ON24, Inc.

ONTF Details

ON24, Inc. (NYSE: ONTF) is a cloud-based digital experience platform that allows businesses to convert customer engagement into revenue through interactive webinar experiences, virtual event experiences, and multimedia content experiences. Customers' subscription agreements for access to the platform and other connected services generate revenue for ONTF. Its common shares were listed on the NYSE on February 03, 2021, at an IPO price of USD 50.00 per share. As of September 13, 2021, the company's market capitalization stood at USD 986.2 million.

Adding Value for the Users: On September 08, 2021, ONTF announced enhanced capabilities for ON24 Webcast Elite live webinars to be viewed directly in the ON24 Engagement Hub, a central content destination for creating demand with prospects, engaging customers, and driving partner enablement. Using live webinar viewing to ON24 Engagement Hub, companies can now consolidate their live and on-demand experiences in one engaging, dynamic content platform that captures audience interest, purchasing readiness, and content performance across all digital engagement.

Enabling Digital Engagement and Generating Customer Insights: On August 31, 2021, Shell Catalyst & Technologies (SCT), a provider of catalyst, technical services, and licensed process technologies to energy companies, used the ON24 Digital Experience Platform to quickly convert to a digital-first engagement strategy and enhance its global reach. Using the platform, SCT efficiently scaled digital engagement with energy producers to build meaningful relationships globally, gaining rich audience data to personalize consumer interactions further.

Q2FY21 Results: The company reported YoY growth of 43.50% in total revenues to USD 52.12 million in Q2FY21 (ended June 30, 2021) compared to USD 36.32 million in Q2FY20. The Subscription and Other Platform segment, which accounted for 85.15% of the total revenue in Q2FY21, reported YoY growth of 63.78%, whereas the Professional Services segment declined 16.08% YoY. ONTF reported a net loss of USD 2.52 million in Q2FY21 vs. a net income of USD 5.28 million in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents (including short-term investments) of USD 396.36 million and total debt of USD 5.63 million.

Key Risks: ONTF relies on data center hosting services provided by third parties for its computing, storage, processing, application integration, and similar services. In addition, content delivery networks (CDN) and some integration services are provided by third-party suppliers. Therefore, any termination/lapse of service or damage to a facility could negatively affect ONTF's operations.

Outlook: In Q3FY21, ONTF expects its revenue to range between USD 47.5 – 48.5 million, along with a non-GAAP operating loss of USD 3.0 – 4.0 million. Non-GAAP EPS is estimated to range between USD (0.09) – (0.07). For FY21, the expected range for revenue is USD 201.2 – 204.2 million, with a non-GAAP operating loss of USD 1.3 – 4.3 million and non-GAAP EPS of USD (0.13) – (0.06).

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ONTF Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: ONTF's stock price decreased 42.69% in the past three months and is currently trading in the lower band of its 52-week range of USD 19.30 to USD 81.98. The stock is currently trading below its 50 DMA level, and its RSI Index is at 31.92. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 26.09. Considering the significant correction in the stock price, decent balance sheet, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 21.10, down 0.19% as of September 13, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.