We have updated our Lightspeed POS Inc. (LSPD.TO) presentation, updating our thesis to include further details on our segment forecasts and valuation. Lightspeed (LSPD.TO) August 29, 2019, Institutional Investor SELL Pitch – Perspectec We are making this presentation public for marketing purposes. Institutional Equity Research subscribers had access to an earlier version of this presentation on August 13, 2019. We believe investors holding LSPD.TO should sell their shares. Our investment thesis is that: There are material headwinds Lightspeed’s growth strategy Lightspeed’s Customer Growth has (and will) come almost entirely from acquired platforms Organic customer location acquisition costs are high and […]
Subscriber Metric Valuation
16 posts
We have launched coverage on Lightspeed POS Inc. (LSPD.TO) with a SELL rating and a price target of C$30. We use lifetime value-added (LTV added) as a base metric gathered through online surveys. In addition, we conducted 22 in-person interviews with retail stores and restaurants across Toronto to get a better sense of customer satisfaction with their product relative to competitors. These methods were used in conjunction with Lightspeed’s gross margin dollar growth relative to its public peer group to come to a fair value for Lightspeed. On a stand-alone basis, Lightspeed’s lifetime value-added divided by its customer growth costs […]
We have updated our 19-slide Shopify Powerpoint Pitch in which we examine the major sticky points in Shopify’s product relative to peers, Shopify’s real TAM and market share, investor expectations, relative subscriber valuations, and other unique issues that are typically overlooked by brokers.
Shopify’s (SHOP-NYSE) share price continues to fluctuate as questions about future gross margins, churn, and valuation continue. We take a unique approach to Shopify’s subscription valuation in order to account for its Merchant business that accounted for 36% of gross margin dollars (TTM). What Moves SHOP’s Share Price and how has it Traded? Source: Perspectec Shopify’s gross margin profile, subscription churn (based on our survey) and operating expense put Shopify as a very expensive stock relative to its peer group. Getting a Clean Shopify SaaS Valuation We believe Shopify’s valuation should be based on its relative SaaS valuation. We do not see a path to a […]
Following up on our U.S. survey conducted in January, we conducted surveys in Mexico, Germany and Japan to determine the changes in Netflix’s international penetration and churn. Since our last international survey in November of 2017, churn in these countries has fallen from 41% to 36.5%. The net affects on Netflix churn is a decrease from 26.2% to 23.8%. Netflix’s increased investment in local language content appears to be paying off after not showing an improvement four months ago. With the improved Customer Lifetime Value (CLTV) / Customer Growth Costs (CGC) ratio, and ultimately leading to a higher valuation. Our […]
Examining Paycom (PAYC-NYSE) taking a full ‘retrospective adoption approach’ to adopting the new ASC 606 standard, their restating of adjusted EBITDA has driven us to update our EV/EBITDA forecast model. The new standard allows Paycom to defer a materially larger than industry average portion of their sales commissions over the lifetime of its customers. This has caused adjusted EBITDA for 2017 to now be $186 million versus $137 million previously. Our new function involves seven public payroll SaaS companies that have produced an r-squared of 0.863 in forecasting the current EV/EBITDA multiple. The end result is our target EV/EBITDA multiple for Paycom has been reduced from 45x to 36x. Our […]
We have collected Google Trends search data for Netflix Originals up to the week ended 17th February 2018 and inputted it into our updated regression model to determine the current net subscriber additions and guide towards the quarter’s expected additions. Our model suggests Netflix would have added 4.34 million subscribers in the first half of the quarter. The current track suggests it is on pace to meet and slightly beat the company’s guidance of 6.3 million subscribers for the quarter. We are estimating net subscriber additions to be 6.6 million in Q1 2018. About our Regression Model – Our forecast […]
Following the release of Netflix’s Q4 results, we conducted our 3rd survey of online U.S. residents. The purpose of the survey was to determine Netflix’s churn rate, penetration rate and reasons for subscribers leaving. Results from the 500 respondents revealed significant changes in Netflix’s churn rate for the 2nd straight survey. U.S. subscriber churn continues to plummet at a steady rate – Our survey reveals that subscribers churned at 9.2% over the last year after excluding responses faster than 3 seconds. This compares to a churn rate of 13.3% in September of 2017 and 17% in May of 2017 using the same shorter than three second […]
