Covering IPOs, Healthcare and Technology Stocks

Andrei Zakharov

Algosun Global

Equity Bottom-Up

<ul>
<li>Activist hedge fund Jana Partners bought ~2.66M <a href="https://www.smartkarma.com/entities/new-relic-inc" target="_blank" data-smartkarma-citation="entities:16283:1" rel="noopener">New Relic Inc (NEWR US)</a>  shares in 2Q22 and upped its stake in the tech company to 5.3%.</li>
<li>According to Reuters, New Relic may explore a potential sale following interest from private equity firms. Mr. Galligan, a partner of Jana Partners, joined the New Relic Board in June. </li>
<li>New Relic shares trade at ~4x EV/Rev on our FY23 revenue estimate, and we think Splunk may set a ceiling on the multiple at which New Relic may be acquired. </li>
</ul>


Activist hedge fund Jana Partners bought ~2.66M New Relic Inc (NEWR US)  shares in 2Q22 and upped its stake in the tech company to 5.3%.
According to Reuters, New Relic may explore a potential sale following interest from private equity firms. Mr. Galligan, a partner of Jana Partners, joined the New Relic Board in June. 
New Relic shares trade at ~4x EV/Rev on our FY23 revenue estimate, and we think Splunk may set a ceiling on the multiple at which New Relic may be acquired. 


Will Jana Partners Have Success In Pushing New Relic For A Sale?

Fundamental Short Selling Research

Eric Fernandez, CFA

TwoRiversAnalytics

<ul>
<li>This model looks for slowing growth, margin declines, sales and/or earnings disappointments, troubling working capital trends, poor estimate trends or lowered guidance, among other characteristics.</li>
<li>The key judgement is whether a slowdown is temporary or the beginning of a trend.  These shorts tend to have high valuations and betas.  Multiple compression accelerates the stock’s decline.</li>
<li>Today we are flagging Repligen, Snap, Dynatrace Inc, Intuitive Surgical</li>
</ul>


This model looks for slowing growth, margin declines, sales and/or earnings disappointments, troubling working capital trends, poor estimate trends or lowered guidance, among other characteristics.
The key judgement is whether a slowdown is temporary or the beginning of a trend.  These shorts tend to have high valuations and betas.  Multiple compression accelerates the stock’s decline.
Today we are flagging Repligen, Snap, Dynatrace Inc, Intuitive Surgical


Breaking Growth Short Candidates: Repligen, Snap, Dynatrace, Intuitive Surgical

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.

<ul>
<li>Elastic just dramatically raised its revenue guidance for FY2025...implying a massive acceleration in revenue growth that the 18% move in the stock underplayed.</li>
<li>Dynatrace is a wildly profitable software company trading at a significant discount to its Rule of 40 metrics.</li>
<li>The overall observability space is red hot, unimpacted by macro factors and being overlooked by software investors.</li>
</ul>


Elastic just dramatically raised its revenue guidance for FY2025...implying a massive acceleration in revenue growth that the 18% move in the stock underplayed.
Dynatrace is a wildly profitable software company trading at a significant discount to its Rule of 40 metrics.
The overall observability space is red hot, unimpacted by macro factors and being overlooked by software investors.


Observability Is Not Just Datadog: Why Elastic and Dynatrace Are Great Longs

<ul>
<li>
<a href="https://www.smartkarma.com/entities/splunk-inc" target="_blank" data-smartkarma-citation="entities:12849:1" rel="noopener">Splunk Inc (SPLK US)</a> , a leading American provider of machine-generated data platform and established software vendor, announced strong 1QFY23 earnings results. </li>
<li>Total revenues grew to $674M, up 34% YoY, the highest revenue growth rate for the last 3 years. Cloud revenues jumped by 66%, reflecting customer adoption of the cloud platform.</li>
<li>WSJ reported that Cisco made a <strong>$20B</strong>+ takeover offer for Splunk. However, no deal was on the table, but if talks resume, Cisco could pay $20B+, according to The NYT.   </li>
</ul>



Splunk Inc (SPLK US) , a leading American provider of machine-generated data platform and established software vendor, announced strong 1QFY23 earnings results. 
Total revenues grew to $674M, up 34% YoY, the highest revenue growth rate for the last 3 years. Cloud revenues jumped by 66%, reflecting customer adoption of the cloud platform.
WSJ reported that Cisco made a $20B+ takeover offer for Splunk. However, no deal was on the table, but if talks resume, Cisco could pay $20B+, according to The NYT.   


1QFY23 Revenue Growth Accelerated As Cloud-Driven Transformation Goes Well

<ul>
<li>Revenue grew 69% YoY to $78M vs. consensus at $70M (+52%), with very impressive underlying growth metrics that show the larger customers are the fastest growing.</li>
<li>Increased selling through hyperscaler partners may aid S&amp;M leverage over time. </li>
<li>Acquisition of Opstrace accelerates the platform expansion into observability, but right now positioned vs. nonconsumption rather than against Datadog.</li>
</ul>


Revenue grew 69% YoY to $78M vs. consensus at $70M (+52%), with very impressive underlying growth metrics that show the larger customers are the fastest growing.
Increased selling through hyperscaler partners may aid S&amp;M leverage over time. 
Acquisition of Opstrace accelerates the platform expansion into observability, but right now positioned vs. nonconsumption rather than against Datadog.


United States

Dynatrace, Inc. operates as a holding company. The Company, through its subsidiaries, develops software intelligence platform for the enterprise cloud. Dynatrace offers software intelligence platform to allow customers to modernize and automate IT operations, develop and release high quality software faster, and improve user experiences for better business outcomes.

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Dynatrace (DT US)

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Breaking Growth Short Candidates: Repligen, Snap, Dynatrace, Intuitive Surgical

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Eric Fernandez, CFA

Observability Is Not Just Datadog: Why Elastic and Dynatrace Are Great Longs

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Andrei Zakharov

Gitlab 4Q22 Earnings: Impressive

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Aaron Gabin

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