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

We think Snowflake is expensive, but not necessarily as expensive at it seems (44x CY22 revenues) when looked at on a growth adjusted metric (0.6x). This quarter didn’t reveal anything notable – the business is still doubling YoY, guidance for 90% growth next quarter seems conservative, and the operating model as a whole seems conservative (e.g. mid70s gross margin target vs. 73% today)…which is why we expect some sort of update coming in two weeks at Snowflake’s analyst day. The stock has become a consensus short, which explains some of the price action today on a just “ok” guidance. The recent drawdown below $200 represented a good entry point…we are long, and would add into Analyst Day.<div class="content-highlight">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.</div>

We think Snowflake is expensive, but not necessarily as expensive at it seems (44x CY22 revenues) when looked at on a growth adjusted metric (0.6x). This quarter didn’t reveal anything notable – the business is still doubling YoY, guidance for 90% growth next quarter seems conservative, and the operating model as a whole seems conservative (e.g. mid70s gross margin target vs. 73% today)…which is why we expect some sort of update coming in two weeks at Snowflake’s analyst day. The stock has become a consensus short, which explains some of the price action today on a just “ok” guidance. The recent drawdown below $200 represented a good entry point…we are long, and would add into Analyst Day.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 2Q22 Earnings: Stay Tuned to Analyst Day

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 China is looking to continue its rout on crypto, pushing for the suspension of some crypto mining operations late last week.  Chinese Vice Premier Liu He told a group of officials that the Government would “clamp down on bitcoin mining and trading activity” to achieve financial stability.

Headline Developments China is looking to continue its rout on crypto, pushing for the suspension of some crypto mining operations late last week.  Chinese Vice Premier Liu He told a group of officials that the Government would “clamp down on bitcoin mining and trading activity” to achieve financial stability.

Amazon’s businesses are booming. Retail is on a $400B runrate growing 45%. AWS $54B, growing 32%, Advertising $25B, growing 73%. We think the company is worth $3T or $6000 a share.<div class="content-highlight">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.</div>

Amazon’s businesses are booming. Retail is on a $400B runrate growing 45%. AWS $54B, growing 32%, Advertising $25B, growing 73%. We think the company is worth $3T or $6000 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 1Q21: The Fastest Growing Business in the World

Summary: Coursera, an online education platform will see its business model decelerate faster than expected. While the TAM trajectory of online education has clearly inflected higher due to the pandemic, we think  the Coursera’s growth trajectory is being mismodeled based on 2020’s surge in signups. Coursera’s profitability is dependent on scaling its enterprise and degree customer bases. While the demand for upskilling employees is real, intense competition from LinkedIn, Pluralsight, and others may crimp growth and gross margins segment, while a lack of leverage with its content suppliers (university partners), plus edX’s open source alternative  weaken revenue sharing over time. A lack of tangible evidence of Coursera’s skills-based credentialing translating to jobs will result in underwhelming consumer growth and lack of pricing power. Downside risks around regulation and competitive incursion by tech platforms paired with an obscene valuation make a compelling short case. Base Case Valuation: $33                                  Bull Case: $57                                 Bear Case: $20<div class="content-highlight">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.</div>

Summary: Coursera, an online education platform will see its business model decelerate faster than expected. While the TAM trajectory of online education has clearly inflected higher due to the pandemic, we think  the Coursera’s growth trajectory is being mismodeled based on 2020’s surge in signups. Coursera’s profitability is dependent on scaling its enterprise and degree customer bases. While the demand for upskilling employees is real, intense competition from LinkedIn, Pluralsight, and others may crimp growth and gross margins segment, while a lack of leverage with its content suppliers (university partners), plus edX’s open source alternative  weaken revenue sharing over time. A lack of tangible evidence of Coursera’s skills-based credentialing translating to jobs will result in underwhelming consumer growth and lack of pricing power. Downside risks around regulation and competitive incursion by tech platforms paired with an obscene valuation make a compelling short case. Base Case Valuation: $33                                  Bull Case: $57                                 Bear Case: $20Obex’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.

