Fundamental Short Selling Research

Eric Fernandez, CFA

TwoRiversAnalytics

Equity Bottom-Up

<ul>
<li>This model seeks companies facing dangerously high leverage coupled with negative or declining cash flows.  It considers interest expense, capex and short term maturities for additional input. </li>
<li>The companies may not be viable given cash flows and capital structures.  These shorts tend to have  higher betas  and can have strong down moves as the crisis is recognized.</li>
<li>This week we flag: Fastly, Affirm Holdings, Bloom Energy, Wynn Resorts</li>
</ul>


This model seeks companies facing dangerously high leverage coupled with negative or declining cash flows.  It considers interest expense, capex and short term maturities for additional input. 
The companies may not be viable given cash flows and capital structures.  These shorts tend to have  higher betas  and can have strong down moves as the crisis is recognized.
This week we flag: Fastly, Affirm Holdings, Bloom Energy, Wynn Resorts


Solvency Risk Short Candidates: Fastly, Affirm Holdings, Bloom Energy, Wynn Resorts

TMT & Consumer Independent Equity Research Analyst, Obex Capital Research

Aaron Gabin

TMT & Consumer Independent Equity Research Analyst

TMT & Consumer Independent Equity Research

Obex Capital Research

“Obex” is Latin for Barriers to Entry. Obex Capital Management’s investment philosophy is driven by an intense focus on which business model’s Barriers to Entry are able to withstand the ever increasing competitive disruption in the TMT and Consumer Sectors.

<ul>
<li>Impressive Analyst Day Presentation got us bulled up on the potential for Afterpay to juice growth on both Square and the Cash App</li>
<li>Cash App getting a design overhaul to create a super app that spans commerce, investing, payments, personal finance, loans, etc. </li>
<li>Unit economics outlined today lead us to a ~40% potential EBITDA margin in 3-5 years...well higher than is currently considered by consensus today. </li>
</ul>


Impressive Analyst Day Presentation got us bulled up on the potential for Afterpay to juice growth on both Square and the Cash App
Cash App getting a design overhaul to create a super app that spans commerce, investing, payments, personal finance, loans, etc. 
Unit economics outlined today lead us to a ~40% potential EBITDA margin in 3-5 years...well higher than is currently considered by consensus today. 


Covering IPOs, Healthcare and Technology Stocks

Andrei Zakharov

Algosun Global

<ul>
<li>Fintech unicorn could report strong earnings results for FY Q3 2022. Total revenue increased by 54% year-over-year, and net loss narrowed to ~$55M for the reporting period.</li>
<li>
<a href="https://www.smartkarma.com/entities/affirm-holdings" target="_blank" data-smartkarma-citation="entities:31038:1" rel="noopener">Affirm Holdings (AFRM US)</a>  closed a $500M revolving ABS deal and added $2.5B in new funding capacity from various partners. Total funding capacity was ~$9B, marking a 55% YoY increase.  </li>
<li>Sovereign wealth fund GIC Singapore acquired ~$126 million worth of <a href="https://www.smartkarma.com/entities/affirm-holdings" target="_blank" data-smartkarma-citation="entities:31038:1" rel="noopener">Affirm Holdings (AFRM US)</a>  shares in April at an average of <strong>$33.00</strong> per share.</li>
</ul>


Fintech unicorn could report strong earnings results for FY Q3 2022. Total revenue increased by 54% year-over-year, and net loss narrowed to ~$55M for the reporting period.

Affirm Holdings (AFRM US)  closed a $500M revolving ABS deal and added $2.5B in new funding capacity from various partners. Total funding capacity was ~$9B, marking a 55% YoY increase.  
Sovereign wealth fund GIC Singapore acquired ~$126 million worth of Affirm Holdings (AFRM US)  shares in April at an average of $33.00 per share.


