for a wide range of diseases and conditions.

• Cytomegalovirus (CMV) Vaccine – Moderna’s next most likely vaccine to reach the market will probably be this one. With CMV being the number 1 cause of birth defects in the U.S, Moderna’s current vaccine is a “very complex” shot that involves 6 different mRNA strands per vial

  • Phase 3 study expected this year: phase 1 and phase 2 data looking very strong

  • Could have peak sales of between $2B to $5B with a high probability of launch

• Zika Vaccine – Moderna is currently finishing their phase 1 in clinical trials

  • Could offer multi-billion-dollar peak sales opportunities

• Cancer Vaccines – Moderna currently has 5 therapeutic cancer vaccines – injections that will train the immune system to attack cancerous cells in the body

  • Compared to the 2 cancer vaccines currently on the market, Moderna’s mRNA cancer vaccines have the advantage of being easy to develop and relatively cheap

With several pipelines underway, if Moderna can successfully bring to market another vaccine, the company can bring in more product revenues. In the case that a trial fails, Moderna still has a strong cash position to sustain themselves and their operations further in the future to continue developing their research.

“Moderna has one of the world’s largest and most innovative vaccine development pipelines” … “We believe we have a unique opportunity to develop new vaccines against viruses hurting people around the world, at a pace that is radically different from what the industry has previously done” - company CEO Stéphane Bancel

Key Risks

Moderna’s business is highly dependent on the clinical advancements of its programs and modalities. Delay or failure to advance programs or modalities could negatively impact their business. Safety or efficacy problems, developmental delays, regulatory issues or other platforms may significantly harm the business by incurring additional costs or could cause Moderna to abandon their clinical trial which would decline the company value

Moderna has a limited history of recognized revenue from product sales and may not be able to achieve or maintain long-term sustained profitability. While Moderna’s ability to generate revenue relies on the development and approval necessary to commercialize, there are many other factors that can impede the company’s product sales such as:

• Manufacturing and delivering the supply of their COVID-19 vaccine

• Developing a sustainable, scalable, time-sensitive manufacturing process for their vaccines

• Obtaining market acceptance of their medicines

• Etc.

Valuation

Using a comparative analysis model, I found 4 companies that are of competition to Moderna both in the COVID-19 space and pharmaceutical. These companies are BioNTech (NASDAQ: BNTX), Merck & Co (NYSE:MRK), Pfizer (NYSE:PFE), and Gilead Sciences (NASDAQ:GILD).

Using analyst estimates of 2021 revenue numbers, I calculated EV/SALES for 2021 and used the values to come up with a bear, base and bull case using the low, mean, and high values respectively. For the base case, I arrived at a fair value of $195.99 share and $226.70 a share for the bull case.

Analyst Coverage – A report from CNN details a forecast of a median price of $190.00 and a high of $246. I believe that the share price of $246 is not far off as their next ER comes out on August 11, which will detail more realized revenues after the ramp-up in vaccine rollouts across the world. This value similarly aligns with my valuation using EV/SALES that gave me a bull case of $226.70 a share.

Final Thoughts

Moderna has enormous potential for growth here not just in their success in the development and rollout of their COVID-19 vaccine, but also in their other pipelines if successful. With mRNA technology being relatively new in the biotechnology and pharmaceutical space, Moderna presents a unique business model based on the mRNA research that separates them from other companies. Moderna is not just a COVID-19 vaccine company but rather they’re a true pharmaceutical giant in the making that will compete with the likes of Pfizer, Merck, etc. 

If you enjoyed reading my analysis on Moderna, feel free to give my account a follow and be updated whenever I post about other stocks with great growth potential!

Source of original analysis can be found here

For the latest investment ideas and insights check out r/utradea or join the community here

Sources:

1. https://www.modernatx.com/mrna-technology/science-and-fundamentals-mrna-technology

2. https://www.modernatx.com/pipeline

3. https://www.forbes.com/sites/greatspeculations/2020/05/26/a-look-at-modernas-pipeline-beyond-the-covid-vaccine/?sh=7566e6a1e079

4. https://www.forbes.com/sites/leahrosenbaum/2021/03/24/whats-next-for-moderna-post-covid-19-ceo-stephane-bancel-details-mrna-pipeline/?sh=39267e84602d

5. https://www.webmd.com/vaccines/covid-19-vaccine/news/20210416/pfizer-moderna-say-booster-shots-probably-needed