Three Big Takeaways: 1) Net Subscriber Addition Growth – Netflix reported net subscriber guidance 32% better than their guidance and even surpassing our aggressive estimates by 3%. As we noted in our past two notes, we expected net subscriber additions to blow past the low guidance Netflix set for itself and that the stock would likely surpass all expectations for it. 2) U.S. Price Increases Combined with Strong Net Subscriber Add Guidance – In terms of guidance, U.S. revenue and total paid members imply that Netflix is expecting well over a 6% Q/Q increase in average revenue per subscriber in […]
With Salesforce (CRM-NYSE) finally releasing company-wide dollar attrition last quarter, we can now launch coverage of CRM being more confident in our relative and historical valuation as well as our target price. This is the first in an ongoing series of research examining Salesforce’s business and share price. Salesforce has a number of diverging elements including: – Trading patterns – Relative valuation, growth – Profitability – Competitive position Over the last few years, there has been one steady method of valuation that has been a strong predictor of its share price: an enterprise value based on its trailing 12-month customer lifetime value added over […]
Paycom’s Q3 results and Q4 guidance was generally in-line with expectations, with revenue produced per sales person in a mature office increasing 2% Q/Q versus our expectations of 4% Q/Q after accounting for seasonality. EBITDA beat on a greater portion of R&D being capitalized than normal and lower than expected G&A expense due to improving efficiency. The company has joined the 30/30 party (30% Y/Y sales growth and 30% EBITDA margins) with an invitation list of one. Q3/17 Results and Q4/17, 2017 and 2018 Forecasts Source: Perspectec and Company Reports Conservative Guidance: As was the case in each of Paycom’s prior quarters since […]
This is the first in an ongoing series of research pieces examining Paycom (PAYC-NYSE) business and share price. We believe both an absolute and peer enterprise SaaS valuation in relation to Paycom’s growth is the best way to determine whether the stock is a buy or sell. Paycom is an enterprise SaaS company primarily offering payroll software services. It is seeing revenue growth similar to a newer SaaS company, but has revenue churn and profitability closer to more established companies. We also believe tracking the timing of the ramp up of its sales offices and sales teams is important to identifying when […]
With this note we are updating our relative SaaS valuation on Netflix. Based on its prior trading history, we continue to believe Netflix should trade on a SaaS metrics basis. This involves metrics such as annual churn rate, customer lifetime value (CLTV) and customer growth costs (CGC) rather than on a traditional P/E or EV/EBITDA basis. Earlier this week we discussed Netflix’s Q3/17 results while updating our price target of $241. We also re-iterated our buy rating on the stock. Increasing Customer Lifetime Value – Q2 vs. Q3: We base our valuation on a CLTV / Trailing 12-month CGC. The CLTV is the gross margin the […]
Netflix reported better than consensus net subscriber additions that were generally anticipated by the market with the run-up in NFLX prior to the Q3/17 report. Netflix remains in a class with NVIDIA as the only large ‘tech’ companies able to raise prices and still see increasing demand of its products. Q3/17 results were in-line with our expectations. In particular, net subscriber additions were 5.3 million versus our forecast of 5.2 million and in comparison to the guidance of 4.4 million. Q4 guidance for net subscriber additions was 6.3 million versus our estimate of 7.4 million, but as we talked about in our preview, we […]
From September 22nd to September 24th we conducted another online U.S. survey with 400 respondents about their Netflix’s (NFLX: NASDAQ) usage. The most notable difference from our previous survey in June was that domestic annual customer churn has moved substantially lower, dropping from 17.3% to 13.3%. This move has caused our estimate of the value of a U.S. subscriber (U.S. CLTV) to increase from our previous from $330 to $429. In terms of the company wide impact, our company-wide Q3 annual churn rate moves from 28.6% to 26.6%. Netflix’s overall CLTV moves from our previous estimate of $139 to $150. EXHIBIT […]