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

<ul><li>We believe the intraday low of 2,532.69 made by the S&amp;P 500 on 2/9/18 marked an important short-term bottom within the long-term advance. We continue to see this low and  the 200-day moving average as critical support levels should there be a retest. After a quick recovery from these lows, the S&amp;P 500 has paused near the 50-day moving average, a logical resting area as the market determines its next move. </li><li>In today’s report we highlight attractive and actionable groups within Technology, all relating to software and the attractiveness of dependable recurring revenues: Software; Enterprise Applications, E-Commerce, Education, and Customer Relationship Mgt. (CRM).</li></ul>

We believe the intraday low of 2,532.69 made by the S&amp;P 500 on 2/9/18 marked an important short-term bottom within the long-term advance. We continue to see this low and  the 200-day moving average as critical support levels should there be a retest. After a quick recovery from these lows, the S&amp;P 500 has paused near the 50-day moving average, a logical resting area as the market determines its next move. In today’s report we highlight attractive and actionable groups within Technology, all relating to software and the attractiveness of dependable recurring revenues: Software; Enterprise Applications, E-Commerce, Education, and Customer Relationship Mgt. (CRM).

Covering IPOs, Healthcare and Technology Stocks

Andrei Zakharov

Equity Bottom-Up

<ul>
<li>Splunk shares outperformed in 2023 and rose ~69% as total ARR exceeded $4B, operating loss narrowed, and FCF margin improved. The company executed well to drive long-term durable growth.</li>
<li>Over the past 2 years, Splunk transformed itself into a cloud company. In 2022, WSJ reported that Cisco made a $20B+ takeover offer. However, no deal was on the table. </li>
<li>Following M&amp;A rumors, the company’s cloud transition, and strong fundamentals, Cisco offered a $157 per share to acquire Splunk in a $28B mega all-cash deal on September 21, 2023. </li>
</ul>


Splunk shares outperformed in 2023 and rose ~69% as total ARR exceeded $4B, operating loss narrowed, and FCF margin improved. The company executed well to drive long-term durable growth.
Over the past 2 years, Splunk transformed itself into a cloud company. In 2022, WSJ reported that Cisco made a $20B+ takeover offer. However, no deal was on the table. 
Following M&amp;A rumors, the company’s cloud transition, and strong fundamentals, Cisco offered a $157 per share to acquire Splunk in a $28B mega all-cash deal on September 21, 2023. 


Splunk and $28B Mega Deal: Will Cisco Overpay For San Francisco-Based Software Company?

<ul>
<li>Freshworks, a cloud-based customer services software unicorn, held its first Investor Day on September 7, 2023. Management highlighted the long-term target to deliver the Rule of 40 by 2025. </li>
<li>The 2023 Investor Day agenda included company vision and strategy, solutions in action, strategy for durable growth, customer spotlight, and financial overview, among others. </li>
<li>Management plans to deliver a long-term balance of growth and profitability, with the 2026 model leading to an FCF margin of 20%+ and $1B+ revenue. </li>
</ul>


Freshworks, a cloud-based customer services software unicorn, held its first Investor Day on September 7, 2023. Management highlighted the long-term target to deliver the Rule of 40 by 2025. 
The 2023 Investor Day agenda included company vision and strategy, solutions in action, strategy for durable growth, customer spotlight, and financial overview, among others. 
Management plans to deliver a long-term balance of growth and profitability, with the 2026 model leading to an FCF margin of 20%+ and $1B+ revenue. 


Freshworks: 2023 Investor Day and Valuation Update

<ul>
<li>
<a href="https://www.smartkarma.com/entities/elastic-nv" target="_blank" data-smartkarma-citation="entities:27526:1" rel="noopener">Elastic NV (ESTC US)</a> delivered a high quality beat and raise and reported a modest upside to revenue and profitability. The start of the fiscal year looked strong.</li>
<li>The leading provider of search engine for enterprises and SMBs guided FY24 ahead of consensus estimates. I reiterate our Overweight rating on ESTC.</li>
<li>The 1Q print was outstanding, with +17% y/y revenue growth, a record non-GAAP Op Margin of ~10% and FCF margin of ~13%.</li>
</ul>



Elastic NV (ESTC US) delivered a high quality beat and raise and reported a modest upside to revenue and profitability. The start of the fiscal year looked strong.
The leading provider of search engine for enterprises and SMBs guided FY24 ahead of consensus estimates. I reiterate our Overweight rating on ESTC.
The 1Q print was outstanding, with +17% y/y revenue growth, a record non-GAAP Op Margin of ~10% and FCF margin of ~13%.