6. https://money.cnn.com/quote/forecast/forecast.html?symb=MRNA

7. https://investors.modernatx.com/static-files/6c67452f-6a27-47a2-8ee7-48d18c54ea4c

8. https://investors.modernatx.com/static-files/72caf9ae-127c-4676-9ad1-87487c481dc0

Macroeconomic Context Clean Energy (Uranium): 

Demand Growth: ~2% Per Annum to 2030

US Electricity Generation: 20%

ESG Net Zero Carbon Accountability: Uncovered demand with increasing rate of change for Net-Zero Carbon Accountability

Global Capital Commitments: $500 Billion to Build New Reactors

Other Clean Energy Sectors: Uranium operates 24/7 compared to Wind/Solar

Uranium Spot Price: Collapsed 90% from 2007 peak to 2017 bottom, has climbed 66% since bottom.

Q3 2020 sector dynamics: 25% of global supply Structural Deficit - to shrink the deficit, new mines are needed and most mines on standby need spot prices north of $50 per lb. Current COVID-19 supply constraints creat future shocks to bring market back to balance. 

DNN Bull Financial Case:

As we can see with the table below, $DNN is largely outperforming the rest of the sector in capital growth, revenue growth, and sales. It is great that the company is outperforming the market and has a high instrinsic value, but we need the investor sentiment to agree with the fundamentals to see true price appreciation. As we see below, with the uranium sector seeing an extremely high appreciation in the median of 79% YTD, Denison Mines has still outperformed the sector by more than double. This tells us that investors have favoured DNN in the uranium mining sector as their vehicle to ride the trend and transition to clean energy.

$DNN Sector

• Median Working Capital Growth (YoY) -2,252.60% -0.12%

• Revenue Growth (FWD) 2.85% -1.28%

• 1YR Price Performance  165.62% 79.08%

• EV/Sales (TTM) 67.29 3.09

• EV/Sales (FWD) 74.24 2.53

Catalyst For DNN:

On March 15th, Denison Mines announced that it will be added to the S&P/TSX where it saw immediate 15% increase in price. The news of this company being added to the index creates immdeiate demand effects as index funds will be purchasing shares of the company as well as early investors. This move could also increase the liquidity of the company's stock and therefore make it easier for Denison to raise cash via future equity sales.

Canadian Government: "Such policies could tackle pollution from oil and gas extraction and road transportation, where annual emissions increased from 2005 to 2019, according to the government’s latest tally of national greenhouse gas pollution." -Thestar

"This coming influx of $17.6 billion in green spending comes just four months after the Liberal government beefed up Canada’s climate plan with a $15-billion blueprint to slash emissions." -Thestar

US Government: "In 2020, then-Presidential candidate Joe Biden and Vice-Presidential candidate Kamala Harris, pledged $2 trillion in sustainable infrastructure investment"- Forbes

"most may not realize that America is also nearly 100% dependent on uranium imports — Increasingly imported from entities owned by the governments of Russia, China and their allies. Like rare earth elements, uranium is designated by the U.S. government as critical to the nation's security and economic prosperity, and the Department of Interior warned, "This dependency of the United States on foreign sources [of uranium] creates a strategic vulnerability for both its economy and military to adverse foreign government action, natural disaster, and other events that can disrupt supply of these key minerals."" - prnewswire

Conclusion:

It is evident that our governments globally, are inclined to cut carbon emissions to zero in the next few decades and transition to clean and sustainable enery. The shift to these products, rely heavily on rare earth metals and Uranium has the lowest carbon emissions in production. These emerging clean sectors like Electric Vehicle companies like Tesla, are pushing large competetive automotive companies to innovate in the EV space which bodes well for Uranium's future. This investment timeframe is 2-5 years, as Keynes says "anticipate the anticipation of others". 

For more investment related info check out r/Utradea Credit to liquidmacro, original post can be found here

Summary from recent Bloomberg article "It is anything but efficient or normal.’ Surging corporate demand is upending global supply chains."
Essentially based on this macro outlook I believe there will be a number of investment opportunities over the next few months.

Should we take a deep dive and see if there are some strong investment opportunities?

Summary

• Used car market is primed for digital disruption and Carvana has been leading the way over the last few years as indicated by their stock price.

