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

<div><p>When we first began writing about Crowdstrike last summer, we saw a company with a beautiful business model that could generate very high incremental margins over time because of its cloud based architecture...collect data once, monetize many times. This quarter was incredibly strong by any measure, but what really stood out in our work is Crowdstrike's best in class combination of revenue growth and profitability.</p></div><div><div><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></div></div>

When we first began writing about Crowdstrike last summer, we saw a company with a beautiful business model that could generate very high incremental margins over time because of its cloud based architecture...collect data once, monetize many times. This quarter was incredibly strong by any measure, but what really stood out in our work is Crowdstrike's best in class combination of revenue growth and profitability.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.

Crowdstrike 3Q21: Like Shooting Fish in a Barrel

<p>When we first began writing about Slack last summer, an acquisition was always on the radar, even as we were initially positive....for the same reason we flipped negative. Slack is a product, not a company, and is best housed inside a larger enterprise IT company...Salesforce.com is certainly it. Price matters though...and Slack is now trading ~22x forward EV/Sales after the 20% rip....CRM 10x. Are we sure Marc Benioff is willing to dilute his stock THAT much? slack = 10% of CRM EV.</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>

When we first began writing about Slack last summer, an acquisition was always on the radar, even as we were initially positive....for the same reason we flipped negative. Slack is a product, not a company, and is best housed inside a larger enterprise IT company...Salesforce.com is certainly it. Price matters though...and Slack is now trading ~22x forward EV/Sales after the 20% rip....CRM 10x. Are we sure Marc Benioff is willing to dilute his stock THAT much? slack = 10% of CRM EV.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.

Palantir Technologies  / Equity Bottom-Up

<p>When we took a deep dive into Palantir, we thought it would be as a long. Up 90% in the past month? Its a short.</p>
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<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>
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When we took a deep dive into Palantir, we thought it would be as a long. Up 90% in the past month? Its a short.

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.


Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

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<p><strong>DoorDash IPO is a big winner and it is likely to generate enormous institutional investors' interest.</strong> Founded in 2012, DoorDash Inc provides on-demand, prepared food delivery service mainly from restaurants. DoorDash has a nearly 50% market share in the U.S. on-demand, prepared food delivery services. DoorDash founders include Stanford students including Tony Xu, Stanley Tang, Andy Fang, and Evan Moore. </p>
<p>DoorDash has shown tremendous improvement in sales and operating leverage in the past three years. DoorDash has clearly been one of the major beneficiaries of the extended COVID-19 pandemic and various lockdown measures in the US, forcing people to eat at home which resulted in a massive increase in delivery of prepared foods to home.</p>
<p>DoorDash's sales increased by 204% YoY to $885 million in 2019. Its sales continued to increase very fast by 226% YoY to $1,916 million in 1Q-3Q2020. The company's operating margins were relatively steady at -72.2% in 2018 and -69.8% in 2019. A most impressive figure was the company's HUGE improvement in operating margin to -6.8% in 1Q-3Q 2020, down from -81.6% in 1Q-3Q 2019.</p>
<p>As of June 2020, DoorDash was last valued at $16 billion. Since its establishment, DoorDash has raised more than $700 million. Major investors in DoorDash include Sequoia Capital, Khosla Ventures, and Softbank.</p>
<p>We are including DoorDash in our model portfolio.</p>
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DoorDash IPO is a big winner and it is likely to generate enormous institutional investors' interest. Founded in 2012, DoorDash Inc provides on-demand, prepared food delivery service mainly from restaurants. DoorDash has a nearly 50% market share in the U.S. on-demand, prepared food delivery services. DoorDash founders include Stanford students including Tony Xu, Stanley Tang, Andy Fang, and Evan Moore. 
DoorDash has shown tremendous improvement in sales and operating leverage in the past three years. DoorDash has clearly been one of the major beneficiaries of the extended COVID-19 pandemic and various lockdown measures in the US, forcing people to eat at home which resulted in a massive increase in delivery of prepared foods to home.
DoorDash's sales increased by 204% YoY to $885 million in 2019. Its sales continued to increase very fast by 226% YoY to $1,916 million in 1Q-3Q2020. The company's operating margins were relatively steady at -72.2% in 2018 and -69.8% in 2019. A most impressive figure was the company's HUGE improvement in operating margin to -6.8% in 1Q-3Q 2020, down from -81.6% in 1Q-3Q 2019.
As of June 2020, DoorDash was last valued at $16 billion. Since its establishment, DoorDash has raised more than $700 million. Major investors in DoorDash include Sequoia Capital, Khosla Ventures, and Softbank.
We are including DoorDash in our model portfolio.


