Mad Hedge Technology Letter
August 30, 2019
Fiat Lux
Featured Trade:
(DIVING BACK INTO VEEVA SYSTEMS)
(VEEVA)
A tech company that I won’t hesitate to pull the trigger on new trade alerts is Veeva Systems (VEEVA).
The most recent results illustrate how investors can never discount strong cloud companies even if the elevated levels of risk scare many people out of making committed investments.
Q2 was another strong quarter with total revenue of $267 million, up 27% year-over-year.
Subscription revenue grew 28% year-over-year, and non-GAAP operating margin was 39%.
Veeva has now passed the $1 billion revenue run rate.
This is 1.5 years ahead of the target first laid out in 2015, an influential contributor to this success has been customer satisfaction.
Strong momentum in Commercial Cloud contributed to outperformance in Q2.
In core customer relationship management (CRM), Veeva continues to extend its leadership position with new small and medium business (SMB) customers and additional enterprise expansions.
Customers continue to adopt more CRM add-ons. This happens on a product-by-product and region-by-region basis.
I’ll offer a few pertinent examples.
Veeva CRM Engage had one of its strongest quarters as 4 top 20 pharmas expanded their use of Engage to new field teams.
Customers are attracted by the deep functionality and multi-platform support of Engage and the tight integration with CRM.
Veeva notched some important design wins at the top 20 pharma for Events Management.
A current customer has been using core CRM globally for many years and recently decided to expand their Veeva relationship to include Events Management in more than 90 countries over time.
They chose Veeva because of the deep functionality and professional services capabilities needed for global events management rollout.
They will replace multiple custom systems and spreadsheets leading to a more efficient and compliant global process.
This type of commitment to Veeva’s products is a positive sign as it tries to retain a more long-standing customer.
Who else does Veeva Systems work with?
They recently signed their 10th top 20 Pharma for Vault QualityDocs. Following their success with Vault PromoMats, eTMF and Submissions.
The pharma customers selected QualityDocs as part of their move away from the legacy content management platform.
What is Veeva QualityDocs?
It is software that provides superior ease-of-use and seamless collaboration, Vault QualityDocs reduces compliance risk and improves quality processes.
It accelerates review and approval workflows and facilitates sharing of GxP documents among employees and partners.
The dire need for modernization is driving the move to Veeva in this area as is the benefit of having QMS integrated with QualityDocs and Training on the Vault platform.
This is another great example of the innovation Veeva captures from an underserved market.
There has also been meaningful progress in 3 targeted industries: consumer packaged goods (CPG), chemicals, and cosmetics.
Since announcing the new Vault Claims product last quarter, Veeva now has projects in place at 3 top CPG companies.
Veeva is also making similar inroads in chemicals and cosmetics industries.
In total, Veeva now has major business at a top 20 CPG, a top 20 cosmetics company and 2 major chemical companies.
And this is just the beginning.
I’ll continue to bet on this stock going up.
It’s the best health tech cloud play out there, no reason not to love the direction of the company.
Mad Hedge Technology Letter
August 28, 2019
Fiat Lux
Featured Trade:
(WHY ROKU WENT BALLISTIC)
(ROKU)
Roku has had a year to remember and the party isn’t over yet after a tech analyst issued another upgrade.
This company was one of my picks to knock it out of the park this year and it has delivered in full force.
The premise behind the upgrade was that Roku (ROKU) could have 82 million active accounts by 2025 as it expands internationally.
What does Roku do?
Roku is a leader in advertising-supported video-on-demand streaming services. It does this by running commercials on its Roku Channel and other channels.
A minor part of their business is involved in making set-top boxes and streaming sticks to access internet video services such as Netflix and Hulu. Plus, it licenses an operating system to makers of smart TVs.
Roku currently relies on the U.S. market totaling 30.5 million active accounts, up 1.4 million from the prior quarter.
As the analyst reemphasized his outperform rating on Roku stock, the stock levitated, and this morning crossed the intraday level of $146 and finished the day over $147.
Roku's international growth could echo Netflix.
The company has been tagged to experience the same type of uber-growth that Netflix experienced as it went global.
