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>When we first looked at Snowflake at the time of the IPO, we saw an incredible business with great management and unbelievable business model. But the stock quickly went well beyond our valuation comfort levels, and last quarter we said we couldn’t justify owning it. We reserve the right to change our minds. The number that stood out this quarter was 168% - Snowflake’s net revenue retention in the quarter. We still think Snowflake is expensive – and you can arguably get a similar growth rate and excellent business model at half the valuation with Crowdstrike…but like many compounders (Adobe, ServiceNow), sometimes you never get the entry point you want. We think the drawdown in growth presents that opportunity.</p>
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<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>
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When we first looked at Snowflake at the time of the IPO, we saw an incredible business with great management and unbelievable business model. But the stock quickly went well beyond our valuation comfort levels, and last quarter we said we couldn’t justify owning it. We reserve the right to change our minds. The number that stood out this quarter was 168% - Snowflake’s net revenue retention in the quarter. We still think Snowflake is expensive – and you can arguably get a similar growth rate and excellent business model at half the valuation with Crowdstrike…but like many compounders (Adobe, ServiceNow), sometimes you never get the entry point you want. We think the drawdown in growth presents that opportunity.

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.


Snowflake 4Q21 Earnings: Their Revenues ARE Worth More Than Yours

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<p>We have theorised previously that the upgraded Switch that everyone expects from Nintendo could utilise graphics partner, Nvidia’s DLSS technology. This could help the company close the gap with Sony and Microsoft and could have a variety of other implications which we discuss below.</p>

We have theorised previously that the upgraded Switch that everyone expects from Nintendo could utilise graphics partner, Nvidia’s DLSS technology. This could help the company close the gap with Sony and Microsoft and could have a variety of other implications which we discuss below.

Nintendo – DLSS Developments Have Implications for Switch “Pro”

<p>In 4Q20, Amazon turned in another sensational quarter, but essentially hasn’t moved since September as it has been “growing” into its valuation after a meteoric move in 1H20. In the past year, Amazon has spent an incremental $11.5B on COVID related costs (~10% of 2020 opex), increased the square footage of its logistics network’s square footage by 50%  and also added ~650,000 (!!!) employees, doubling its employee base in what also turns out to be the largest mobilization of workers in the US since World War II. And yet…since September 2, the stock is down 4% from its alltime high. We think Amazon is worth closer to $6,000 then $3,000 and think that it has potentially the same type of setup as last year when we began writing (on Smartkarma) about Amazon. In years after the company has huge capacity expansions, it tends to outperform as the operating leverage of capacity utilization shines through.</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 4Q20, Amazon turned in another sensational quarter, but essentially hasn’t moved since September as it has been “growing” into its valuation after a meteoric move in 1H20. In the past year, Amazon has spent an incremental $11.5B on COVID related costs (~10% of 2020 opex), increased the square footage of its logistics network’s square footage by 50%  and also added ~650,000 (!!!) employees, doubling its employee base in what also turns out to be the largest mobilization of workers in the US since World War II. And yet…since September 2, the stock is down 4% from its alltime high. We think Amazon is worth closer to $6,000 then $3,000 and think that it has potentially the same type of setup as last year when we began writing (on Smartkarma) about Amazon. In years after the company has huge capacity expansions, it tends to outperform as the operating leverage of capacity utilization shines through.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.

Meta Platforms (Facebook) / Equity Bottom-Up

<p>Alot of handwringing on the Facebook conference call about tough 2H20 comps and the big "Apple IDFA Overhang"...we think the lady doth protest too much. Facebook will be just fine, and at 14x forward EBITDA for ~20% EBITDA growth, its one of the most compelling values in TMT.</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>

Alot of handwringing on the Facebook conference call about tough 2H20 comps and the big "Apple IDFA Overhang"...we think the lady doth protest too much. Facebook will be just fine, and at 14x forward EBITDA for ~20% EBITDA growth, its one of the most compelling values in TMT.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.

Facebook 4Q20: Trying to Take a Bite Out of the Apple

Covering IPOs, Healthcare and Technology Stocks

Andrei Zakharov

Algosun Global

<p>JFrog, the liquid software company, will report financial results for the fourth quarter and fiscal year 2020 on February 11, 2021 following market close. JFrog successfully completed IPO in September 2020 and sold ~9.7 million shares at IPO price of $44 per share. Net proceeds reached ~$393 million and JFrog shares rose ~36% since IPO. We saw a temporary selling pressure on JFrog stock price due to early lock-up expiration in respect to 25% of shares under lock-up agreements. However, insiders and shareholders did not rush to sell JFrog shares in November and December previous year.</p><p>In our insight we will focus on JFrog 4Q:20 earnings preview and set a new 12-month price target on JFrog stock.</p>

JFrog, the liquid software company, will report financial results for the fourth quarter and fiscal year 2020 on February 11, 2021 following market close. JFrog successfully completed IPO in September 2020 and sold ~9.7 million shares at IPO price of $44 per share. Net proceeds reached ~$393 million and JFrog shares rose ~36% since IPO. We saw a temporary selling pressure on JFrog stock price due to early lock-up expiration in respect to 25% of shares under lock-up agreements. However, insiders and shareholders did not rush to sell JFrog shares in November and December previous year.In our insight we will focus on JFrog 4Q:20 earnings preview and set a new 12-month price target on JFrog stock.

Bear-Case Is Highly Unlikely. Risk/Reward Skewed To The Upside

United States

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)

Snowflake 4Q21 Earnings: Their Revenues ARE Worth More Than Yours

Snowflake had an incredible quarter and we think its a reasonable entry point for the highest valuation software stock in the market.

Aaron Gabin

Nintendo – DLSS Developments Have Implications for Switch “Pro”

We examine recent developments for Nvidia's DLSS technology and consider the implications for the expected Switch "Pro", including for third party...

Mio Kato

Amazon 4Q20: The GOAT Departs

Amazon CEO Jeff Bezos is stepping down. We doubt he steps away. 2021 is a unique setup. Its the first time Amazon was up during a big capacity...

Aaron Gabin

Facebook 4Q20: Trying to Take a Bite Out of the Apple

Facebook printed a extremely strong quarter and commentary regarding potential overhangs from Apple and tough comps is just Facebook talking down...

Aaron Gabin

Bear-Case Is Highly Unlikely. Risk/Reward Skewed To The Upside

JFrog looks like a more attractive stock at current valuations keeping in mind forthcoming IPO of key VC-backed rival GitLab Inc.

Andrei Zakharov

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