Slack IPO Analysis

Slack had $400M of revenue for last year and growth rate of 88%. Slack is rumored to be looking for $17B valuation in its upcoming IPO.

Slack has a wonderful product Slack Channels which is superior to emails for team communication and collaboration. Slack has $10M DAU (Daily Active Users) and these are paying enterprise users. Slack cost per user is $8 per month of $6.67 per month if billed annually.

Major competitions are Microsoft (Office 365) and Microsoft Teams and FB could evolve as a threat with Office offerings.

 

Alphabet(GOOGL) Revenue Growth Slows - One Off or Changing Trend?

Alphabet (GOOGL) Revenue Growth Slows to 17% in 1Q2019. Is this One Off or Changing Trend?
Most likely it’s a combination of additional competition from AMZN and new players and faster growth by FB (26% growth). GOOGL also is unable to gain traction in Cloud Services with AMZN and MSFT dominating.

Problem analyzing results is that Alphabet does not provide details about YouTube and other parts of the business and also Other Bets Waymo etc are still not magnetizable and generating revenue. There is also a question of whether FB has better business model than GOOGL.

Overall GOOGL still has potential in Cloud Services and YouTube (Video Ads) and online advertising is only 40% of global advertising so there is still growth runway. Risks include fines for monopoly behavior and regulations and possibility of security breaches etc.

GOOGL trades now at $1190 which $160 per share excess cash and $50 EPS in 2019. That implies 20 times multiple or 5% adjusted earnings yield for a leading tech company with optionality in Other Bets and still growth to come.

MritikCapital Fair Value for GOOGL is $1250 and recommended buy under pride is $1000 or below. Last traded at $978 on 24 Dec 2018.

Alphabet (GOOGL) 1Q2019 Earnings Release

Biggest Winners in the Market’s Incredible Rebound 24Dec2018 to 26Apr2019

These stocks are the biggest winners in the market’s incredible rebound back to a record.

BPY at Citi Global Property CEO Conference - Mar 2019

BPY at Citi Global Property CEO Conference - Mar 2019

CITI Global Property CEO Conference - BPY Brian Kingston Interview


Brookfield's listed real estate vehicle. We're an owner across multipleasset classes around the world, and we own best-in-class properties in the world's most dynamic markets, primarily in the U.S., U.K., Europe, Australiaand a growing presence in Asia. Similar to all of Brookfield's real estate activities around the world, we've got a long focus and history on buildingstrong operating platforms in these markets, owning the best assets, working them hard and really focusing on our capital allocation decisions.And so all of that, that discipline comes to -- into our investment philosophy within BPY.

US Junk Bond vs Leveraged Loan Yield History

US Junk Bond vs Leveraged Loan Yield History shows where we are in the interest rate cycle.
We are late cycle and chances of a credit cycle ending are high.

Usually High Yield bonds trade at a higher yield than loans but this has inverted due to reversal of US Fed as they no longer plan to raise rates.

The average yield on Barclays High Yield Index is now 6.5% down from 8% at end of 2018. US 10 year Yield is now 2.53% with a spread below 4%. During 2001 internet bubble crash High Yield bonds yielded 10% and in 2008/2009 financial crisis they yielded 20%+.

I suspect we are an environment of low interest rates creating higher risk taking. Not sure when the tide will turn but some day interest rates will normalize. US Fed Funds Rate in 2000 was 6.5% and it reached 0.25% from 2009-2011 and is now at 2.5%. Political interference is a factor so it is impossible to predict what happens next. As long as rates remain low borrowers benefit at the expense of savers.

Uber IPO Analysis & Slowing Revenue Growth

Uber IPO is upcoming and valuation they were looking for was initially $120B but now it is down to $80B valuation and they are looking to raise $8B. IPO price initially targeted $47 to $55 but now they are looking for $44 to $50 as LYFT is down 20% from IPO price.

Slowing Revenue Growth at Uber is something to be noted. The growth has declined sharply from 70% sales growth to 20% sales growth and it may be a good time to IPO before growth stalls further. Currently Uber is operating at $4B loss per year run rate.

By the way PayPal has a partnership with Uber and they have committed to buying $500M worth of Uber shares at IPO price just before the IPO. Latest Quarter revenue was $3B so projecting this out to $12B 2019 revenue Uber will be validated at 7 times revenue.

Market Peaking - Time to be Cautious

Market is Peaking with S&P close to eclipsing the previous high of 2930 and sentiment getting bullish. This can be seen by the spate of IPO activity and recovery of FAANG stocks and other risk on sectors.

Time to be Cautious as valuations are full and potential risks are no longer discounted in the market prices. This does not mean market will fall. Interest Rates kept low globally will act as a hedge and keep valuations higher. Not clear what can trigger a crisis of confidence or a turn in the debt cycle but being cautious and keep investing slowly could be the way to go.

Blackstone raises over $22B for flagship buyout fund: Bloomberg

Blackstone LP (BX) will ultimately raise $25B+ for this latest PE Fund. Apollo Global LP (APO) last PE Fund was $24.7B. Brookfield Asset Management (BAM) latest PE fund on first closing was $9B so they have ways to go before they catch up with BX and APO in private Equity. I think they will over next 3-5 years. Berkshire Hathaway (BRK.B) also has $100B cash looking for PE like take private deals.

Most important question is where will this money be invested and when. Looks like everyone is counting on another crisis to come along some day to get their money invested. Time will tell when this occurs and what kind of returns these PE firms will generate. They have learnt over last 30 years that cycles eventually turn. This cycle with manipulated low interest rates is a new one so will be interesting to see how this cycle ends and what causes it.
Blackstone raises over $22B for flagship buyout fund: Bloomberg

Brookfield Said To Consider US$2B China Property Deal

Brookfield Asset Management Inc (BAM) is planning to buy a commercial property site in Shanghai for around US$2 billion, according to people familiar with the matter.

Brookfield Strategic Real Estate Partners III is considering buying three office towers and a retail mall at Greenland Huangpu Center from a unit of Greenland Hong Kong Holdings Ltd., the people said, asking not to be identified because the details aren’t public.

Brookfield Said To Consider US$2B China Property Deal

5 Year IPO Returns History

5 Year IPO Returns History shows on average people lose money investing in an IPO.
To make money by investing in IPO you need to pick a real winner like GOOGL, AMZN, FB etc.

Many IPOs including ZM, BYND are flying high. UBER and SK are upcoming IPOs much anticipated. Are these going to turn out to be once in a generation companies that grow and dominate their space or are we in a speculative bubble.