Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

Robinhood Markets  / Equity Capital Markets

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Our base case valuation of Robinhood is implied market cap of US$25.1 billion or US$29.8 per share, which is 25% lower than the mid-point of the IPO price range (US$40). Given the downside risk, we would AVOID this IPO. 
<ul><li>Our valuation of Robinhood is based on an EV/S multiple of 10.7x using our estimated sales of US$2.1 billion in 2022. <ul>
<li>The EV/S multiple of 10.7x is based on the average multiple of the comps in 2022.</li>
<li>The valuation multiple is higher than the those of online brokers Charles Schwab and Interactive Brokers Group.</li>
<li>However, it is lower than the valuation multiples of the fintech comps including Coinbase and Affirm.</li>
</ul>
</li></ul>
</div>


Our base case valuation of Robinhood is implied market cap of US$25.1 billion or US$29.8 per share, which is 25% lower than the mid-point of the IPO price range (US$40). Given the downside risk, we would AVOID this IPO. 
Our valuation of Robinhood is based on an EV/S multiple of 10.7x using our estimated sales of US$2.1 billion in 2022. 
The EV/S multiple of 10.7x is based on the average multiple of the comps in 2022.
The valuation multiple is higher than the those of online brokers Charles Schwab and Interactive Brokers Group.
However, it is lower than the valuation multiples of the fintech comps including Coinbase and Affirm.




Latest News from the World’s Leading Innovators

Granite Bay Capital

An innovation focussed investment company

Granite Bay Capital is an innovation focussed investment company with a deep focus on the companies at the leading edge of innovation across major themes such as AI, ubiquitous computing, sustainability, automation and longevity.

Thematic (Sector/Industry)

Headline Developments Apple (AAPL) and Goldman Sachs (GS) are reportedly partnering to launch a buy now, pay later (BNPL) service through Apple Pay, according to Bloomberg .  The service will reportedly allow users to spread payments of their purchases across four interest-free payments every two weeks, or across several months with interest.

Headline Developments Apple (AAPL) and Goldman Sachs (GS) are reportedly partnering to launch a buy now, pay later (BNPL) service through Apple Pay, according to Bloomberg .  The service will reportedly allow users to spread payments of their purchases across four interest-free payments every two weeks, or across several months with interest.

Global equities research in innovation & tech

Vishal Hargovan

Equity Bottom-Up

Afterpay results pointed to continued outperformance, making it a leader in the global BNPL sector.Afterpay has delivered a very strong set of results with overall underlying sales (GMV) up 106% to $9.8bn putting it on track for north of $20bn GMV in FY21.Afterpay's deal with Stripe will drive further merchant adoption via a seamless integration process. Stripe has extended this functionality to Squarespace with other eCommerce platforms to follow.

Afterpay results pointed to continued outperformance, making it a leader in the global BNPL sector.Afterpay has delivered a very strong set of results with overall underlying sales (GMV) up 106% to $9.8bn putting it on track for north of $20bn GMV in FY21.Afterpay's deal with Stripe will drive further merchant adoption via a seamless integration process. Stripe has extended this functionality to Squarespace with other eCommerce platforms to follow.

Afterpay 1H21 Earnings Calls Key Takeaways

<ul>
<li>Affirm is a leading North American based BNPL provider that is well placed to grow aggressively over the next decade</li>
<li>Their advantages are threefold:</li>
</ul><ol>
<li>Excellence at technology and data which enables Affirm to win enterprise scale platforms</li>
<li>The ability to address transactions across the average order value scale hence address a larger proportion of credit card displacement TAM</li>
<li>Transparency and fairness with a commitment to never charge late fees appeals to merchants who share this value set / brand ethos</li>
</ol><ul><li>There will be multiple winners in the BNPL space and while Afterpay is our preferred pick, we believe Affirm’s strengths cannot be ignored and warrants strong consideration in a long portfolio</li></ul>


Affirm is a leading North American based BNPL provider that is well placed to grow aggressively over the next decade
Their advantages are threefold:

Excellence at technology and data which enables Affirm to win enterprise scale platforms
The ability to address transactions across the average order value scale hence address a larger proportion of credit card displacement TAM
Transparency and fairness with a commitment to never charge late fees appeals to merchants who share this value set / brand ethos
There will be multiple winners in the BNPL space and while Afterpay is our preferred pick, we believe Affirm’s strengths cannot be ignored and warrants strong consideration in a long portfolio

Affirm (AFRM) – The Rise of the Financial Super App

Key points
<ul>
<li>Afterpay is well on its way to becoming an "Internet Scale" company facilitating viral customer growth in multiple markets.</li>
<li>AfterPay’s flywheel results in aggregation of demand and supply with exceptionally low marginal cost of acquisition.</li>
<li>Afterpay is exposed to two winning trends - growth in eCommerce and migration away from credit cards.</li>
<li>Afterpay is Global - low-cost acquisitions in Europe and Asia will enable it to scale in new geographies quickly and attract global retailers.</li>
<li>It brings retailers new customers, higher conversion, hard to reach millennials and higher AOVs.</li>
<li>It drives repeat purchases with each new cohort increasing frequency of use over the previous cohort.</li>
<li>We still see further upside, despite Afterpay being up almost 5X since the beginning of 2020 (valuation article to follow).</li>
</ul>

Key points

Afterpay is well on its way to becoming an "Internet Scale" company facilitating viral customer growth in multiple markets.
AfterPay’s flywheel results in aggregation of demand and supply with exceptionally low marginal cost of acquisition.
Afterpay is exposed to two winning trends - growth in eCommerce and migration away from credit cards.
Afterpay is Global - low-cost acquisitions in Europe and Asia will enable it to scale in new geographies quickly and attract global retailers.
It brings retailers new customers, higher conversion, hard to reach millennials and higher AOVs.
It drives repeat purchases with each new cohort increasing frequency of use over the previous cohort.
We still see further upside, despite Afterpay being up almost 5X since the beginning of 2020 (valuation article to follow).


United States

Affirm Holdings, Inc. is a financial technology company. The Company builds platform for digital and mobile-first commerce. Affirm Holdings offers financial services tool that allows consumers to purchase goods and services. Affirm Holdings serves customers worldwide.

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Affirm Holdings (AFRM US)

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Our base case valuation of Robinhood is implied market cap of US$25.1 billion or US$29.8 per share, which is 25% lower than the mid-point of the...

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Headline Developments Apple (AAPL) and Goldman Sachs (GS) are reportedly partnering to launch a buy now, pay later (BNPL) service through Apple

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Affirm (AFRM) – The Rise of the Financial Super App

Affirm has a strong technology focus and a mission driven CEO who believes in bringing fairness to financial products. Investors should not...

Vishal Hargovan

Afterpay - An Internet Scale Company

Afterpay is on its way to becoming an "Internet Scale" company. We still see further upside driven by two winning trends - growth in eCommerce and...

Vishal Hargovan

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