Spotify Technology S.A.

SPOT Details

Spotify Technology S.A. (NYSE: SPOT) is a Luxembourg-based music streaming service provider in 178 countries and territories and growing, including its February 2021 launch in South Korea and 85 more countries and territories spanning Asia, Africa, the Caribbean, Europe, and Latin America. As of September 30, 2021, it has 381 million monthly active users (MAUs) and 172 million Premium Subscribers on its platform. In addition, subscriptions and advertising are now used to monetize its services.

Latest News:

• Share Repurchase Program: On August 20, 2021, SPOT stated that it would initiate a stock repurchase program during Q3FY21. As a result, the company authorized repurchases of 10 million ordinary shares, up to a total of USD 1.0 billion. The expiry date for this repurchase authorization is April 21, 2026.

9MFY21 Results:

• Improvement in Topline: Due to a growth in the number of premium members and the number of music impressions sold, SPOT's revenues climbed by 22.18% to EUR 6.98 billion in 9MFY21 (ended September 30, 2021) from EUR 5.71 billion in 9MFY20.
• Improvement in Bottomline: Its net income (attributable to ordinary shareholders) was EUR 5 million during 9MFY21, compared to a loss of EUR 456 million during 9MFY20.
• Leveraged Balance Sheet: The company exited the quarter with a cash balance (including short-term investments) of EUR 3.24 billion and a total debt of EUR 1.76 billion.
• Decline in ARPU: The Premium Average Revenue Per User (ARPU) was EUR 4.25 during 9MFY21 vs. EUR 4.33 during 9MFY20.

Key Risks:

• Concentrated Ownership: The business' founders, Daniel Ek and Martin Lorentzon, own 33.5% and 41.9% of the aggregate voting power in the company, respectively, as of December 31, 2020, and hence control all items needing shareholder approval. As a result, the capacity of other shareholders to influence corporate affairs is limited.

Outlook:

• MAUs and Premium Customer Estimates: Total MAUs for Q4FY21 is expected to range between 400 and 407 million, with 177 to 181 million premium customers, according to the company's projections as of October 27, 2021.
• Topline and Operating Loss Estimates: Revenues are forecasted to range from EUR 2.54 to 2.68 billion, with an operating loss of EUR 72 to 152 million.

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.

SPOT Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

SPOT's share price has surged 30.15% in the past three months and is currently trading at the mid-band of its 52-week range of USD 201.68 to USD 387.44. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 77.40, indicating an overbought zone. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 250.74.

Considering the significant uptick in the stock price and other technical indicators, we believe the decent business fundamentals are adequately reflected at the current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 293.19, up 7.34% as of October 28, 2021, 10:45 AM ET.

*All forecasted figures and Industry Information have been taken from REFINITIV.

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

Overstock.com, Inc.

OSTK Details

Overstock.com, Inc. (NASDAQ: OSTK) is a Salt Lake City-based online retailer and technology firm. Its leading e-commerce site provides a wide selection of new home products, such as furniture, décor, area rugs, bedding and bath, home remodeling, and other related items. It sells its products and services via the websites www.overstock.com, www.o.co, www.overstock.ca, and www.overstockgovernment.com.

Latest News:

• Partnership With Mercy Housing: OSTK announced its charity relationship with Mercy Housing, a non-profit organization devoted to providing affordable housing to people and families with low incomes in the US, on September 23, 2021. OSTK promises to provide support, product contributions, and staff volunteer opportunities as part of the relationship and facilitate consumer donations on its website.
• Favorable Ruling: On September 21, 2021, the company stated that the US District Court for the District of Utah announced its verdict in OSTK's favor and dismissed the class action lawsuit previously filed against it by Mangrove Partners Fund, Ltd.

9MFY21 Results:

• Expansion in Revenues: The company's net revenues increased 17.52% to USD 2.14 billion during 9MFY21 (ending September 30, 2021) from USD 1.82 billion during 9MFY20 resulting from an increase in the number of active customers.
• Surge in Bottomline: The consolidated net income during 9MFY21 was USD 356.10 million vs. USD 36.04 million reported in 9MFY20.
• Increase in Active Customers & Order Value: During Q3FY21, the number of active consumers increased by 5% year over year to 8.7 million, and the average order value was USD 214, up 24% year over year.

Key Risks:

• Reliance on Third-Party Companies: Third-party firms, such as carriers and many independent fulfilment partners, are essential to OSTK's success. Accordingly, difficulties with any of the company's major fulfilment partners or third-party carriers, delivery or product assembly services, or other third parties participating in its operations might adversely impact the company's financial conditions.

Valuation Methodology: Price/Earnings Per Share 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.

OSTK Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

OSTK's share price has surged 33.01% in the past three months and is currently trading around the higher-band of the 52-week range of USD 46.75 to USD 112.30. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 70.44, indicating an overbought zone. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 77.53.

Considering the significant uptick in the stock price and other technical indicators, we believe the decent business fundamentals are adequately reflected at the current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 96.83, up 25.49% as of October 28, 2021, 1:15 PM ET.

*All forecasted figures and Industry Information have been taken from REFINITIV.

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