Daily Brief TMT/Internet: Lenovo, Paypal Holdings, Amazon.com Inc, Arlo Technologies Inc, Cambium Networks , PVA TePla and more

• China’s smartphone market saw growth in 1Q 2024, with increased shipments of OLED panels indicating potential for LG.
• Panasonic’s battery unit received US subsidy but faces weak EV demand, potentially hurting sales.
• Concerns rise as tech giants invest in AI infrastructure, with focus on consolidation, data privacy, and potential misuse of power.

• PayPal Holdings Inc.’s Q1 2024 earnings showcased a solid start for the year with substantial improvements across various sectors of the business, tempered by an understanding of the need for continued retooling and operational changes.
• The company leadership is operating cohesively and the new strategies in place are evidently beginning to make a difference.
• PayPal has maintained steady progress with their three customer groups; large enterprises, small businesses, and consumers, including their subsidiary, Venmo.

• Amazon.com reported robust first quarter financial results in 2024, with revenue of $143.3 billion, a 13% increase year-over-year.
• However, the result excludes the impact of foreign exchange rates, which caused an unfavorable impact that reduced revenue by roughly $700 million.
• The company delivered higher than expected operating income of $15.3 billion, which is a 221% increase from last year, driven primarily by efficiency improvements and better customer experiences.

• ARLO grew the number of paid subscribers faster than expected in the first quarter, but it was the contract extension with Verisure that was the big news of the day
• ARLO and Verisure have had an agreement for five years expiring later this year. The new agreement is through 2029
• The growth in paid subscribers in Q1 puts ARLO on pace to achieve 4 million total paid subscribers by the end of 2024, after hitting 3 million in February 2024

• Cambium Networks (CMBM) reported earnings on May 9 that came in below our expectations (we were the lowest on the Street), mainly due to a delay in FTC approval of 6 GHz spectrum.
• This also hit gross margin, which came in at 22.7%. Company expectations are for a better 2Q24 and 2H24, but with continued challenges in inventory and the move to 6 GHz.
• The company did see a recovery in the enterprise market in 1Q24, but not enough to offset the weakness in 6 GHz. The stock dropped 13% in the aftermarket.

PVA TePla has transitioned from a small seller of industrial systems to a materials technology and metrology solutions company, set to reach c €280m in revenues in FY24. Its increasing exposure to the fast-growing semiconductor industry (more than two-thirds of sales) and high-end materials markets is securing growth, driven by AI, digitisation and e-mobility. The combination of a higher capital intensity in the semiconductor industry and growing end markets bodes well for players like PVA TePla, which are exposed to the fast-growing part of equipment sales like metrology. Despite this, PVA TePla is still largely valued as an industrial company, trading at a significant discount to peers and our DCF.