If Roku can accumulate 82 million active accounts by 2025, it should have $4.5 billion in annual platform revenue.
This would make Roku's market capitalization around $40 billion to $50 billion in 2025. Its current market value is about $16.5 billion.
Operational superiority filters into the financial results with Roku expanding revenue to $250 million, up 59% year over year.
Roku posted a loss per share of $0.08, both metrics were better than analysts' consensus estimates.
Roku distributes content from a powerful list of streaming providers providing both paid and free ad-supported options. This allows the company to collect not only a piece of each paid subscription on its platform but also benefits from a growing advertising base.
Unless the government bans digital ads, Roku is poised to harvest the lion’s share of the spoils for the streaming revolution.
The unfortunate side to Roku’s stardom is the herculean task of trading a stock that moves up and down in dramatic fashion.
If the stock ever exhausts back to the $100 level, buy and hold long term.
If you try to trade this beast, your positions will get roughed around on the massive swings in the price action.
A great company deserves its plaudits and Roku positioned itself as the tech company in the right place and the right time in 2019.
“As an entrepreneur, I try to push the limits. Pedal to the metal.” – Said Co-Founder of Uber Travis Kalanick
Mad Hedge Technology Letter
August 26, 2019
Fiat Lux
Featured Trade:
(INTUIT’S WAKE UP CALL)
(INTU)
Intuit Inc. (INTU), one of my favorite domestic cloud plays came to life Friday morning by posting earnings and revenue surpassing estimates.
Cha-Ching!
Intuit provides financial management and compliance products and services for small businesses, consumers, self-employed, and accounting professionals.
It’s not the sexiest company, but it does the job.
This is the perfect late economy cycle software stock to hide out while the two largest economies in the world battle it out on the geopolitical level.
And don’t worry, Chinese haven’t found a use case to rip off the software, insulating the products from any international exposure.
The stock responded in kind shooting up 7% and I have been keen on this name for quite a while.
Its non-GAAP loss was 9 cents per share slimmer than the expected loss of 14 cents.
Profit has improved 800% on a year-over-year basis on revenue grossing $994 million, up 15% from the year-ago quarter’s adjusted revenues.
Total revenue crushed estimates of $961 million by displaying robust momentum in online ecosystem revenues and growth in the consumer business.
We can attribute the startling outperformance to the 33% subscriber surge for QuickBooks Online, which tallied up more than 4.5 million at the end of the fiscal fourth quarter.
The Online ecosystem revenues jumped 35% to $459 million.
The U.S.-based subscribers of QuickBooks Online expanded 25% to more than 3.2 million while international subscribers rose 58% on a year-over-year basis to more than 1.3 million.
Can Intuit squeeze more juice out of the lemon for 2020?
Revenues are expected to register in the range of $7.44-$7.54 billion.
For the full fiscal year, Small Business and Self-Employed group is expected to grow 12-14% year-over-year.
The Consumer Group is expected to increase by 9-10%.
Intuit predicts revenue growth of 10-12% in the range of $1.12-$1.13 billion for the first quarter of fiscal 2020.
Intuit expects Online Ecosystem revenues to grow more than 30%.
There are some parts of this business that are supercharged with more than 30% expansion, hallmarks of a solid growth cloud company.
The reality is that in total, this is a company that is growing around 10% and the 8-10% projected for 2019 was eclipsed with growth of 13%.
Investors cannot expect growth that typifies Amazon Web Services or Microsoft Azure, but this stock remains a reliable yet unspectacular bet on the cloud names to advance.
Accountant software is not a fashionable business, but this software has to be classified as best in show.
If investors are keen on “buy the dip” strategies, this candidate should give one no pause in jumping in headfirst.
This stable cloud stock has tickled the fancy of investors already up 35% year to date and is resilient in times of stress.
The dips are shallow and the up moves impressive, hard not to like this stock.
“Everybody is coming into crypto” – Said Co-Founder of Winklevoss Capital Management Cameron Winklevoss
Mad Hedge Technology Letter
August 23, 2019
Fiat Lux
Featured Trade:
(SPLUNK’S SWAN DIVE)
(SPLK)