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.

Equity Bottom-Up

<p>In between earnings seasons, we are trying to catch up on the flurry of TMT IPOs over the past few months that have caught our eye. Why Digital Ocean? We're pretty big Amazon bulls cause of AWS, so when we heard there was this mini-AWS that the developer community swears by, had 30%+ EBITDA margins, was accelerating growth by growing dollar retention rates and ARPUs...we had to learn more. Strikes us at the type of business that could be a 5 to 10-bagger over the next year or two. </p><div class="content-highlight"><p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p></div>

In between earnings seasons, we are trying to catch up on the flurry of TMT IPOs over the past few months that have caught our eye. Why Digital Ocean? We're pretty big Amazon bulls cause of AWS, so when we heard there was this mini-AWS that the developer community swears by, had 30%+ EBITDA margins, was accelerating growth by growing dollar retention rates and ARPUs...we had to learn more. Strikes us at the type of business that could be a 5 to 10-bagger over the next year or two. Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

<p>The headline for Amazon’s quarter was that its revenue growth decelerated 1700bps to 24% YoY , and appears set to decelerate another 1000bps in 3Q. Tough comps people. Tough comps.</p><p>The company has to invest more and more money to keep up with demand…historically, these are the times you invest in Amazon, when its going through capacity buildouts…its just never happened before that Amazon has had ongoing investment cycles for multiple years. In the end…the absolute size and profitability of the business will be larger. It might just take 2-3 quarters to prove out.</p><p>In the meantime, its higher margin AWS and Advertising businesses are ACCELERATING. AWS on a $59B runrate, growing 37% (500bps acceleration QoQ), Advertising on a $32B runrate, growing 87% (1400bps acceleration). We value these two businesses at ~2T….which is 30% ahead of the current market cap. We think retail is also worth ~$1T, which is what get us to our $3T valuation, which equates to $6,000 a share. </p><div class="content-highlight"><p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p></div>

The headline for Amazon’s quarter was that its revenue growth decelerated 1700bps to 24% YoY , and appears set to decelerate another 1000bps in 3Q. Tough comps people. Tough comps.The company has to invest more and more money to keep up with demand…historically, these are the times you invest in Amazon, when its going through capacity buildouts…its just never happened before that Amazon has had ongoing investment cycles for multiple years. In the end…the absolute size and profitability of the business will be larger. It might just take 2-3 quarters to prove out.In the meantime, its higher margin AWS and Advertising businesses are ACCELERATING. AWS on a $59B runrate, growing 37% (500bps acceleration QoQ), Advertising on a $32B runrate, growing 87% (1400bps acceleration). We value these two businesses at ~2T….which is 30% ahead of the current market cap. We think retail is also worth ~$1T, which is what get us to our $3T valuation, which equates to $6,000 a share. Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

Amazon 2Q21: Pay Attention to AWS and Advertising

Top 10 Mega Caps | Artificial Intelligence, Mint Finance

Uttkarsh Kohli

Top 10 Mega Caps | Artificial Intelligence

Deep Fundamental Analysis

Mint Finance

Mint Finance's investment research blends deep fundamental analysis with technical & quant insights. Investment strategies straddle across multiple asset classes with risk management embedded into every trade to deliver an outsized reward-to-risk ratio.

Mint Finance's research is centered around three key themes. First, energy transition and climate change. Second, artificial intelligence. Third, shifting world order with its impact across politics and monetary economics.

<ul>
<li>Google's ad revenue growth consensus is 11.7% YoY in Q2, with some analysts projecting even higher, reflecting robust global digital ad spend trends.</li>
<li>Google Cloud's revenue reached $9.5 billion in Q1 2024, marking a 35% YoY increase and a 4x growth over the past four years. Q2 expected to see continued growth. </li>
<li>AI investments and innovations showcased at Google I/O aim to boost user experience and market leadership, with potential double-digit growth.</li>
</ul>


Google's ad revenue growth consensus is 11.7% YoY in Q2, with some analysts projecting even higher, reflecting robust global digital ad spend trends.
Google Cloud's revenue reached $9.5 billion in Q1 2024, marking a 35% YoY increase and a 4x growth over the past four years. Q2 expected to see continued growth. 
AI investments and innovations showcased at Google I/O aim to boost user experience and market leadership, with potential double-digit growth.


