Author: Cornelio Ash

Cornelio Ash is a senior equity analyst and member of the U.S. Focus List and the Global Focus List Committees, which approves all equity recommendations for developed, emerging, and frontier markets. He is also a lead for the Technology sector and specializes in the Americas region. Cornelio joined the firm in 2005 and received his B.A. in Finance from California State University, Northridge. He holds a Series 65 securities license.

Splunk

Posted on by Cornelio Ash

Key points from this report:

 

  • The stock is breaking out from a seven-week flat base off support at the rising 10-WMA. Buy.
  • Q2 FY21: Strong cloud momentum, ARR, RPO, and booking are key metrics during transition phase. In Q2 FY21, total ARR increased 50% y/y to $1.93B, the seventh consecutive quarter of 50%+ growth. Of this, cloud ARR increased 89% y/y to $568M.
  • Total remaining performance obligations (RPO) increased 42% y/y to $1.75B. Out of which, current RPO stands at $1.02B (+37% y/y).
  • Q2 cloud bookings contributed 53% of total software bookings, up from 36% last year. Management is confident of reaching the FY23 cloud mix target of 60% by FY21.

SoftwareONE Holding

Posted on by Cornelio Ash

Key points from this report:

 

  • The stock is emerging out of a large cup-with-handle consolidation. Buy. Support is along the rising 21-DMA followed by the 50-DMA.
  • Synergies from Comparex. In January 2019, the company acquired Germany-based software, cloud, and IT solutions provider Comparex for CHF 353.6M.
  • Microsoft partnership. Microsoft’s software suite contributes 54% of gross profit, of which 62% is attributable to Azure, Office 365, and Dynamics 365.
  • Cloud Spend Management is a CHF 556B ($613B) untapped opportunity.
  • Low-cost operating model. SoftwareONE operates on a dynamic resource model, sharing resources across regions and performing standardized functions from low-cost locations

Global Laggards

Posted on by Cornelio Ash

Highlighted Charts

 

U.S.: G A T X Corp (GATX), Adtalem Global Education (ATGE), J & J Snack Foods (JJSF), Essex Property Trust (ESS), Integra Lifesciences (IART), Itron (ITRI), Tabula Rasa Healthcare (TRHC).

 

Developed: Mmc Norilsk Nickel (MNOD.GB; MNOD LI), Skanska B (SKBF.SE; SKAB SS), Mowi (MHG.NO; MOWI NO), Hulic (HULI.JP; 3003 JP), Siemens Healthineers (SHLX.DE; SHL GR), Sunny Optical (SOPT.HK; 2382 HK), Telstra (TLS.AU; TLS AU), Aurizon Holdings (AZJ.AU; AZJ AU).

 

Emerging: Uni President Enterprises (PRE.TW; 1216 TT), Jumbo (BABY.GR; BELA GA), America Movil (AML.MX; AMXL MF).

Adobe

Posted on by Cornelio Ash

Key points from this report:

 

  • SaaS is COVID-resistant: Adobe has high revenue visibility as ~91% of revenue is subscription-based, driven primarily by enterprise customers. The largest segment, Digital Media (71% of total revenue), grew +18% in Q2 FY21 and includes Creative Cloud, which is  100% subscription-based. Digital engagements/usage increased significantly across the globe, including for Acrobat (+50% y/y) and Adobe Sign (+175% y/y).
  • Annualized recurring revenue remains +20%. Adobe’s ARR continues to grow +20% since its transition to a subscription revenue model in 2013. Digital media ARR currently stands at $9.17B (+23% y/y), led by Creative Cloud ARR ($7.93B) and Document cloud ARR ($1.24B). In Q2, new ARR was $443M.
  • Addressable market expanding. Adobe estimates that its total addressable market (TAM) will increase to $128B by 2022, up from $108B in 2021, driven by growth in the number of users (~4.7B users) across the digital market. TAM includes the Experience Cloud ($84B), the Creative Cloud ($31B), and the Document Cloud ($13B).