Alpha-Centric ESG Research

Kyle Rudden

Corporate "net-zero" climate pledges are all the rage of late, with proud press releases being issued on a daily basis. This is a welcome trend – the world is woefully behind climate goals and based on current national pledges, we have a 5% chance of achieving the Paris Agreement's 2-degree goal.Corporate climate action is imperative.However, corporate pledges aren't always what they purport to be. Occasional greenwashing aside, even well-intentioned pledges from reputable companies can be misleading. Not intentionally, but due to ambiguous "net-zero" vernacular and the complexities of corporate climate action plans.The devil is in the details, for example:<ul>
<li>
<a href="https://www.smartkarma.com/entities/royal-dutch-shell-plc" target="_blank" data-smartkarma-citation="entities:22108:1" rel="noopener">Royal Dutch Shell (RDSA LN)</a> has a 2050 goal premised on carbon offsets (not reductions) of a magnitude larger than today's entire global carbon offset markets in those specific areas.</li>
<li>
<a href="https://www.smartkarma.com/entities/bp-plc" target="_blank" data-smartkarma-citation="entities:21847:1" rel="noopener">BP plc (BP LN)</a> plans net-zero by 2050 via offsets and continued oil production is incompatible with 2-degree global warming (plus it funds lobbying against climate-change regulations).</li>
<li>
<a href="https://www.smartkarma.com/entities/microsoft-corp" target="_blank" data-smartkarma-citation="entities:15273:1" rel="noopener">Microsoft (MSFT US)</a> aims to be carbon negative by 2030, and by 2050 to have removed all CO2 emitted in its entire history (impossible with current technologies and offset markets).</li>
</ul>This Insight addresses those details. What to look for, and how to scrutinize climate pledges. Major differences between net-zero emissions, net-zero carbon, and carbon neutral. Emissions reduction versus offsetting. And the need for careful planning and long lead times, with no room for error.This will also serve as theoretical context for upcoming Insights that delve deeper into corporate climate pledges (e.g., a thematic report on science-based targets, and critiques of company-specific pledges).

Corporate "net-zero" climate pledges are all the rage of late, with proud press releases being issued on a daily basis. This is a welcome trend – the world is woefully behind climate goals and based on current national pledges, we have a 5% chance of achieving the Paris Agreement's 2-degree goal.Corporate climate action is imperative.However, corporate pledges aren't always what they purport to be. Occasional greenwashing aside, even well-intentioned pledges from reputable companies can be misleading. Not intentionally, but due to ambiguous "net-zero" vernacular and the complexities of corporate climate action plans.The devil is in the details, for example:

Royal Dutch Shell (RDSA LN) has a 2050 goal premised on carbon offsets (not reductions) of a magnitude larger than today's entire global carbon offset markets in those specific areas.

BP plc (BP LN) plans net-zero by 2050 via offsets and continued oil production is incompatible with 2-degree global warming (plus it funds lobbying against climate-change regulations).

Microsoft (MSFT US) aims to be carbon negative by 2030, and by 2050 to have removed all CO2 emitted in its entire history (impossible with current technologies and offset markets).
This Insight addresses those details. What to look for, and how to scrutinize climate pledges. Major differences between net-zero emissions, net-zero carbon, and carbon neutral. Emissions reduction versus offsetting. And the need for careful planning and long lead times, with no room for error.This will also serve as theoretical context for upcoming Insights that delve deeper into corporate climate pledges (e.g., a thematic report on science-based targets, and critiques of company-specific pledges). 

Climate Pledges: Promise and Potential for Planet and Profit... But the Devil Is in the Details

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 2Q22 Earnings: Stay Tuned to Analyst Day

Snowflake has become a consensus short, we think the recent drawdown below $200 represented a good entry point…we are long, and would add into...

Aaron Gabin

Weekly Innovation Review #33

Headline Developments China is looking to continue its rout on crypto, pushing for the suspension of some crypto mining operations late last week. ...

Granite Bay Capital

Amazon 1Q21: The Fastest Growing Business in the World

Amazon’s businesses are booming. Retail is on a $400B runrate growing 45%. AWS $54B, growing 32%, Advertising $25B, growing 73%. We think the...

Aaron Gabin

Coursera: Back to School

Coursera, an online education platform will see its business model decelerate faster than expected. Downside risks around regulation and...

Aaron Gabin

Climate Pledges: Promise and Potential for Planet and Profit... But the Devil Is in the Details

Companies announce net-zero climate pledges daily, but they aren't always what they claim. The devil is in the details. This Insight explains what...

Kyle Rudden

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