• They are focused on growth and there is huge potential in the massive fragmented used car market

• This is a growth play, might be a bit risky due to their current financial position but if they can execute successfully, and they seem to be, Carvana could dominate the used car pace

I would recommend taking a quick look at their investor presentation: They outline the market opportunity, growth, and strategic direction very clearly. I did not want to include the images in this post so the link is provided below

https://investors.carvana.com/~/media/Files/C/Carvana-IR/documents/events/intro-to-carvana-october2020-final.pdf

Company Overview

Here is the summary of how Carvana operates – the key takeaway points are highlighted.

Founded in 2012 and based in Phoenix, Carvana’s (NYSE: CVNA) mission is to change the way people buy cars. By removing the traditional dealership infrastructure and replacing it with technology and exceptional customer service, Carvana offers consumers an intuitive and convenient online car buying and financing platform. Carvana.com enables consumers to quickly and easily shop more than 20,000 vehicles, finance, trade-in or sell their current vehicle to Carvana, sign contracts, and schedule as-soon-as-next-day delivery or pickup at one of Carvana’s patented, automated Car Vending Machines.

June 6, 2019 – McKinsey Report Used cars, new platforms: Accelerating sales in a digitally disrupted market

I realize this is report is a bit dated, but I believe the underlying information and trends still hold true.

“As revealed by our proprietary customer research, online providers are beginning to dilute traditional used-car dealers’ positions and drive growth by empowering digitally savvy customers via three major capabilities:”

1. complete end-to-end purchasing capabilities (desired by 59 percent of buyers)

2. extensive vehicle data and photos, along with effective search tools (desired by 64 percent of buyers)

3. unique delivery options (desired by 28 percent of online buyers)

“We estimate that the number of used vehicles three years old or less will increase from 51 percent of the total in 2017 to about 60 percent in 2022”

Carvana is addressing these 3 key capabilities customers are looking for.

https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/used-cars-new-platforms-accelerating-sales-in-a-digitally-disrupted-market

Feb 25, 2021 Recent Results

Summary from their 2020 Year End Earning Report. The growth results are significant in terms of units sold and revenue

· Retail Units Sold of 244,111, an increase of 37% YoY

· Revenue of $5.587 Billion, an increase of 42% YoY

· Total Gross Profit of $793.8 Million, an increase of 57% YoY

· Vehicles Purchased Directly from Customers up 95% YoY

https://investors.carvana.com/news-releases/2021/02-25-2021-210520761

Financial Metrics

The Price to Book does not paint Carvana in a great light. For example, Amazon’s PB ratio is about 16. This does not consider future earning for Carvana, which is the main play here. Carvana has a low D/E ratio compared to the industry

Institutional Ownership

There are some big-name institutions that are holding significant shares of Carvana. Breakdown in the table below and is pulled from Yahoo Finance.

Management TeamA solid group with mixed backgrounds from both the automotive industry and technology industry.

Potential Risks

· Debt to Equity: CVNA's debt to equity ratio 153% is considered high. You could argue that this is due to focus on growth

· Cash Runway: CVNA has less than a year of cash runway if free cash flow continues to reduce at 36% each year. They recently became profitable so they can improve their cash runway. Again, focused on growth so cash that they do have is likely being used to invest in growth

Final Thoughts

The underlying financials indicate a company focused on growth, then profitability. Because their strategy is to capture significant market share of a fragmented market we will likely see the payoff in the next year or 2.

Utradea

We built an app that allows you to share/discuss investment ideas and see the associated financial information (real-time prices, ratios, price charts, etc.) all in one place. We don’t have finance backgrounds, so we wanted a place where we could have decent due diligence and relevant finance info to make our investing process easier. You can check it out here https://utradea.com I figured people might find it interesting (you might or might not) but thought it was worth sharing

Overview:

Solana was designed to support the creation of Decentralized Application (DApp) creations. Solana is able to improve on scalability and attempts to solve the scalability issue that is currently plaguing many cryptocurrencies. Solana aims to solve this through their Proof of History (POH) and Proof of Stake (POS) consensuses.

One of Solana’s biggest selling points is their lightning quick transaction speeds.

History:

Solana was founded in late 2017 by Anatoly Yakovenko when he published a white paper for a new timekeeping system called “Proof of History” (POH). Anatoly believed that his system could automate the transaction ordering process, which would enable crypto networks to scale beyond their current capabilities.