[Q2 Earnings Preview] Google: Ad Revenue & Cloud Growth Plus AI Advancements in Focus

Podcast On the Business of Semiconductors, The Circuit

The Circuit

Podcast On the Business of Semiconductors

A Podcast On the Business of Semiconductors. With Jay Goldberg and Ben Bajarin

Thematic (Sector/Industry)

<ul><li>Discussion about the potential for Chinese companies to use shell corporations to rent GPUs from American companies</li><li>Mention of a blog post by Sequoia and a report from Goldman Sachs on the challenges of monetizing AI infrastructure</li><li>Skepticism about the return on investment in AI due to lack of clear revenue sources and consumer use cases, particularly with companies like Microsoft and Amazon investing billions in AI projects.</li></ul><p><em>This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.</em></p>

Discussion about the potential for Chinese companies to use shell corporations to rent GPUs from American companiesMention of a blog post by Sequoia and a report from Goldman Sachs on the challenges of monetizing AI infrastructureSkepticism about the return on investment in AI due to lack of clear revenue sources and consumer use cases, particularly with companies like Microsoft and Amazon investing billions in AI projects.This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

<ul>
<li>Never a pioneer, instead a perfectionist in delivering mind bending experience. That’s what Apple has stood for traditionally. Can it repeat the act in the Gen AI era? </li>
<li>Siri to have advanced language comprehension and Writing Tools to deliver useful features to drive convenience and productivity. </li>
<li>Private Cloud Compute ensures user data remains encrypted and secure. Reflects Apple's commitment to privacy amidst growing concerns surrounding data misuse.</li>
</ul>


Never a pioneer, instead a perfectionist in delivering mind bending experience. That’s what Apple has stood for traditionally. Can it repeat the act in the Gen AI era? 
Siri to have advanced language comprehension and Writing Tools to deliver useful features to drive convenience and productivity. 
Private Cloud Compute ensures user data remains encrypted and secure. Reflects Apple's commitment to privacy amidst growing concerns surrounding data misuse.


Will Apple Intelligence Drive IPhone Maker past USD 4 Trillion in Market Cap?

United States

VMware, Inc. provides virtualization solutions from the desktop to the data center. The Company's solution products addresses a range of IT problems, which includes cost and operational inefficiencies, business continuity, software lifecycle management and desktop management.

Oracle Corporation supplies software for enterprise information management. The Company offers databases and relational servers, application development and decision support tools, and enterprise business applications. Oracle's software runs on network computers, personal digital assistants, set-top devices, PCs, workstations, minicomputers, mainframes, and massively parallel computers.

Electronic Arts Inc. develops, publishes, and distributes branded interactive entertainment software worldwide for video game consoles, personal computers, handheld game players, and cellular handsets. The Company also provides online game-related services.

ServiceNow, Inc. provides enterprise information technology (IT) management software. The Company designs, develops, and produces prepackaged computer software, cloud services, and IT service management platform. ServiceNow serves customers throughout the United States.

Check Point Software Technologies Ltd. develops, markets and supports a range of software and hardware products and services for information technology (IT) security and offers its customers a network and gateway security solutions, data and endpoint security solutions and management solutions.

Fair Isaac Corporation provides analytics, including predictive modeling, decision analysis, intelligence management, decision management systems, and consulting services.  The Company helps companies in countries around the world acquire customers more efficiently, increase customer value, reduce fraud, lower operating expenses, and enter new markets more profitably.

