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We're bringing you all the news you need to know for this week. This report contains news on the most important IPO this week, the crypto world & earnings news. We've highlighted the most important topics in each section!
These week's biggest IPO is by far Braze.
Braze is a SaaS platform that connect customer CRMs with consumer data. Braze then takes this data and personalizes experiences for consumers interacting with the brands they work with.
While there are a handful of use cases, from a marketing perspective, personalized messaging goes a long way with your customer.
The more you can personalize your marketing, the higher chance that a person buys from you and then starts to affiliate themselves with the brand.
Use cases aside, Braze is another tech platform who has some pretty solid numbers. After analyzing their financials, these are the biggest things that stuck out to us:
Braze made $150M in revenue last year, which grew 56% from the year prior. They also made $103.6 million in the first half of 2021, which was 53% higher than the same time period last year. If we annualize this data (just a fancy way for saying what we estimate to happen for the rest of the year), it'll look like forward looking revenue is close to $207M. At a IPO valuation of $5.2B this is a pretty expensive price tag trading at over 25x revenue. While 50% growth is definitely impressive, for a company without a ton of hype, this is on the expensive end of the spectrum.
Looking at comparable deals we see a similar story. When Marketo was bought in 2017 for $1.8B billion, they were also generating around $321M in revenue then. When they were sold to Adobe later on, the revenue wasn't made public but at close to a $5 billion price tag then, the revenue was likely at least 4x higher than Braze's revenue today. Even with higher multiples today than 5 years ago, the deal seems very expensive from comparable standpoint.
Gross margins are continuing to decline while the rule of 40 rate has declined to. Gross margins declining are not good for a business of their size and the rule of 40 states that a software company's combined growth rate and profit margin should be greater than 40%. This is a general framework but looking at Braze's numbers we see that their most recent calculation was 28%.
When adding all of this up, we're choosing not to invest in this IPO. While Braze is a fast growing company, with a solid outlook, we'd need to see the business improve before jumping in!
Bitcoin ATH & ETF Talks:
Crypto is obviously beyond hot right now. With Bitcoin hitting an ATH of close to $70,000 this week, many investors are polarized. One side of the fence believes this run up is due to sell off while others think that this is just the beginning.
No manner what camp you're in over the short term, our fundamental belief is that we're still in the first quarter of what crypto will become. See our long term outlook that we posted earlier this year: here
What is still lacking though is an actual ETF for bitcoin. This would be huge!
While the futures ETF was approved earlier this year, a spot ETF would be the big differentiator.
If you're wondering, "What does that mean?" It basically means that the ETF buys and tracks futures contracts of Bitcoin rather than buying Bitcoin itself. Therefore the ETF isn't buying bitcoin itself, which shouldn't materially affect the actual price of Bitcoin itself.
If the ETF was however to buy Bitcoin itself, this would substantially drive the value of bitcoin up as the ETF would add huge demand to the underlying value of the security.
And while there is hope for a spot ETF, the SEC just quietly disapproved the most recent bid for it!
While most people thought this would happen, we're projecting that it eventually gets approved. And honestly that is when the real fun starts.
If word of that happens, that will be the catalyst needed to push the price up to over $100k. While the news this week was not good, we believe it'll just push the timeline further!
If you want up to date news, trading information and access to our live chat, be sure to join our FREE discord channel where we give you all this and more. Just join here -> Crypto Discord Channel
Most Important Companies Reporting Earnings This Week:
Lucid Group (LCID), November 15th:
When we recommended Lucid last month (see the analysis: here) we fully knew this was a highly speculative pick.
In the original analysis we knew this was a multi-year stock that would take years to play out. Fast forward to today though and the first sight of shipments have sent the stock soaring.
But during this earnings call, we're less concerned with the massive performance over the last month, and are keen to find out what's coming next.
As a stock that will experience a ton of volatility, this is something that must be tracked at the company level instead of the stock price. Therefore the biggest things we're looking for are:
With shipments of cars expected this month, we know Q3 revenue will be minimal. But the company believes EBITDA will turn positive by 2024! While we may not get a ton of insight here, any updated projection in a positive way will surely be taken well by the market.
Technology updates: Will they be able to talk about new models coming, lower price points, margin expansion, and improvements in battery tech? The likely answer is no as this is premature but if they do, again, the stock could sky rocket. Be on the watch for any exciting outlooks from the company.
Therefore with the stock spiking up so much recently, we're going to sit on the sidelines and hold onto the stock until the madness shakes out.
Ginko Bioworks (DNA), November 15th:
If you missed our piece of Ginko you've done messed up. This is a can't miss video where our biotech guy went a little too crazy and spent 2 weeks digging out this story:
Now that you're caught up, how freaking cool is what they're doing? Whether you're a science nerd or not, you can't deny that they're working on some pretty cool sh*t.
Here's the quick and dirty version: Ginko Bioworks Analysis
But back on topic now, you're here because you want to know what is happening this week for them or at least you're willing to let us tell you.
But in any case, this week you're likely to hear a combination of insane growth while most likely spending a lot of money.
And similar to Lucid, this is not going to shape up over night. This is a multi-year project and those are the types of companies we believe in at Moby - the one's changing the world.
Therefore should the stock drop, we're using this time to add more Ginko to our already existing position.
Home Depot (HD), November 16th:
Is Home Depot boring? Yes.
Does that mean that they're a bad company? No.
Are we still asking you questions? Without a doubt. But let's get back on topic.
Home Depot is quietly up 40% this year and up 200% in the last year while paying a dividend yield close to 2%.
With so much construction going on in the country, inflation rising and other macro factors, HD has been riding the wave for the better part of the last year.
But going forward, a rise in interest rates could lead to a slow down in mortgages, which could affect home purchases and other spending habits that have benefitted HD over the last year+ since the pandemic started. Therefore during this earnings call we'll be watching closely to the outlook they discuss going forward.
Either way we believe it should be positive and therefore we're continuing to hold the stock.
This is one of our top plays in the retail/construction industry! With a low risk/medium reward profile and a strong dividend, HD has always been a great investment.
Nvidia (NVDA), November 17th:
If you've made it this far, we promise this is the last one. After reading so much about investments, your eyes may start to become blurry -- calm down you are not having a seizure (we hope...)
We'll keep this one quick and easy though.
In a 3 word summary: Nividia is awesome.
Plan and simple, the stock has been on an absolute tear the last 5 years up over 1,200%!
Even with the chip shortages, Nvidia's products have been needed across almost every industry. Now factor in all this metaverse talk and there's even more tailwinds for their use cases.
But with the stock up over 130% this year, stocks like this are subject to pullbacks if the outlook even slightly changes.
Therefore if there is weakness post earnings call, we'd use this time to buy more of the stock if you're holding it for a multi-year period.
Nvidia has been one of our favorite stocks for the last 5 years and will continue to be so for some time!
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