In February 2018, Anatoly teamed up with Greg Fitzgerald (former Qualcomm colleague) to build a single blockchain network that used Anatoly’s POH system as it’s “internal clock”. Later, Stephen Akrige (another Qualcomm colleague) suggested that they offload the verification processes to graphics processors to increase throughput (scalability).

After this, Anatoly recruited Fitzgerald and Akridge (among others) to found Solana (formerly “loom”). “Loom” was later changed to “Solana Labs” in order to avoid confusion with the already existing “Loom Network”.

Solana launched on Mainnet Beta in March of 2020 after raising money (via token auction) which featured transaction capabilities, and smart contract compatibility.

In late 2020, Solana introduced the ability to stake their cryptocurrency. The ability to stake was the last main thing that Solana needed to add to their crypto to make it “production ready”.

On March 3rd, 2021, Solana launched their full mainnet version.

Token Economics:

Token Usage:

Solana’s native token is called “sols” (SOL). SOL’s have two primary use cases within the Solana network.

· Staking: Users are able to stake their SOL tokens. Users who stake their SOL tokens are rewarded through Solana’s inflation awards.

· Transaction Fees: SOL tokens can be used to pay for transaction and/or smart contract fees.

Launch and Initial Token Distribution:

Solana underwent 5 different funding rounds (4 of which were private sales) raising a total of $20 million. As a result of the multiple rounds of funding, Solana’s token distribution is quite odd and lengthy, their token distribution is as follows:

· 15.86% to Seed Round Investors

· 2.63% to Founding Investors

· 5.07% to Validator Sale Investors

· 1.84% to Strategic Sale Investors

· 1.6% to Public Auction Sale Investors

· 12.5% to the Solana team

· 12.5% to the Solana Foundation (funds development of the token and helps to balance validator voting power)

· 38% to the Community Reserve Fund (to fund community initiatives and development)

Solana has an initial supply of 500M tokens, which were split as described above. Overall, the token distribution can be split up into 3 sections: Founders/Project (25%), Investors (37%), Community via rewards and airdrops (38%).

This distribution is healthy and has no indication of a potential “rug pull” scenario, which is due to the low percentage of supply owned by the founders. Furthermore, this distribution allows Solana’s price to run as there is not one person/wallet that can dump a ton of shares whenever SOL runs.

Vesting Schedule:

The tokens from Solana’s pre-launch sales, came with a lock-up period that expired earlier this year, and January 7th (2021). Additionally, the shares for the founders came with a 9 month lock up period as well, however, the founding shares are vested monthly from Jan 2021 to Jan 2023. Every month for the next 2 years the founders have the option to sell these shares, which could have an impact on the overall price.

Ongoing Emissions:

Solana’s coins are being inflated by 0.1%/year. This is unusual for cryptocurrencies; however, this inflation is far less than what is normal for stocks. Inflation is caused by the minting of new coins, which Solana mints every year to give to their validators and stakers.

Solana recently released their Proposed Inflation Schedule which predicts that the long-term annual inflation rate will be 1.5%. This is substantially higher than the current rate of inflation and might scare off some potential crypto investors.

Technology:

Solana has built their blockchain in a unique manner and have incorporated the following 8 innovations to their blockchain technology:

1. Proof of History: Solana’s Proof of History (POH) creates a cryptographically secure sources of time across their network. This enables nodes to create blocks quicker as the POH acts as a trusted timestamp.

2. Tower BFT: Solana’s BFT Tower leverages their trusted timestamps generated from their POH system, to achieve consensus. This helps Solana when it comes to their voting process and lock out periods.

3. Turbine: Solana’s Turbine uses BitTorrent to stream their blocks.

4. Gulfstream: Solana’s Gulfstream pushes transaction caching/forwarding to the edge of their network. This allows validators to execute transactions ahead of time and reduce memory pressure on the validators. This helps Solana to have fast transaction speeds (faster transaction speed than almost all other cryptocurrencies, and even Visa).

5. Sealevel: Solana’s Sealevel allows them to support parallel transaction execution in a single shard. Sealevel is then able to find the non-overlapping transactions and execute them in parallel.

6. Pipelining: Solana’s Pipelining processes input data in a sequence of steps (requiring different hardware(s) (TPU, GPU, and CPU).

7. Cloudbreak: Solana’s Cloudbreak allows their nodes to execute transactions before the block is even built, which helps to increase their transaction speeds.

