Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

We continue to view the market as healthy in terms of breadth, although rotations are occurring at the margin which warrant minor tweaks to our overall theme of continued consolidation and heightened volatility. Also within our May Equity Strategy, we highlight opportunities within the Technology (Overweight), Financial (Overweight), and Energy (Market weight) Sectors.

We continue to view the market as healthy in terms of breadth, although rotations are occurring at the margin which warrant minor tweaks to our overall theme of continued consolidation and heightened volatility. Also within our May Equity Strategy, we highlight opportunities within the Technology (Overweight), Financial (Overweight), and Energy (Market weight) Sectors.

U.S. Equity Strategy: Upgrading Utilities, Downgrading Manufacturing

IPO and L/S equity, 2015 Starmine top stock picker, Global Equity Research Ltd

Rickin Thakrar

IPO and L/S equity, 2015 Starmine top stock picker

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.

Equity Capital Markets

Dropbox filed its highly anticipated S1 prospectus in the US on Friday with the intention of raising $500mn in the market. We note five points with regards to Dropbox’s prospectus.Revenue growth – why won’t you stay with me? We note a few areas of concerns with regards to Dropbox's fading revenue growth, which are 1) billings growth is lower than revenue growth – reflecting concerns with regards to customer retention, 2) Surveys show Dropbox is losing market share while customer reviews are below average, 3)  Microsoft’s decision last week to offer its storage service for free and Dropbox's latest aggressive promotions set a powerful backdrop for increased near-term competition.Exit rate and corporate governance make us nervous: The exit rate for Dropbox is not great. Dropbox’s 4Q17 showed a reversion in margin improvement as the company stepped up sales and marketing spend – we believe due to increased competition. We believe the latest exit rate could undermine a straight-line DCF trajectory. Further, we estimate over 50% of the voting rights shares are in the hands of the founders and one VC firm. While this governance is not ‘Snap’ like, we think this may dissuade some investors.The user base modification: In 2016, we estimate Dropbox scrubbed 100mn inactive accounts from its user base and amended its calculation methodology with regards to registered users. While this is a sensible strategy and has optimized costs, we note that Dropbox’s user base in its prospectus (c500mn) is the same as it had under the old methodology in 2016 when it first passed the 500mn user mark – a<a href="https://blogs.dropbox.com/dropbox/2016/03/500-million/" target="_blank">s the company noted on its blog</a>. As a result, we believe the private valuation of Dropbox in 2014 of $10bn may have been based on an inflated user base.Cash flow supportive while industry growth provides tailwind: On the positive side, Dropbox generated c$300mn in free cash flow (OCF – capex) in FY17 however adjusted for capital leases, this figures drops to c$172mn. Nonetheless, this is a marked improvement from zero in FY16 (albeit partially driven by low capex in our view). In addition, Gartner estimates that Software as a service (SaaS) growth to grow at c20% for the next three years – providing a meaningful sector tailwind.Bottom line – an upround will be a challenge: Dropbox shares are coming to the market hot – with a very robust private valuation of $10bn in FY14. However, we believe the weak exit rate, increased competition, concentrated voting power and an amended user base are concerns and we would be uninterested in paying a premium valuation for the shares.

Dropbox filed its highly anticipated S1 prospectus in the US on Friday with the intention of raising $500mn in the market. We note five points with regards to Dropbox’s prospectus.Revenue growth – why won’t you stay with me? We note a few areas of concerns with regards to Dropbox's fading revenue growth, which are 1) billings growth is lower than revenue growth – reflecting concerns with regards to customer retention, 2) Surveys show Dropbox is losing market share while customer reviews are below average, 3)  Microsoft’s decision last week to offer its storage service for free and Dropbox's latest aggressive promotions set a powerful backdrop for increased near-term competition.Exit rate and corporate governance make us nervous: The exit rate for Dropbox is not great. Dropbox’s 4Q17 showed a reversion in margin improvement as the company stepped up sales and marketing spend – we believe due to increased competition. We believe the latest exit rate could undermine a straight-line DCF trajectory. Further, we estimate over 50% of the voting rights shares are in the hands of the founders and one VC firm. While this governance is not ‘Snap’ like, we think this may dissuade some investors.The user base modification: In 2016, we estimate Dropbox scrubbed 100mn inactive accounts from its user base and amended its calculation methodology with regards to registered users. While this is a sensible strategy and has optimized costs, we note that Dropbox’s user base in its prospectus (c500mn) is the same as it had under the old methodology in 2016 when it first passed the 500mn user mark – as the company noted on its blog. As a result, we believe the private valuation of Dropbox in 2014 of $10bn may have been based on an inflated user base.Cash flow supportive while industry growth provides tailwind: On the positive side, Dropbox generated c$300mn in free cash flow (OCF – capex) in FY17 however adjusted for capital leases, this figures drops to c$172mn. Nonetheless, this is a marked improvement from zero in FY16 (albeit partially driven by low capex in our view). In addition, Gartner estimates that Software as a service (SaaS) growth to grow at c20% for the next three years – providing a meaningful sector tailwind.Bottom line – an upround will be a challenge: Dropbox shares are coming to the market hot – with a very robust private valuation of $10bn in FY14. However, we believe the weak exit rate, increased competition, concentrated voting power and an amended user base are concerns and we would be uninterested in paying a premium valuation for the shares.

Dropbox IPO Preview – Drop It Like It’s Hot

United States

Box, Inc. develops internet applications software. The Company operates a content sharing platform that enables users to share, access, and manage content in the cloud, as well as provides mobile access, online file storage, and online collaboration solutions. Box serves customers worldwide.

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Box Inc Class A (BOX US)

U.S. Equity Strategy: Upgrading Utilities, Downgrading Manufacturing

We continue to view the market as healthy in terms of breadth, although rotations are occurring at the margin which warrant minor tweaks to our...

Vermilion Research

Dropbox IPO Preview – Drop It Like It’s Hot

Dropbox filed its highly anticipated S1 prospectus in the US on Friday with the intention of raising $500mn in the market. We note five points with...

Rickin Thakrar

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Market Cap (USDm)

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