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.

Equity Capital Markets

<ul><li>Zynga reported outstanding quarterly results, including higher-than-expected Q3 revenue and bookings, as well as better-than-expected operating leverage.</li><li>Their live services generated great results ahead of their guidance in Q3, including their highest-ever third-quarter revenue of $705 million, up 40% year over year, and record Q3 bookings of $668 million, up 6% year over year.</li><li>In Q3, the company increased its advertising revenue and reservations by 99% year over year.</li></ul>

Zynga reported outstanding quarterly results, including higher-than-expected Q3 revenue and bookings, as well as better-than-expected operating leverage.Their live services generated great results ahead of their guidance in Q3, including their highest-ever third-quarter revenue of $705 million, up 40% year over year, and record Q3 bookings of $668 million, up 6% year over year.In Q3, the company increased its advertising revenue and reservations by 99% year over year.

<ul><li>Zynga delivered a mediocre quarterly result failing to meet the high market expectations.</li><li>However, the company has had a history of over-delivering which is why market expectations are always high on the stock.</li><li>In addition, Zynga's top-line performance, fused with positive operating leverage, generated the highest ever operating cash flow of $161 million in Q2.</li></ul>

Zynga delivered a mediocre quarterly result failing to meet the high market expectations.However, the company has had a history of over-delivering which is why market expectations are always high on the stock.In addition, Zynga's top-line performance, fused with positive operating leverage, generated the highest ever operating cash flow of $161 million in Q2.

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>We owned Activision for many years until the pandemic when our thought was that like Netflix Activision had likely pulled in demand and would be enjoying a peak in near term earnings. The controversy around its work environment has provided an entry point for one of the best video game franchises as it is trading at 19x forward earnings, below even the March 2020 at the pandemic low. Given the stock’s longterm average of 25-26x, we think the risk reward here is compelling.</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>

We owned Activision for many years until the pandemic when our thought was that like Netflix Activision had likely pulled in demand and would be enjoying a peak in near term earnings. The controversy around its work environment has provided an entry point for one of the best video game franchises as it is trading at 19x forward earnings, below even the March 2020 at the pandemic low. Given the stock’s longterm average of 25-26x, we think the risk reward here is compelling.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

<div class="content-highlight"><p>AppLovin announced its IPO price range of $75 to $85 per share. The company is selling 25 million shares and at the high end of the IPO price range, the company is aiming to raise $2.1 billion. At the high end of the IPO price range ($85 per share), AppLovin would be valued at $30.4 billion. </p></div><p>Our base case valuation of AppLovin is EV of $35.1 billion, implied market cap of $35.7 billion, and implied target price per share of $99.8. This represents 17% higher than the high end of the IPO price range of $85. We have a POSITIVE view of the AppLovin IPO. Our base case valuation of AppLovin is based on a 16x EV/S multiple (using 2021 sales estimate), which represents a 10% higher than the average EV/S multiple of the comps. It is also below the EV/S multiple of Unity Software and Roblox which trade at EV/S multiple of 26.8x and 19.2x, respectively. </p><p>We estimate AppLovin to generate sales of $2.2 billion (up 51% YoY) and an operating profit of $65.2 million in 2021. From 2020 to 2025, we have assumed the company's sales to grow at a CAGR of 28.6%.</p>

AppLovin announced its IPO price range of $75 to $85 per share. The company is selling 25 million shares and at the high end of the IPO price range, the company is aiming to raise $2.1 billion. At the high end of the IPO price range ($85 per share), AppLovin would be valued at $30.4 billion. Our base case valuation of AppLovin is EV of $35.1 billion, implied market cap of $35.7 billion, and implied target price per share of $99.8. This represents 17% higher than the high end of the IPO price range of $85. We have a POSITIVE view of the AppLovin IPO. Our base case valuation of AppLovin is based on a 16x EV/S multiple (using 2021 sales estimate), which represents a 10% higher than the average EV/S multiple of the comps. It is also below the EV/S multiple of Unity Software and Roblox which trade at EV/S multiple of 26.8x and 19.2x, respectively. We estimate AppLovin to generate sales of $2.2 billion (up 51% YoY) and an operating profit of $65.2 million in 2021. From 2020 to 2025, we have assumed the company's sales to grow at a CAGR of 28.6%.

<ul>
<li>Founded in 2011, <a href="https://www.smartkarma.com/entities/applovin-corp" target="_blank" data-smartkarma-citation="entities:32989:1" rel="noopener">AppLovin Corp (APP US)</a> is getting ready to complete its IPO in 2Q 2021. The company is aiming to raise about $1 billion in this IPO. KKR purchased a minority stake in the company in 2018 at about $2 billion valuation. The IPO valuation is likely to be much higher.</li>
<li>The <a href="https://www.cityindex.co.uk/market-analysis/applovin-ipo-background-guide/" target="_blank" rel="noopener">company</a> originally started its business helping customers to improve the smartphone customer experiences for all the users. In recent years, the company has become a much bigger player in the mobile gaming segment and it also helps developers to grow their users and improve monetization of their apps. </li>
<li>AppLovin's income statement shows strong sales growth in the past three years but declining profit margins. AppLovin generated sales of $1,451.1 million and an operating loss of $62.1 million in 2020. The company's sales have nearly tripled from 2018 to 2020. Despite the company's strong sales growth, one of the things that is not so clear in the prospectus is what percentage of the company's sales growth in the past three years has been driven by organic growth versus acquisitions.</li>
</ul>


Founded in 2011, AppLovin Corp (APP US) is getting ready to complete its IPO in 2Q 2021. The company is aiming to raise about $1 billion in this IPO. KKR purchased a minority stake in the company in 2018 at about $2 billion valuation. The IPO valuation is likely to be much higher.
The company originally started its business helping customers to improve the smartphone customer experiences for all the users. In recent years, the company has become a much bigger player in the mobile gaming segment and it also helps developers to grow their users and improve monetization of their apps. 
AppLovin's income statement shows strong sales growth in the past three years but declining profit margins. AppLovin generated sales of $1,451.1 million and an operating loss of $62.1 million in 2020. The company's sales have nearly tripled from 2018 to 2020. Despite the company's strong sales growth, one of the things that is not so clear in the prospectus is what percentage of the company's sales growth in the past three years has been driven by organic growth versus acquisitions.


United States

Zynga Inc. operates as a social gaming company. The Company offers games and support on social networking sites, cellular devices, and internet forums. Zynga's gaming network includes puzzle, card, role-playing, and virtual world games for users worldwide.

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Zynga Inc Cl A (ZNGA US)

Zynga Inc . - Investment Thesis

Zynga reported outstanding quarterly results, including higher-than-expected Q3 revenue and bookings, as well as better-than-expected operating...

Baptista Research

Zynga Inc . - Investment Thesis

Zynga delivered a mediocre quarterly result failing to meet the high market expectations. However, the company has had a history of...

Baptista Research

ATVI 2Q21: Its Time to Buy Activision

The controversy around ATVI's work environment has provided an entry point for one of the best video game franchises as it is trading at 19x...

Aaron Gabin

AppLovin IPO Valuation Analysis

Our base case valuation of AppLovin is implied market cap of $35.7 billion and target price per share of $99.8. This represents 17% higher than the...

Douglas Kim

AppLovin IPO Preview

AppLovin Corp (APP US) is getting ready to complete its IPO in 2Q 2021. The company is aiming to raise about $1 billion in this IPO.

Douglas Kim

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