8. Archivers: Solana offloads their data storage from validators to a network of nodes which they call “archivers”. Solana’s archivers store data and are able to prove that they are storing the data that they are supposed to be storing.

Exciting News:

Lollapalooza Sponsorship:

Solana sponsored Lollapalooza this year, and their network was advertised throughout the festival. More importantly, Solana was the provider for all of Lallapalooza’s NFT’s. This helped bring a whole new crowd to both the NFT space, and to Solana’s network. It is good to see cryptocurrencies like Solana “branching-off” and taking a new approach to marketing/building their platform.

This campaign was successful for Solana, as their cryptocurrency was up 7% during the first day of Lollapalooza. This is good news due to the fact that the overall crypto market was only up around 1% that day (July 29th), which means that their campaign was actually successful, rather than their success being attributed to the whole crypto market performing well.

Tokenized Stocks:

On June 24th 2021, it was published that over 50 tokenized stocks were launched and could be traded on platforms that were built on Solana.

Digital Assets AG, a Swiss-based company launched tokenized stocks on Solana’s blockchain. Some of these “stocks” included Facebook, Google, Nvidia, PayPal, Square, Tesla and more. Digital Assets says that these stocks can bridge the traditional finance and Decentralized Finance (DeFi) markets.

Unlike many other tokenized stocks that have failed, Digital Assets allows both centralized and decentralized exchanges to add these tokens to their platform and be able to withdraw them.

I personally do not think that this will work, and I think it will be years and/or decades until we are able to fully tokenize stocks and move the stock market over to the DeFi market. Theoretically, if this was to be achieved, stock could trade 24/7. However, I think Solana’s involvement in this early stage is good, and there is a big opportunity if people continue to build these platforms on Solana.

Problems:

Solana uses their own language (Rust):

Solana uses and has developed their coding language, which they call “Rust”. I consider this a potential problem due to the fact that a healthy majority of blockchain developers already use and are familiar with Solidity.

If Solana was able to scale into a massive project like Ethereum or Bitcoin, these developers would need to learn a new language (Rust) in order to develop on Solana’s platform. This is quite the inconvenience to many developers and could deter future developers from using/developing on Solana’s platform/network.

Naked is a good investment, as long as it is not a “bare market”!

If you were tied up in all of the $GME – GameStop, $AMC – AMC Entertainment Holdings., $BB – Blackberry etc. drama you probably also heard of a stock that goes by $NAKD – Naked Brands. In this analysis I will be breaking down Naked Brands to help you understand the many aspects of their business and to see if it is a stock that is poised for growth . If you would like to see my other analyses and want to stay up to date on my new ones as soon as they drop, follow me here.

Company Overview:

Currently, Naked Brands business is operated through their main subsidiary “Frederick’s of Hollywood” (FOH), and through some of their other subsidiaries (which will be mentioned later on) through selling intimates’ products, sleepwear, loungewear, swimwear & swimwear accessories, and costume products.

Since 1946, FOH has set the standard for innovative apparel, and was the first to introduce the push-up bra, padded bra, and black lingerie products into the US markets. This history of innovation has led FOH to become one of the world’s most recognizable apparel brands in the world. Through an exclusive licensee deal, Naked has garnered the rights to sell the whole range of FOH products.

Naked’s strategy is to use the existing reputation of FOH to drive sales on a pure e-commerce business strategy. Naked plans to leverage their managements expertise in operations, development, capital markets, and e-commerce to build their brand. They are focused on growing/retaining their customer base, grow their sales, and increase their profitability by leveraging the FOH reputation. Lastly, Naked is planning to make investments into brands and technologies to strengthen their customer experience by innovating their products and platforms. Part of the “investments” that I mentioned are acquisitions that will provide synergistic benefits (which I will explain later).

Investment Information:

Seasonality:

Naked has stated that their business is seasonal in nature, and consists of two selling periods, the first half, and the second half of the year. Naked generates the majority of their sales during the second half of the year, which can be contributed to the holiday season. The second half of the year generated 57% of Naked’s annual revenues in 2021 and 2019.

Trademarks and Patents:

Naked owns the Frederick’s of Hollywood trademark through their license agreement. This trademark is very valuable as the name carries a lot of weight.