Synopsys, Inc. supplies electronic design automation solutions to the global electronics market.  The Company provides design technologies to creators of advanced integrated circuits, electronic systems, and systems on a chip. Synopsys also provides consulting services and support to its customers to streamline the overall design process and accelerate time to market.

Activision Blizzard, Inc. publishes, develops, and distributes interactive entertainment software and peripheral products. The Company's products cover diverse game categories, including action/adventure, action sports, racing, role playing, simulation, first-person action, music-based gaming and strategy.

Workday, Inc. provides enterprise cloud-based applications. The Company offers human capital, spend, and financial management, as well as payroll, initiatives and higher education solutions. Workday serves the finance, healthcare, manufacturing, education, and technology industries worldwide.

HubSpot, Inc. provides a cloud-based marketing and sales software platform. The Company offers integrated applications that helps in lead generation and social marketing.

Nintendo Co., Ltd. globally develops, manufactures and sells home-use video game hardware and software in home entertainment business.  The company also produces home-game products including cards.

Dassault Systemes operates as a software company. The develops and offers 3Dexperience platform to create innovative new products and services using virtual experiences. Dassault Systemes serves aerospace, construction, business services, consumer packaged goods, high-tech, life science, health care, marine, energy, and industrial equipment industries worldwide.

WiseTech Global Pty Ltd provides various technology and information technology management solutions. The Company offers cloud based various technology platforms, market specific software and logistics technology solutions, such as edienterprise, a platform supply chain logistics management system, software-as-a-service, and clinical management software. 

Constellation Software Inc is a software holding company.  The Company acquires mission-critical, vertical market software companies, and helps them to grow.

Spotify Technology S.A. provides music streaming services. The Company offers commercial free music and ad-supported services to subscribers. Spotify Technology serves clients worldwide.

Dassault Systemes is a technology company. The company provides software applications services designed to support client company's innovation processes. The company's line of business includes provision of 3D design software, 3D digital mock up and product lifecycle Management. Dassault Systemes also provides several software brands.

Xero Limited offers an online accounting system.  The software features bank transaction importing, a cashbook, a general ledger, invoicing, accounts receivable, accounts payable, financial reporting, and management of expense claims.

CAPCOM CO., LTD. develops consumer video game software.  The Company also develops, manufactures, markets, and leases arcade game machines.  Capcom also operates amusement facilities.

International Games System Co., Ltd. plans, designs, develops, manufactures, and markets software and hardware for arcade games, PC games, and Internet on-line games.

Oracle Financial Services Software Ltd. provides comprehensive information technology solutions to the financial services industry worldwide. The Company provides transaction processing and accounting software for banks, investment managers and mutual funds. Oracle Financial also provides internet delivery of financial services as well as business intelligence and analytical applications.

Microsoft Corporation operates as a software company. The Company offers applications, extra cloud storage, and advanced security solutions. Microsoft serves customers worldwide.

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Microsoft Corp (MSFT US)

Recent IPO Insights: Digital Ocean

Why Digital Ocean? When we heard there was this mini-AWS that the developer community swears by, had 30%+ EBITDA margins, was accelerating net...

Aaron Gabin

Amazon 2Q21: Pay Attention to AWS and Advertising

Retail decelerated ALOT. In the meantime, its higher margin AWS and Advertising businesses are ACCELERATING. We value these two businesses at...

Aaron Gabin

[Q2 Earnings Preview] Google: Ad Revenue & Cloud Growth Plus AI Advancements in Focus

Google's Q2 earnings on 23/Jul will focus on projected 11.7% ad revenue growth, cloud earnings & AI innovations. Key acquisitions highlight...

Mint Finance

Episode 75: The AI Big $$$ Question

Skepticism about the return on investment in AI due to lack of clear revenue sources and consumer use cases, particularly with companies like...

The Circuit

Will Apple Intelligence Drive IPhone Maker past USD 4 Trillion in Market Cap?

Apple has made history yet again as the first firm with a market cap surpassing $3.5 trillion. Apple was late to join the AI game, yet it has...

Mint Finance

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