Elastic: Blowout 1QFY24 Earnings. Shares Popped ~20% On Heavy Volume

<ul>
<li>Following takeover rumors surrounding <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> , private equity firms finally agreed to acquire a US-based low-cost observability provider for ~$6.5B.</li>
<li>American private equity firm Francisco Partners and global alternative asset manager TPG offered $87 per <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> share in an all-cash transaction.</li>
<li>The <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> Board of Directors approved the buyout deal, and is expected to close in late 2023 or early 2024.</li>
</ul>


Following takeover rumors surrounding New Relic Inc (NEWR US) , private equity firms finally agreed to acquire a US-based low-cost observability provider for ~$6.5B.
American private equity firm Francisco Partners and global alternative asset manager TPG offered $87 per New Relic Inc (NEWR US) share in an all-cash transaction.
The New Relic Inc (NEWR US) Board of Directors approved the buyout deal, and is expected to close in late 2023 or early 2024.


New Relic Takeover Valuation Analysis: The Buyout Price Looks Reasonable

United States

New Relic, Inc. provides cloud based application performance management solutions for cloud and data center applications. The Company offers a solution including real user, application, and availability monitoring features that enable developers and operations teams to manage web application performance in real-time. New Relic conducts its business in the United States.

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New Relic Inc (NEWR US)

U.S. Equity Strategy

We believe the intraday low of 2,532.69 made by the S&P 500 on 2/9/18 marked an important short-term bottom within the long-term advance. We...

Vermilion Research

Splunk and $28B Mega Deal: Will Cisco Overpay For San Francisco-Based Software Company?

Despite a transaction price of $157 per share offered by Cisco to acquire Splunk in a $28B mega deal, investors should take profits now.

Andrei Zakharov

Freshworks: 2023 Investor Day and Valuation Update

2023 Investor Day highlights massive TAM, ongoing business momentum, adoption of multi-product strategy, and AI monetization opportunities: PT...

Andrei Zakharov

Elastic: Blowout 1QFY24 Earnings. Shares Popped ~20% On Heavy Volume

Elastic beats expectations with strong Q1FY24 results, guiding FY24 ahead of consensus estimates. I remain bullish on the stock and see further...

Andrei Zakharov

New Relic Takeover Valuation Analysis: The Buyout Price Looks Reasonable

Private equity firms Francisco Partners and TPG have agreed to acquire New Relic for ~$6.5B, with the deal expected to close in late 2023 or early...

Andrei Zakharov

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

U.S. Equity Strategy

We believe the intraday low of 2,532.69 made by the S&P 500 on 2/9/18 marked an important short-term bottom within the long-term advance. We...

Vermilion Research

Splunk and $28B Mega Deal: Will Cisco Overpay For San Francisco-Based Software Company?

Despite a transaction price of $157 per share offered by Cisco to acquire Splunk in a $28B mega deal, investors should take profits now.

Andrei Zakharov

Freshworks: 2023 Investor Day and Valuation Update

2023 Investor Day highlights massive TAM, ongoing business momentum, adoption of multi-product strategy, and AI monetization opportunities: PT...

Andrei Zakharov

Elastic: Blowout 1QFY24 Earnings. Shares Popped ~20% On Heavy Volume

​Elastic beats expectations with strong Q1FY24 results, guiding FY24 ahead of consensus estimates. I remain bullish on the stock and see further...

Andrei Zakharov

New Relic Takeover Valuation Analysis: The Buyout Price Looks Reasonable

​Private equity firms Francisco Partners and TPG have agreed to acquire New Relic for ~$6.5B, with the deal expected to close in late 2023 or early...

Andrei Zakharov

Elastic beats expectations with strong Q1FY24 results, guiding FY24 ahead of consensus estimates. I remain bullish on the stock and see further...

Private equity firms Francisco Partners and TPG have agreed to acquire New Relic for ~$6.5B, with the deal expected to close in late 2023 or early...