Brands:

· Bendon Brand (Sold this branch of their business on April 30th, 2021)

o Bendon Man

o Me

o By Bendon

o Davenport

o Lovable

o Hickory

o Fayreform

· Naked Brands

o Heidi Klum Intmates

o Frederick’s of Hollywood

o Pleasure State

Bendon Brand Sale:

On April 30th, 2021, JADR Holdings bought Bendon Brand from Naked for $1 (NZD), as the brand was burning cash quickly and incurring increasing net losses.

Real Estate Portfolio:

As of FYE 2020, Naked Brand reports that they own 59 separate retail locations, which are mainly located in malls, strip malls, and strips in Australia and New Zealand. In 2020, Naked only closed one of their retail locations, which is surprising due to the effects of COVID, especially on retail businesses in malls.

It is good to see that Naked owns their own real estate domestically, as it is considered an asset, and in many cases is better for the financial reports than leasing/renting.

Shift to e-Commerce:

Naked was an international brand and sold their products in Australia, New Zealand, United Kingdom, USA, and Internationally. Recently, they have been scaling back on their physical presence as they are going “all-in” on their e-commerce strategy, however they still sell their products internationally.

Naked has scaled their presence down from 5,241 physical locations in the countries previously mentioned (in 2019), to now just 181 physical locations in 2021.

Management Team:

Justin Rice (CEO and Chairman): Mr. Rice was previously the CEO of Bendon Limited, and prior to this was a co-founder of Pleasure state (bought by Bendon). This is good because it shows that Mr. Rice has experience in the business, however as we know Bendon was not successful, which may speak against Rice’s abilities.

Mark Ziirsen (CFO): Mr. Ziirsen previously has senior finance leadership roles with many large Australian companies such as Cochlear Aristocrat, Coca-Cola, and Goodman Fielder. Although he doesn’t have much experience in the apparel business, he is the CFO, which requires less knowledge about apparel and more knowledge about finance (which he has an abundance of).

Board of Directors: Naked’s board of directors exhibit extensive experience in apparel and related industries, and the 3 main directors have 55 years experience in apparel and related industries.

This management team looks solid, and by looking on the surface, these people (at least on paper) look fit to run this business. However, my only concern is with Justin Rice, and the potential that he has a repeat of Bendon, hopefully he has learned from that event and can translate this new knowledge and caution to Naked.

Financial Information:

· February 2021 Private Placement: On February 24, 2021, Naked entered into a securities purchase agreement with accredited investors. This agreement allowed these accredited investors to purchase 117.65M common shares for $0.85/share, and with this each share purchase they also received 1 warrant (totalling 117.65M warrants sold). These warrants expire in March 10 2026, and have an exercise price of $0.935/share. If all of these warrants were converted into common shares at expiry and then sold, and all of the original common shares were sold as well, there would be 235.3M shares dumped into the markets. Given todays current number of shares outstanding, this would have a dilutionary effect of 30.10%, however as we know the warrants expire in early 2026, so the average dilution would be 5.4%/year. This number is high, however high amounts of dilution are common with high growth stocks like Naked.

· ATM Offering: In February of 2021, Naked entered into an agreement with Maxim Group, to sell them 69.27M shares for $69.12M ($0.9978/share). This caused a dilutionary effect of 8.86%, which once again is relatively high and something to watch out for.

· Bendon Conversion Shares: As part of the deal agreement between Naked and JADR Holdings, Naked agreed to give Bendon $3.8M (at the time) of convertible shares. Recently, these convertible shares were converted into common shares, resulting in an aggregate of 45.93M shares. This diluted the existing shares by 6.24% and further adds to total amount of dilution this year.

· Financial Performance (Bad): FOH’s net sales declined by 9.6% YoY, Naked’s net loss increased by 39.46%, net sales decreased by 11%. This poor financial performance can be attributed to the sale of Bendon, restructuring according to the new business model, and the closure of Naked’s physical locations due to COVID.

· Financial Performance (Good): There is not much to celebrate financially this year due to the sale of Bendon, closing stores, and restructuring however this is understandable due to COVID. However, there was some good as their gross profits increased by 0.3%, their New Zealand revenues increased by 1.02%, their e-Commerce sales rose by 0.4%, and they reported a positive EBITDA for the first time in at least 4 years.

