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

Palantir Technologies  / Equity Bottom-Up

<p>Palantir generated $93M more revenues this quarter then a year ago. From that $93M, the company generated $174M more in operating income, which swung its EBIT margins from (31%) to 32% YoY…adjusted EBITDA margins of course (there was $1B in incremental SBC). In any case, that is some sort of remarkable business. Especially for a software company that is building a direct sales force and theoretically needs to be investing heavily in R&amp;D to keep up with the competition. Palantir talks about generating insight through the fog of war, but in our short time analyzing this company, we can’t find our way through the fog.</p><p></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>

Palantir generated $93M more revenues this quarter then a year ago. From that $93M, the company generated $174M more in operating income, which swung its EBIT margins from (31%) to 32% YoY…adjusted EBITDA margins of course (there was $1B in incremental SBC). In any case, that is some sort of remarkable business. Especially for a software company that is building a direct sales force and theoretically needs to be investing heavily in R&amp;D to keep up with the competition. Palantir talks about generating insight through the fog of war, but in our short time analyzing this company, we can’t find our way through the fog.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.

Palantir 4Q20 Earnings: The Greatest Operating Leverage Story Ever Told

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

Qualtrics International / Equity Capital Markets

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<p><a href="https://www.smartkarma.com/entities/qualtrics-international-inc" target="_blank" data-smartkarma-citation="entities:27731:1" rel="noopener">Qualtrics (XM US)</a>, a US cloud software company, is aiming to complete its IPO again after two years. In November 2018, <a href="https://www.smartkarma.com/entities/sap-se" target="_blank" data-smartkarma-citation="entities:21704:1" rel="noopener">SAP SE (SAP GR)</a> acquired Qualtrics for $8 billion. SAP has now decided to spin-off Qualtrics and IPO this business. The initial IPO pricing ranges from $20 to $24 per share, which would value <a href="https://www.cnbc.com/2020/12/28/qualtrics-files-s-1-aims-for-valuation-of-up-to-14point4-billion-in-ipo.html" target="_blank" rel="noopener">Qualtrics</a> at $12 billion to $14.4 billion. The Qualtrics IPO is expected to be completed in January/February 2021.</p>
<p>After the IPO, SAP will maintain an 80% stake in Qualtrics. The private equity firm Silver Lake will be buying slightly more than 4% of the Qualtrics shares for $550 million (implying a valuation of $13.7 billion) and the Qualtrics founder Ryan Smith will be buying 1% for $120 million (implying a valuation of $12 billion).</p>
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Qualtrics (XM US), a US cloud software company, is aiming to complete its IPO again after two years. In November 2018, SAP SE (SAP GR) acquired Qualtrics for $8 billion. SAP has now decided to spin-off Qualtrics and IPO this business. The initial IPO pricing ranges from $20 to $24 per share, which would value Qualtrics at $12 billion to $14.4 billion. The Qualtrics IPO is expected to be completed in January/February 2021.
After the IPO, SAP will maintain an 80% stake in Qualtrics. The private equity firm Silver Lake will be buying slightly more than 4% of the Qualtrics shares for $550 million (implying a valuation of $13.7 billion) and the Qualtrics founder Ryan Smith will be buying 1% for $120 million (implying a valuation of $12 billion).


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<p>This is our second annual edition of the<em><strong> IPOs Pipeline Worldwide (Top 100 Companies)</strong></em>report. This year has been a superb year for the global IPO market and the pipeline of the global IPOs remains robust in 2021. Among the 100 potential IPOs, they are from 16 countries, including the US, China, India, UK, and Indonesia. We estimate that of these 100 companies, more than half should be able to complete their IPOs in 2021. </p>
<p>Most of the IPOs in this list have more than $1 billion in market cap. We believe that the first half of 2021 is likely to be a more active market than the second half of the year, as the companies and the bankers attempt to capitalize on the continued strong momentum for IPOs globally. </p>
<p><strong>This report is meant to serve as a comprehensive, reference guide to help clients so that they could get a broad view of the major IPOs that could get completed next year on a world-wide basis. </strong></p>
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This is our second annual edition of the IPOs Pipeline Worldwide (Top 100 Companies)report. This year has been a superb year for the global IPO market and the pipeline of the global IPOs remains robust in 2021. Among the 100 potential IPOs, they are from 16 countries, including the US, China, India, UK, and Indonesia. We estimate that of these 100 companies, more than half should be able to complete their IPOs in 2021. 
Most of the IPOs in this list have more than $1 billion in market cap. We believe that the first half of 2021 is likely to be a more active market than the second half of the year, as the companies and the bankers attempt to capitalize on the continued strong momentum for IPOs globally. 
This report is meant to serve as a comprehensive, reference guide to help clients so that they could get a broad view of the major IPOs that could get completed next year on a world-wide basis. 


2021 IPOs Pipeline Worldwide (Top 100 Companies)

<p>In this report, we review our IPO investment research in 2020, including the performance of our calls and how we plan to change our process of selection for IPO research in 2021. For those who follow Smartkarma's IPO research, this platform provides one of the most extensive, independent IPO related research (especially in Asian markets). </p><div class="content-highlight"><p><strong>We made 40 investment calls on IPOs this year, of which 34 had positive ratings on the IPOs and 6 had negative ratings. The 36 stocks (with positive ratings) had share price performances that were up 74.5% on average from their IPO prices. The 6 stocks (with negative ratings) had share price performances that were up only 8% on average from their IPO prices. </strong></p></div>

In this report, we review our IPO investment research in 2020, including the performance of our calls and how we plan to change our process of selection for IPO research in 2021. For those who follow Smartkarma's IPO research, this platform provides one of the most extensive, independent IPO related research (especially in Asian markets). We made 40 investment calls on IPOs this year, of which 34 had positive ratings on the IPOs and 6 had negative ratings. The 36 stocks (with positive ratings) had share price performances that were up 74.5% on average from their IPO prices. The 6 stocks (with negative ratings) had share price performances that were up only 8% on average from their IPO prices. 

Review of Our IPO Research in 2020 & Change in Our IPO Research Process for 2021

United States

Snowflake Inc. provides software solutions. The Company develops database architecture, data warehouses, query optimization, and parallelization solutions. Snowflake serves customers worldwide.

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Snowflake (SNOW 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

Palantir 4Q20 Earnings: The Greatest Operating Leverage Story Ever Told

Palantir's quarter, much like the rest of the company was perplexing. We believe the stock is overvalued even in the high 20s, and the coming...

Aaron Gabin

Qualtrics IPO Preview

Qualtrics, which was acquired by SAP for $8 billion two years ago, is trying to complete an IPO again. The initial IPO valuation range of Qualtrics...

Douglas Kim

2021 IPOs Pipeline Worldwide (Top 100 Companies)

This report is meant to serve as a comprehensive, reference guide for the top 100 IPOs worldwide in 2021 to help clients so that they could get a...

Douglas Kim

Review of Our IPO Research in 2020 & Change in Our IPO Research Process for 2021

In this report, we review our IPO investment research in 2020, including the performance of our calls and how we plan to change our process of...

Douglas Kim

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