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>Intel has more product delays, Coursera's chief competitor is acquired. IBM's email doesn't work and Redhat chief departs. Amazon tries to form a rebel alliance.</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>

Intel has more product delays, Coursera's chief competitor is acquired. IBM's email doesn't work and Redhat chief departs. Amazon tries to form a rebel alliance.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.  

TMT Weekly: 4 Things That Stood Out the Week of 7/2/​2021

<p>Coursera’s first quarterly earnings was confirmatory of our short thesis. The company guided to decelerating revenue growth as it begins to lap the surge in students from the pandemic, with little to no operating leverage, hardly the stuff of a stock trading 15x sales. A point that should’ve been obvious to us, but we didn’t really hit on enough in our recent initiation is how inversely correlated Coursera is to employment trends. As the pandemic recedes, the secular acceleration of online education will recede…AND the number of unemployed who had the time (and motivation) to take online courses at home will also diminish.  This will result in a sharper deceleration in Coursera’s top of funnel consumer learners, which will have a trickle down effect on the higher margin enterprise and degree tiers. We stay short, reiterate base case $33 and $20 bear case.</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>

Coursera’s first quarterly earnings was confirmatory of our short thesis. The company guided to decelerating revenue growth as it begins to lap the surge in students from the pandemic, with little to no operating leverage, hardly the stuff of a stock trading 15x sales. A point that should’ve been obvious to us, but we didn’t really hit on enough in our recent initiation is how inversely correlated Coursera is to employment trends. As the pandemic recedes, the secular acceleration of online education will recede…AND the number of unemployed who had the time (and motivation) to take online courses at home will also diminish.  This will result in a sharper deceleration in Coursera’s top of funnel consumer learners, which will have a trickle down effect on the higher margin enterprise and degree tiers. We stay short, reiterate base case $33 and $20 bear case.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.

Coursera 1Q21: Rising Employment Will Decelerate Growth

<p><strong>Summary: </strong>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.</p><p> <strong>Base Case Valuation: $33                                  Bull Case: $57                                 Bear Case: $20</strong></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>

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.

Covering IPOs, Healthcare and Technology Stocks

Andrei Zakharov

Algosun Global

Equity Capital Markets

<p>Coursera, a rapidly growing online EdTech unicorn, is expected to IPO this week. The company’s amended prospectus puts the expected price range per share at $30 to $33, implying a market cap of ~$4.7 billion at midpoint of the price range, making it the most valuable educational technology unicorn scheduled to go public this year.</p><p>Coursera has raised ~$445 million in funding over 13 rounds and was backed by American venture capital firms New Enterprise Associates, G Squared, Kleiner Perkins, Black River Ventures, SuRo Capital and Learn Capital, according to Crunchbase and Pitchbook. We expect net proceeds from the offering may reach ~$430 million. Coursera plans to trade on the New York Stock Exchange under the ticker “COUR”. Morgan Stanley, Goldman Sachs, Citigroup and UBS Investment Bank are lead underwriters on the IPO.    </p>

Coursera, a rapidly growing online EdTech unicorn, is expected to IPO this week. The company’s amended prospectus puts the expected price range per share at $30 to $33, implying a market cap of ~$4.7 billion at midpoint of the price range, making it the most valuable educational technology unicorn scheduled to go public this year.Coursera has raised ~$445 million in funding over 13 rounds and was backed by American venture capital firms New Enterprise Associates, G Squared, Kleiner Perkins, Black River Ventures, SuRo Capital and Learn Capital, according to Crunchbase and Pitchbook. We expect net proceeds from the offering may reach ~$430 million. Coursera plans to trade on the New York Stock Exchange under the ticker “COUR”. Morgan Stanley, Goldman Sachs, Citigroup and UBS Investment Bank are lead underwriters on the IPO.    

Coursera IPO. Leading High-Growth EdTech Unicorn

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<p>Our base case continues to be for near-term consolidation while the market determines the implications of states’ reopening (i.e., the “wait-and-see” phase). Until this consolidation period resolves below support or above resistance we are maintaining a relatively neutral stance considering the wide range of outcomes. Many major indexes are testing logical resistance and until we see breakouts it is hard to get too bullish. In this report we highlight attractive stocks from a RS perspective.</p>

Our base case continues to be for near-term consolidation while the market determines the implications of states’ reopening (i.e., the “wait-and-see” phase). Until this consolidation period resolves below support or above resistance we are maintaining a relatively neutral stance considering the wide range of outcomes. Many major indexes are testing logical resistance and until we see breakouts it is hard to get too bullish. In this report we highlight attractive stocks from a RS perspective.

U.S. Equity Strategy: Round Trip Back To Resistance

United States

2U, Inc. provides online educational services. The Company offers graduate and undergraduate degree programs in social work, data science, public administration, healthcare, laws, and industrial relations. 2U serves customers  worldwide.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

2U Inc (TWOU US)

TMT Weekly: 4 Things That Stood Out the Week of 7/2/2021

Intel has more product delays, Coursera's chief competitor is acquired. IBM's email doesn't work and Redhat chief departs. Amazon tries to form a...

Aaron Gabin

Coursera 1Q21: Rising Employment Will Decelerate Growth

Coursera’s first quarterly earnings was confirmatory of our short thesis. The company guided to decelerating revenue growth with little to no...

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

Coursera IPO. Leading High-Growth EdTech Unicorn

Coursera IPO is a promising investment in market leader of online education and the biggest trusted MOOC provider worldwide

Andrei Zakharov

U.S. Equity Strategy: Round Trip Back To Resistance

Our base case continues to be for near-term consolidation while the market determines the implications of states’ reopening (i.e., the...

Vermilion Research

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

TMT Weekly: 4 Things That Stood Out the Week of 7/2/​2021

Intel has more product delays, Coursera's chief competitor is acquired. IBM's email doesn't work and Redhat chief departs. Amazon tries to form a...

Aaron Gabin

Coursera 1Q21: Rising Employment Will Decelerate Growth

Coursera’s first quarterly earnings was confirmatory of our short thesis. The company guided to decelerating revenue growth with little to no...

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

Coursera IPO. Leading High-Growth EdTech Unicorn

Coursera IPO is a promising investment in market leader of online education and the biggest trusted MOOC provider worldwide

Andrei Zakharov

U.S. Equity Strategy: Round Trip Back To Resistance

Our base case continues to be for near-term consolidation while the market determines the implications of states’ reopening (i.e., the...

Vermilion Research

TMT Weekly: 4 Things That Stood Out the Week of 7/2/2021