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Lion

24 Nov, 9 tweets, 3 min read

We are seeing a continued evolution of multiples contracting in many companies. Some have come back to pre-covid levels (2018-2019) but there are many that still have significantly higher multiples.

Here is a comparison of the changes in multiples we had in Aug 2021 vs Nov 2021

The majority of these companies are seeing multiples contracting. These are some of the most severe in the past 4 months:

Difference between Aug2021 and Nov 2021:
$ROKU -123%
$MGNI -99%
$LSPD -96%
$PTON -93%
$SE -83%
$FVRR -74%
$SNAP -69%
$PINS -40%
$RDFN -39%
$CRWD -34%

$TWLO -30%
$OKTA -30%
$PYPL -19%
$TWTR -18%
$ZM -18%
$MELI -16%

There are some that even with their contraction are still trading at a 50% premium versus pre-covid:
$MGNI $SE $FVRR $PYPL $TWTR

Some are getting closer to pre-covid multiples, although still higher:
$SNAP $TWLO $OKTA $CRWD

And some have now lower multiples vs pre-pandemic:
$ZM $MELI $PINS $RDFN $PTON $LSPD

This are only facts. Business prospects, competition and other factors may have changed.

There are some notable companies that have seen an additional expansion in their multiple in the past 4 months:
$NET 136%
$MDB 47%
$TSLA 42%
$W 27%
$NVDA 24%
$ETSY 23%
$MA 14%

For this analysis, I compared current multiples to the average multiples that each company had in the 8 quarters of 2018-2019 for the following metrics:
EV/GP NTM
EV/FCF NTM
EV/EBITDA NTM

Negative FCF and EBITDA were excluded in unprofitable companies.

Over time, I believe most companies will trade at their historical multiples again.

With some exceptions where business prospects, competition and execution has changed over time, of course.

For reference, 10-year Treasury Yield was between 1.8% and 3.2% in 2018 and 2019.

https://twitter.com/Investing_Lion/status/1423299026766737408?s=20

This thread is a follow up on a previous thread shared the 5th August 2021:

https://twitter.com/Investing_Lion/status/1423299026766737408?s=20

Even with some of them having a severe multiple contraction during 2021, most of these companies have had high returns when we look at the past 3 years.

How much will some of them give back as multiples keep contracting?
What are the best opportunities from here?

Will see.

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More from @Investing_Lion

Lion

@Investing_Lion

16 Nov

$SE Sea Limited earnings thoughts:

Revenue growth came in strong at $2,688M, which is 121.8% YoY and 17.91% QoQ.

1. E-commerce is executing impressively and grew 25% QoQ (on top of a 30% QoQ growth in Q2).

2. Digital entertainment is showing signs of slowing down.

⬇️

E-Commerce
Orders grew to 1,700 million from 1,400 and 1,100 in Q2 and Q1.
GMV came in at 16.8 billion up from 15 and 12.6 in Q2 and Q1.
Both growth rates in Q3 are slightly slower than Q2 but still very strong and particularly impressive compared to other e-commerce players.

Digital Entertainment

- Bookings were flat in Q3 vs Q2 at 1200M. They were 1200 in Q2, 1100 in Q1 and 1000 in Q4 last year.

- Quarterly Active Users and Paying Users grew 0.5% and 1% sequentially compared to the average 8% and 12% in the last three quarters.

Read 5 tweets

Lion

@Investing_Lion

24 Oct

After an interesting and volatile start to the Q3 earnings season, we can see where valuation multiples stand for technology companies.

This is the consolidated graph with all the companies comparing EV/GP NTM vs estimates of 3-yr revenue growth:

E-Commerce
EV/GP NTM

$AMZN 8.1x
$BABA 7.9x
$SE 37.5x
$MELI 22.9x
$JD 4.9x
$W 6.0x
$SHOP 61.2x
$CPNG 10.7x
$ETSY 16.5x
$PDD 10.2x
$OZON 7.1x
$BIGC 18x
$GLBE 104x

Fintech and Payments
EV/GP NTM

$V 22.4x
$MA 26.4x
$PYPL 18.9x
$SQ 21.8x
$AFRM 137x
$SOFI 20x
$UPST 32.8x
$LSPD 45.4x
$DLO 78.6x

Read 8 tweets

Lion

@Investing_Lion

22 Oct

I sold $PINS this week.

I am aware that I may realize I was wrong over time but after thinking hard about it, I made the decision and I want to be transparent about it.

Here is why I made this decision ⬇️

$PINS did not have a great report last quarter.

Financial numbers where good (growth, margins, ARPU) but I did not like management talking about "web users" and "mobile users" to justify the user slow down.

However, I did see some truth in it, so I decided to hold and wait

During the quarter, it became clear that $PINS had decided to make a shift in the business they had built all this years to have an e-commerce experience and presence.

These type of transitions are always hard and require laser focus by management to execute correctly

Read 9 tweets

Lion

@Investing_Lion

25 Sep

Sustainability of growth in SaaS: Will they accelerate or slow down in 2022 vs 2021?

Here is the % difference NTM - LTM and overall NTM growth:

$BILL Difference: +51% / NTM growth: 101%
$AI +16% / 36%
$SPLK +13% / 16%
$PCTY +12% / 25%
$PAYC +6% / 24%
$ADSK +4% / 18%

% difference NTM - LTM and overall NTM growth:

$CRM +2% / 23%
$DOCN +2% / 31%
$WDAY +2% / 19%
$ZEN +1% / 27%
$ZUO +1 / 12%
$WKME 0% / 29%
$QLYS 0% / 12%
$BL 0% / 20%
$OKTA -1% / 44%
$APPN -2% / 16%
$BIGC -3% / 36%
$FROG -3% / 34%
$SPT -3% / 31%
$PD -4% / 25%
$PLAN -4% / 25%

% difference NTM - LTM and overall NTM growth:

$NOW -5% / 26%
$PCOR -5% / 23%
$HUBS -6% / 35%
$ADBE -6% / 15%
$TEAM -8% / 21%
$MDB -8% / 32%
$SMAR -9% / 31%
$VEEV -10% / 20%
$NET -14% / 38%
$DDOG -14% / 45%
$ZS -15% / 41%

Read 6 tweets

Lion

@Investing_Lion

28 Aug

Now that most companies have reported earnings, it is a good time to assess where current valuation multiples stand and the estimates of revenue CAGR for the next few years.

This is the consolidated graph with all the companies:

In this other one, I included some companies that I had to exclude in the first graph:
$AFRM
$SNOW
$DLO
$GLBE

The next graphs are grouped by industry.

E-Commerce

EV/GP NTM and EV/EBITDA NTM (for profitable Cos)

$AMZN 8.4x / 20.6x
$BABA 6.5x / 12.6
$SE 36.4x
$MELI 24.4x / 123x
$JD 4x / 32x
$W 7.4x / 44x
$SHOP 66x / 266x
$CPNG 10.6x
$ETSY 14.1x / 36.64x
$PDD 9.1x
$OZON 8.1x
$BIGC 21.2x
$GLBE 116x

Read 10 tweets