Affirm Raises Outlook For FY 2022: No Changes In Bullish Narrative

<ul>
<li>We see limited upside potential for <a href="https://www.smartkarma.com/entities/upstart-holdings-inc" target="_blank" data-smartkarma-citation="entities:29727:1" rel="noopener">Upstart Holdings Inc (UPST US)</a>  shares after reporting a record 200%+ YoY revenue growth rate in CY’21.   </li>
<li>Our calculations suggest insiders sold ~$1.5 billion worth of Upstart shares since August 2020, including Third Point, CEO of Upstart Holdings, and management of the fintech company. </li>
<li>Rising interest rates and tightening of credit markets may negatively impact revenue, keeping in mind that <a href="https://www.smartkarma.com/entities/upstart-holdings-inc" target="_blank" data-smartkarma-citation="entities:29727:1" rel="noopener">Upstart Holdings Inc (UPST US)</a>  primarily facilitates unsecured personal loans on the platform.</li>
</ul>


We see limited upside potential for Upstart Holdings Inc (UPST US)  shares after reporting a record 200%+ YoY revenue growth rate in CY’21.   
Our calculations suggest insiders sold ~$1.5 billion worth of Upstart shares since August 2020, including Third Point, CEO of Upstart Holdings, and management of the fintech company. 
Rising interest rates and tightening of credit markets may negatively impact revenue, keeping in mind that Upstart Holdings Inc (UPST US)  primarily facilitates unsecured personal loans on the platform.


Upstart Holdings: Slowdown In Revenue Growth And Tightening Of Credit Markets

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/upstart-holdings-inc" target="_blank" data-smartkarma-citation="entities:29727:1" rel="noopener">Upstart Holdings Inc (UPST US)</a> is both a consumer Internet brand as well an online loan origination platform. </li>
<li>Upstart is a rare fintech that has established credibility by delivering high growth with profits and cash generation. The healthy 2022 outlook underscores the long-term potential. </li>
<li>While the ongoing market volatility is a near-term risk, the tech sell-off presents an opportunity to gain exposure to a good story at an attractive valuation. </li>
</ul>



Upstart Holdings Inc (UPST US) is both a consumer Internet brand as well an online loan origination platform. 
Upstart is a rare fintech that has established credibility by delivering high growth with profits and cash generation. The healthy 2022 outlook underscores the long-term potential. 
While the ongoing market volatility is a near-term risk, the tech sell-off presents an opportunity to gain exposure to a good story at an attractive valuation. 


Upstart Holdings: Fast-Growing, Profitable, Cash Generative with Share Buybacks

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)

Solvency Risk Short Candidates: Fastly, Affirm Holdings, Bloom Energy, Wynn Resorts

This model seeks companies facing dangerously high leverage coupled with negative or declining cash flows. This week we flag: Fastly, Affirm...

Eric Fernandez, CFA

Revisiting Long Ideas: Square (Block)

Square had a strong 1Q22 and a bullish analyst day presentation yesterday that reignited our enthusiasm for this ecosystem of ecosystems. Afterpay...

Aaron Gabin

Affirm Raises Outlook For FY 2022: No Changes In Bullish Narrative

We are moving our price target to $70.00 from $76.00, which we believe is fair and conservative. We model total revenue rising to ~$1.98B in FY’23,...

Andrei Zakharov

Upstart Holdings: Slowdown In Revenue Growth And Tightening Of Credit Markets

We think investors should be cautious on Upstart shares due to the slowdown in revenue growth rates and the tightening of credit markets

Andrei Zakharov

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52-week Range

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Solvency Risk Short Candidates: Fastly, Affirm Holdings, Bloom Energy, Wynn Resorts

This model seeks companies facing dangerously high leverage coupled with negative or declining cash flows. This week we flag: Fastly, Affirm...

Eric Fernandez, CFA

Revisiting Long Ideas: Square (Block)

Square had a strong 1Q22 and a bullish analyst day presentation yesterday that reignited our enthusiasm for this ecosystem of ecosystems. Afterpay...

Aaron Gabin

Affirm Raises Outlook For FY 2022: No Changes In Bullish Narrative

We are moving our price target to $70.00 from $76.00, which we believe is fair and conservative. We model total revenue rising to ~$1.98B in FY’23,...

Andrei Zakharov

Upstart Holdings: Slowdown In Revenue Growth And Tightening Of Credit Markets

We think investors should be cautious on Upstart shares due to the slowdown in revenue growth rates and the tightening of credit markets

Andrei Zakharov

Upstart Holdings: Fast-Growing, Profitable, Cash Generative with Share Buybacks

Upstart is a rare fintech that has established credibility by delivering high growth with profits and cash generation. The tech sell-off is an...

Arun George