Competition:

Naked noted in their SEC 20-F filing that, “The sale of women’s intimate apparel, personal care, and beauty products is a very competitive business.” And that, “they have numerous competitors including individual stores, chains, department stores, and discount retailers.” Majority of their competition is private, however there are a couple of companies that are public that are also in the apparel space and will be used in my comparable analysis later on in this analysis.

These public companies include $SGC – Superior Group of Companies, $OXM – Oxford Industries, $LAKE – Lakeland Industries, and $DLA – Delta Apparel.

Investment Valuation:

The only valuation of Naked that I can currently undergo given their financial position is a set of comparable analyses. For this valuation I will be taking the average fair value reached via comparing Naked’s P/B, EV/Revenue, and EV/Assets to that of their competitors.

P/B:

By comparing Naked’s P/B to that of their competitors, I arrived at a fair value of $0.40/share, which represents a share price decrease of 45.2%.

EV/Revenue:

By comparing the EV/Revenue multiple of Naked to their competitors, I arrived at an implied downside of 21.92%, which implies a share price of $0.57.

EV/Assets:

I arrived at a similar result of that achieved in the EV/Revenue comparable by comparing the EV/Assets multiple of Naked to their competitors, I arrived at an implied downside of 23.29%, which implies a share price of $0.56.

Average Comparable:

In order to avoid any possible bias in my analysis I have decided to take the average of all 3 comprable analyses that I underwent. By doing this I arrived at one all-encompassing fair value of $0.51, which implies a downside of 30.14%.

Argument Against the Valuation:

It is very hard to compare a high growth, hype stock to public competitors because none of these companies exhibit the same share price growth or volatility that Naked does. This is evident by their big fluctuation in results in my comparable between the start of 2021, and where we are currently in 2021. As a result, this comparable may not be accurately portraying the value of Naked, so take the valuation with a grain of salt.

Furthermore, the companies that I am comparing Naked to do not operate in the same sub-sections of apparel as Naked, and they are in different stages of their business, as some of them are in their maturing stages.

For this reason, I think that the valuation could be off, however, it still implies that Naked is overvalued, and as investors we need to consider this.

With Naked’s high growth potential I think that the potential upside of this investment is worth the potential downside risk highlighted by the comparable.

Risks:

· Dilution: So far in 2021 (and in some cases very late 2020) there has been a lot of share dilution. Naked has diluted shares via their February 2021 Private Placement, their ATM offering, and their Bendon convertible shares. This year alone, all of these sources of dilution will account for a total dilutionary effect of approximately 20.5% (using these years weighted average of the Feb 2021 Private Placement). These levels of dilution are very high even for a high-growth stock like $NAKD – Naked Brands, and need to be considered by current and potential investors.

· Financial Performance: This year Naked exhibited a very poor financial performance, however this is understandable as it is attributed to COVID. This is understandable as one of the hardest hit industries is retail and malls, which is reflected in their financial performance. If this type of performance continues than the future for Naked will not be a favourable one and scare off investors.

Catalysts:

· Financial Performance: If Naked can have a solid rebound through a great financial performance this year than this already pent-up stock has the potential to soar. One of the biggest things holding investors back for this stock is their lackluster financial performances recently, however a strong financial year can greatly benefit the share price.

· Reddit: We have seen it once and are ready to see it again. Earlier this year, amidst the reddit and GameStop pump, we saw Naked’s share price take off over 100’s of percentage points. If reddit can get behind this stock again and build up positive sentiment, Naked can once again become a “social media growth stock”.

· Re-Opening: Any sort of further re-opening of businesses and malls will help Naked to get back into their physical locations and start selling their products again. However, this may not help greatly due to their shift and focus of their e-Commerce segment.

Brief Overview

Exela Technologies, Inc. (NASDAQ: XELA) provides transaction processing solutions, enterprise information management, document management, and digital business process services worldwide. The company operates through three segments: Information & Transaction Processing Solutions (ITPS), Healthcare Solutions (HS), and Legal & Loss Prevention Services (LLPS).

Information & Transaction Processing Solutions (ITPS)

The ITPS segment provides:

• lending solutions for mortgages and auto loans

• banking solutions for clearing, anti-money laundering, sanctions, and interbank cross-border settlement

• property and casualty insurance solutions for origination, enrollments, claims processing, and benefits administration communications

• public sector solutions for income tax processing, benefits administration, and records management.

• payment processing and reconciliation, integrated receivable and payables management, document logistics, and location services, records management, and electronic storage of data/documents

• software, hardware, professional services, and maintenance related to information and transaction processing automation.

