Covering IPOs, Healthcare and Technology Stocks

Andrei Zakharov

Equity Bottom-Up

<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> reported a solid 4QFY23, reflecting a stronger-than-expected non-GAAP operating margin of ~9% and GAAP subscription gross margin of ~79%. </li>
<li>Elastic cloud revenue grew 28% y/y, representing 40% of total revenue. Elastic cloud is scaling well, and margins improved faster-than-anticipated. </li>
<li>We are concerned about slowing H1 FY24 y/y growth in total revenue and failure to achieve the $2B revenue mark in FY25. Price target to $112.</li>
</ul>



Elastic NV (ESTC US) reported a solid 4QFY23, reflecting a stronger-than-expected non-GAAP operating margin of ~9% and GAAP subscription gross margin of ~79%. 
Elastic cloud revenue grew 28% y/y, representing 40% of total revenue. Elastic cloud is scaling well, and margins improved faster-than-anticipated. 
We are concerned about slowing H1 FY24 y/y growth in total revenue and failure to achieve the $2B revenue mark in FY25. Price target to $112.


Focus On Profitability Expansion And Durable Growth: PT Reduced To $112 From $133

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>There were 6 inclusions and 6 exclusions for the <a href="https://www.smartkarma.com/entities/nasdaq-100-stock-index" target="_blank" data-smartkarma-citation="entities:26197:1" rel="noopener">Nasdaq-100 Stock Index (NDX INDEX)</a> at the annual December reconstitution. Then another ad hoc change was added on top of that.</li>
<li>Impact on the inclusions ranges from 1-8 days of ADV to buy, while the impact on the deletions varies from 0.7-2.6 days of ADV to sell.</li>
<li>Apart from the constituent changes, there are expected to be inflows in <a href="https://www.smartkarma.com/entities/tesla-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors</a> and <a href="https://www.smartkarma.com/entities/broadcom-inc" target="_blank" data-smartkarma-citation="entities:998:1" rel="noopener">Broadcom</a> and outflows from <a href="https://www.smartkarma.com/entities/apple-inc" target="_blank" data-smartkarma-citation="entities:666:1" rel="noopener">Apple</a>, <a href="https://www.smartkarma.com/entities/microsoft-corp" target="_blank" data-smartkarma-citation="entities:15273:1" rel="noopener">Microsoft</a>, <a href="https://www.smartkarma.com/entities/amazon-com-inc" target="_blank" data-smartkarma-citation="entities:409:1" rel="noopener">Amazon.com</a> and <a href="https://www.smartkarma.com/entities/nvidia-corp" target="_blank" data-smartkarma-citation="entities:5891:1" rel="noopener">NVIDIA</a>.</li>
</ul>


There were 6 inclusions and 6 exclusions for the Nasdaq-100 Stock Index (NDX INDEX) at the annual December reconstitution. Then another ad hoc change was added on top of that.
Impact on the inclusions ranges from 1-8 days of ADV to buy, while the impact on the deletions varies from 0.7-2.6 days of ADV to sell.
Apart from the constituent changes, there are expected to be inflows in Tesla Motors and Broadcom and outflows from Apple, Microsoft, Amazon.com and NVIDIA.


NASDAQ 100 Index Rebalance: 6 Regular Changes + 1 Adhoc Change; US$37bn to Trade

<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?

Independent research on the U.S. markets, Baptista Research

Baptista Research

Independent research on the U.S. markets

Baptista Research is an independent financial research house focused on the U.S. markets. We provide equity research as well as credit research reports on the top-listed U.S. companies with most of our focus on technology, consumer goods and services, automobiles, industrials, oil and gas, pharma, and healthcare. Our research has served more than 3000 institutional investors including mutual funds, hedge funds, banks, family offices, and various buy-side firms. We operate a research subscription service where institutions, as well as retail investors, can have priority access to all our research. We also have a wide distribution of our research reports across some of the top global financial platforms. Apart from equity research and credit research, we also provide advisory services with respect to mergers & acquisitions (M&A), private equity/ venture capital fundraising, valuation reports, and investment management services for corporates.
Baptista Research is owned and managed by Ishan Majumdar, an ex-Venture Capitalist/ Investment Banker, a Chartered Accountant, and a Masters’ degree holder in Management from HEC Paris. Ishan has nearly a decade of experience in Mergers and Acquisitions, Leveraged Buyouts (LBOs), Venture Capital Investing, Corporate Strategy, and Valuation in front-office roles at the likes of BNP Paribas CIB, Credit Agricole CIB, Groupe Danone, and TIW Private Equity. He has worked on and closed multiple acquisition deals, leveraged buyouts, and start-up investment transactions.

<ul><li>Splunk Inc. delivered a decent result and managed an all-around beat in the last quarter, marked by solid execution, operational discipline, and favorable customer engagement.</li><li>Total revenue experienced a healthy year-over-year increase, demonstrating Splunk's ability to achieve this growth while managing costs underscores its strategic approach.</li><li>Additionally, Splunk continued to innovate by leveraging AI in security and observability, introducing the concept of Splunk AI to empower organizations to detect, investigate, and respond more efficiently.</li></ul>

Splunk Inc. delivered a decent result and managed an all-around beat in the last quarter, marked by solid execution, operational discipline, and favorable customer engagement.Total revenue experienced a healthy year-over-year increase, demonstrating Splunk's ability to achieve this growth while managing costs underscores its strategic approach.Additionally, Splunk continued to innovate by leveraging AI in security and observability, introducing the concept of Splunk AI to empower organizations to detect, investigate, and respond more efficiently.

Splunk Inc.: Strategic Partnership with Microsoft & Other Major Drivers

<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

Splunk Inc. develops web based application software. The Company provides software that collects and analyzes machine data generated by websites, applications, servers, networks, and mobile devices. Splunk serves customers worldwide.

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Splunk Inc (SPLK US)

Focus On Profitability Expansion And Durable Growth: PT Reduced To $112 From $133

Elastic remains my top pick in the observability and search space, and I see the potential for revenue growth re-acceleration in 2024.

Andrei Zakharov

NASDAQ 100 Index Rebalance: 6 Regular Changes + 1 Adhoc Change; US$37bn to Trade

There are 7 changes at the close on 15 December with an estimated one-way trade of US$18.7bn. Impact on the constituent changes varies from 1-8...

Brian Freitas

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

Splunk Inc.: Strategic Partnership with Microsoft & Other Major Drivers

Splunk Inc. delivered a decent result and managed an all-around beat in the last quarter, marked by solid execution, operational discipline, and...

Baptista Research

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

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Focus On Profitability Expansion And Durable Growth: PT Reduced To $112 From $133

Elastic remains my top pick in the observability and search space, and I see the potential for revenue growth re-acceleration in 2024.

Andrei Zakharov

NASDAQ 100 Index Rebalance: 6 Regular Changes + 1 Adhoc Change; US$37bn to Trade

There are 7 changes at the close on 15 December with an estimated one-way trade of US$18.7bn. Impact on the constituent changes varies from 1-8...

Brian Freitas

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

Splunk Inc.: Strategic Partnership with Microsoft & Other Major Drivers

Splunk Inc. delivered a decent result and managed an all-around beat in the last quarter, marked by solid execution, operational discipline, and...

Baptista Research

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

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...