DoorDash Inc IPO Preview - A Big Winner in the U.S. Prepared Food Delivery Services Market

<p>Root Inc is getting ready to complete its IPO in the NASDAQ exchange in the next few weeks. Root Inc is an insurtech company that operates through a mobile app that uses smartphone technology, telematics, and data science to provide auto and home insurance. Since the founding of the company, Root has raised a total of<a href="https://www.insurancejournal.com/news/national/2020/10/06/585407.htm" target="_blank" rel="noopener"> $523 million</a> in funding. It was last valued at $3.65 billion in September 2019 in a round led by ST Global and Coatue. Root is targeting about <a href="https://www.businessinsider.com/root-insurance-us-based-insurtech-filed-for-ipo-2020-10#:~:text=The%20US%2Dbased%20insurtech%20has,currently%20available%20in%2029%20states." target="_blank" rel="noopener">$6 billion</a> valuation in this IPO. You can read Root Inc's S-1 <a href="https://www.sec.gov/Archives/edgar/data/1788882/000162828020014305/roots-1.htm" target="_blank" rel="noopener">here.</a> </p>
<p><strong>Surging revenue &amp; rapid improvement in net margins</strong> - The company's revenues have exploded higher in the past three years. In 2019, the company generated revenue of $290.2 million (up 570% YoY) while its total operating expenses increased by 393% YoY. A combination of a much higher revenue growth rate than operating expenses has resulted in a rapid improvement in net margins, which improved from -159.6% in 2018, -97.3% in 2019, and -58.9% in 1H 2020.</p>
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<p><strong>Root Inc's exploding revenue growth and improvement in the reduction of net losses is very impressive, in the ranks of <a href="https://www.smartkarma.com/entities/snowflake-inc" target="_blank" data-smartkarma-citation="entities:29254:1" rel="noopener">Snowflake Inc (SNOW US)</a>. </strong></p>
<p><em>Although Snowflake and Root compete in different industry segments, both are SaaS companies with exceptional sales growth and significant operating leverage going forward. Similar to Snowflake, the word <strong>"WOW"</strong> came to my mind in reading through Root's IPO prospectus. </em><em>Root Inc could be one of those exceptional, highly disruptive SaaS companies that even the great value investors such as Warren Buffett could inject significant amounts of capital (similar to Snowflake).</em></p>
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Root Inc is getting ready to complete its IPO in the NASDAQ exchange in the next few weeks. Root Inc is an insurtech company that operates through a mobile app that uses smartphone technology, telematics, and data science to provide auto and home insurance. Since the founding of the company, Root has raised a total of $523 million in funding. It was last valued at $3.65 billion in September 2019 in a round led by ST Global and Coatue. Root is targeting about $6 billion valuation in this IPO. You can read Root Inc's S-1 here. 
Surging revenue &amp; rapid improvement in net margins - The company's revenues have exploded higher in the past three years. In 2019, the company generated revenue of $290.2 million (up 570% YoY) while its total operating expenses increased by 393% YoY. A combination of a much higher revenue growth rate than operating expenses has resulted in a rapid improvement in net margins, which improved from -159.6% in 2018, -97.3% in 2019, and -58.9% in 1H 2020.

Root Inc's exploding revenue growth and improvement in the reduction of net losses is very impressive, in the ranks of Snowflake Inc (SNOW US). 
Although Snowflake and Root compete in different industry segments, both are SaaS companies with exceptional sales growth and significant operating leverage going forward. Similar to Snowflake, the word "WOW" came to my mind in reading through Root's IPO prospectus. Root Inc could be one of those exceptional, highly disruptive SaaS companies that even the great value investors such as Warren Buffett could inject significant amounts of capital (similar to Snowflake).


Root Inc IPO Preview - The Next Snowflake?

United States

Snowflake Inc. provides software solutions. The Company develops database architecture, data warehouses, query optimization, and parallelization solutions. Snowflake serves customers worldwide.

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Snowflake (SNOW US)

Crowdstrike 3Q21: Like Shooting Fish in a Barrel

Crowdstrike delivered the most impressive performance of any software company during this reporting season so far. Unlike its high valuation peers,...

Aaron Gabin

Slack + Salesforce.com: Initial Thoughts

We take a look at the potential pluses and minuses of Salesforce.com's proposed acquisition of Slack. The proposed deal is expensive and makes more...

Aaron Gabin

2021 High Conviction: Short Palantir

We take a deep dive into the Palantir business model and come away skeptical that the success of its first quarter as a public company is sustainable.

Aaron Gabin

DoorDash Inc IPO Preview - A Big Winner in the U.S. Prepared Food Delivery Services Market

DoorDash IPO is a big winner and it is likely to generate enormous institutional investors' interest. DoorDash has a nearly 50% market share in the...

Douglas Kim

Root Inc IPO Preview - The Next Snowflake?

Root Inc could be one of those exceptional, disruptive SaaS companies that even the great value investors such as Warren Buffett could inject...

Douglas Kim

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