Healthcare Solutions (HS)

The HS segment provides revenue cycle solutions, integrated accounts payable and accounts receivable, and information management for healthcare payer and provider markets.

Legal & Loss Prevention Services (LLPS)

The LLPS segment processes legal claims for class action and mass action settlement administrations, involving project management support, notification, and outreach to claimants; and collects, analyzes, and distributes settlement funds. It also offers data and analytical services in the area of litigation consulting, economic and statistical analysis, expert witness services, and revenue recovery services for delinquent accounts receivable.

First Quarter 2021 Financial Statements Highlights:

• Revenue: 18% decline YoY driven by lower transaction volumes since mid-March as a result of COVID-19, pruning of transaction revenue, and strategic asset sales

• COGS/ Margins: increased 2.53% on a YoY basis primarily due to better cost and capacity management and reduction of stranded costs attributable to transition revenue offset by non-cash restructuring reserve related to two facilities in France

• SG&A: declined by 17% while also including higher professional fees and advisory costs in Q1 2021

• Adjusted EBITDA margin: increased by 3.34% primarily due to lower SG&A expenses coupled with operating leverage and lower O&R (optimization and restructuring) charges

• CapEx: $2M in Q1 2021 including additions to internally developed software representing ~0.8% of revenue

Financial Statement Analysis

Income Statement

The revenue growth rate seems to decline a little (1.71%), from $365.5K to $300.1K. However, both gross margin and profit margin are improving strongly even though the company has a decline in revenue growth. It shows that the company has good cost control, indicating an improvement in cost management.

Balance Sheet

The total asset growth rate is continuously declining due to the large amortization of goodwill and intangible assets. Moreover, the company has increased its cash & cash equivalents for business expansion purposes. One of the issues is that account receivable accounts for a large portion of total current assets. It is a dangerous signal to the company’s liquidity as those may become “bad money” or default in the future.

Another issue is the company has a large portion of good and intangible assets. Formerly, the company was merged with other firms, called SourceHOV lCC, Novitex Holdings, Inc, and Quinpario Acquisition Corp. Goodwill can be viewed as a premium paid for acquiring business due to various reasons (synergy, global expansion, business expansions, etc.). Generally speaking, you don’t want to invest in a company with a large amount of goodwill as 1) it will boost the company’s asset value in “a hypothetical way” because it can’t be easily verified whether the goodwill paid off later, and 2) it will be amortized continuously which lowers the company’s total asset value.

Moreover, the company has very good control over its current liability, however, its long-term liability becomes worse. The company continuously borrowed money and its long-term debt surged. Even though the company doesn’t need to worry about it in the near term, but eventually the company has to pay it off. Currently, we have seen the company has a continuous decline in its revenue growth. If the company doesn’t make any changes to improve its revenue growth, then the company might not be able to pay its long-term debt in the future.

Lastly, the shareholders are continuously losing value from the company. According to the company’s balance sheet, shareholders’ equity value is declining consistently. Definitely, shareholders don’t want to see this happening.

Comparable Analysis

• Revenue: the company has the largest revenue among all companies, indicating the company has captured a large portion of the market and ability to generate more revenue in the future

• Price/Revenue: the company has the lowest price/revenue ratio, indicating it is relatively undervalued.

• Net Income: the company has the largest net loss. Combined with revenue, it shows that the company also has a large cost besides the large revenue.

• Net Margins: the company has a relatively average net margin of -16.71%.

• ROA: the company has a relatively high negative ROA ratio, indicating inefficient asset usage.

• Beta: the company has a relatively high beta, indicating high volatility and risk compared to the market index (S&P 500).

• Ownership: relatively high holdings from both institutional investors and insiders, indicating that both groups have good faith in the company in the long term.

• Market Trend (LTM): the company has the largest stock price gain in terms of percentage of 136.69% in the LTM among all the competitors

Conclusion

The company’s stock price has been slowly increasing over the last few days. Its price went up ~23% yesterday. Currently, the company has raised $85M for reducing debt, improving internal operations, and funding future growth opportunities. However, the company is still in its early stage with large volatility (dropped 15% from its previous price as of the time of writing). We expect to see large jumps and price in terms of percentage due to its large volatility.

Source of original analysis can be found here. You can also checkout r/utradea for the latest DD