Global Laggards

Posted on by Cornelio Ash

Highlighted Charts

 

U.S.: Novagold Resources (NG), Mohawk Industries (MHK), Expedia Group (EXPE), Prosperity Bancshares (PB), Jazz Pharmaceuticals (JAZZ), Companhia Brasileira (CBD), Silicon Motion Technology (SIMO), Cogent Communication (CCOI), Netscout Systems (NTCT).

 

Developed: AGC (AG@N.JP; 5201 JP), CK Asset (CKPH.HK; 1113 HK), Peptidream (PETI.JP; 4587 JP), Galenica Sante (GALE.CH; GALE SW), Seek (SEK.AU; SEK:AU), Stadler Rail (SRAIL.CH; SRAIL SW).

 

Emerging: Catcher Technology (CTH.TW; 2474 TT), Uni-President Enterprises (PRE.TW; 1216), Itausa Investimentos Itau (IS4.BR; ITSA4 BZ).

Global Laggards

Posted on by Cornelio Ash

Highlighted Charts

 

U.S.: Packaging Corp of America ( PKG ), Armstrong World ( AWI ), Strategic Education ( STRA ), Edgewell Personal Care ( EPC ), Northern Trust ( NTRS ), Cardiovascular Systems ( CSII ), Coherent (COHR), 8×8 ( EGHT ).

 

Developed: Tokai Carbon ( EL@N.JP; 5301 JP ), Umicore ( UMI.BE; UMI BB ), Kakaku.com ( KAKA.JP; 2371 JP ), Genting Singapore Ltd ( GINT.SG; GENS SP ), Mapletree Commercial Trust ( MTRE.SG; MCT SP ), Astellas Pharma ( YP@N.JP; 4503 JP ), Essilorluxottica ( EI.FR; EL FP ).

 

Emerging: Formosa Chems. & Fibre (FOR.TW; 1326 TT), Formosa Petrochemical (FPC.TW; 6505 TT).

Nintendo

Posted on by Cornelio Ash

Key points from this report:

 

  • The stock is actionable after pulling back to its pivot from a six-week cup consolidation. Extended beyond ¥52,500. Support at the rising 50-DMA (¥47,596).
  • Play-from-home environment remains robust: Switch hardware (consoles) increased 167% y/y to 5.68M units, including 2.62M Switch Lite units, while software units (games) grew +123% y/y to 50.43M.
  • Strong Q1 results: Nintendo exceeded expectations on all key metrics including EPS, operating profit, and revenue. It reported EPS of ¥893.88 (+541% y/y), operating profit of ¥144.74B (+428% y/y), and revenue of ¥358.1B (+108% y/y).
  • Gaming momentum remains strong amid COVID environment: According to industry reports, online games generated $10.5B in revenue in June 2020, up +9% y/y.

ServiceNow

Posted on by Cornelio Ash

Key points from this report:

 

  • Strong Q2 FY20 results, beat across all metrics. Reported adjusted EPS of $1.23 (+73% y/y) and revenue of $1.071B (+28% y/y), both above expectations of $1.01 and  $1.048B, respectively.
  • Subscription revenue increased 30% y/y to $1.016M (95% of total revenue) and is on pace for an annualized run rate of +4B. The subscription revenue segment has higher gross margins, which aids overall expansion. In Q2, adjusted gross margin expanded 200bps y/y to 83% while operating margin expanded 900bps to 28%, mainly driven by strong subscription gross margin.
  • As of Q2, ServiceNow’s total number of deals with an annual contract value (ACV) greater than $1M stands at 964 (+26% y/y; +3% q/q). The company plans to increase the number of deals of that size to 2K+ by 2023.
  • ServiceNow raised full-year subscription revenue guidance by $60M and subscription billings guidance by $50M, which includes $18M and $22M FX tailwinds, respectively. Also raised operating margin by 100bps.