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FinTech Acquisition "Blank Check" IPO: Buzzy Name, Fuzzy Aim
- There is circumstantial evidence that the aim of this FinTech "blank check" IPO is to acquire a company in the fast-growing prepaid gift and rewards card market.
- But, this market has just entered a "post-plastic" and "post-internet" end-to-end mobile app world where it is highly uncertain who will succeed or fail.
- Most blank check IPOs are aimed at turnarounds or spin-offs in static industries. This IPO is not.
- We recommend waiting until an acquisition is announced before deciding to invest.
OnDeck Capital IPO: A Treadmill Lender
- OnDeck Capital (ONDK) has engineered a treadmill lending platform for small businesses resulting in 49.2% of 2014 originations from repeat customers. .
- This is a risky way to grow the business as ending the refinance of any repeat customer risks default. OnDeck is on the treadmill too and cannot get off.
- OnDeck also has substantial balance sheet risk and should not be seen nor valued in the same terms as LendingClub (LC). We recommend not investing in OnDeck.
LendingClub: The First Big FinTech IPO
- The purpose of this article is to pinpoint LendingClub's core value-creating FinTech, which is at the intersection of scoring and loan funding.
- We rate LC a buy generally on the basis of its FinTech to drive future deal flow, rather than current financial metrics, such as unit margins.
- The article also highlights other areas of value-creating FinTech that LC has left untouched.
Machine Zone: IPO Or What?
- Machine Zone is a US-based mobile gaming start-up with a Top 3 game on the charts. We estimate that its current revenue run rate is $800M with a $2B valuation.
- It would be a prime candidate to have a 2014 IPO if it were not for the IPO debacles of Zynga and King.
- We discuss its current 2014 options including more venture capital, an investment by a strategic partner such as Softbank, or an acquisition by Electronic Arts.
Markit IPO: Buy The Moat And Be Better Than Buffett
- Markit's IPO is set for Wednesday, June 18th. It is a buy. Its core product are prices and indices that facilitate the buying and selling of credit default swaps.
- Its biggest threat is its own Board of Directors - a bank cartel which wears multiple hats as supplier, customer, dominant shareholder, and underwriter.
- We use a game theoretic approach to analyze Markit's prospects, suggesting that this moat's moat is a doomsday machine defense.
- Even at our estimated trailing P/E ratio of 30, it is a buy.
- In doing so, you will be able to brag that you outdid Buffett because you are buying the moat instead of a company with a moat.
Zynga Is A Dog Without A Top 10 Mobile Hit
- Zynga will not meet its current FY14 guidance unless FarmVille 2: Country Escape is a Top 10 Hit.
- Based on app store data, we show that the game peaked in late April at #14, but since has faded to #30.
- In a recent presentation, Zynga CEO commented that a similar game called Hay Day was eating FarmVille's lunch. We confirm this graphically with app store data.
App Store Data Says 'Bubble Witch' Gives King A Pop
- On June 3rd, King launched a mobile version of its Bubble Witch Saga game. Based on only 5 days of app store data, we predict it will be a hit.
- Bubble Witch is projected to be equal to or better than Pet Rescue Saga, with an annual revenue run rate exceeding $100 Million.
- Coupled with the launch of Farm Heroes Saga in January, we project King now to beat its current FY14 revenue guidance of $2,500 Million.
- There is early evidence from app store data that Bubble Witch is a cannibal that could eat as much as $50 Million that might have gone to its mates.
- Still, we have a target price for King at $23.30 based on a conservative price-sales ratio of 2.70.
Kabam: Mobile Gaming Company To IPO Even After King And Zynga
- Kabam is a San Francisco-based mobile gaming company with three hit games each of which has accumulated $100 M in revenue since launching.
- Kabam, along with Machine Zone, are the two most likely USA mobile gaming companies to do an IPO since King (KING) and Zynga (ZNGA).
- But, the disappointing stock performance of KING and ZNGA post-IPO has made investors wary of the next mobile gaming company IPO.
- We present data and graphs in support of two lessons that should be built in to the next mobile gaming IPO.
- (1) Price IPO no more than 2.23 trailing price-sales ratio; (2) be in 4 month window where company has a Top 10 game with likely 8 months to go.
KLab: An Undervalued Japanese Mobile Gaming Stock
- KLab is a mobile gaming stock listed on the Tokyo Exchange (3656). It has a long running hit game called Love Live! School Idol Festival.
- We estimate that KLab's current (5-26-14) forward price-sales ratio to be 1.29, far below that of GungHo Online's ratio of 3.31.
- Based on a reasonable forward price-sales ratio of 2.50, we believe that KLab's stock could double in the near term.
- Followers of US mobile gaming stocks like King (KING), Glu Mobile(GLUU) and Zynga (ZNGA) can learn from following Japanese gaming stocks like KLab.
Mixi: A Rare Undervalued Mobile Gaming Stock
- Mixi is that rare mobile gaming stock that you can still invest in before a hit game is fully capitalized into its stock price.
- Unlike King Digital and Zynga where their hit games were fully capitalized into their IPOs, Mixi's hit has only topped the charts for the last 2 months.
- Based on an graph of app store revenue rankings and estimated revenue, I derive a forward price-sales ratio for Mixi of 2.51, below that of GungHo Online at 3.34.
- Mixi's stock should be 39% higher were it to have the same forward price-sales ratio as GungHo.
- Mixi is a buy BEFORE it releases FYE2015 guidance on Thursday, May 15th after the close of the Tokyo Stock Exchange.
It's Mobile Time For Square Enix
- Square Enix (SQNXF) is a publicly held Japanese gaming company with a stable of console franchises. The stock has languished for 5 years with the exception of a recent spike.
- We present 4 solid reasons why Square Enix will produce a mobile hit in 2014. Now is the time to begin watching app store revenue rankings provided by App Annie.
- Do NOT invest based on blog hype of a pending release. Consider investing only after a release crosses a Top 10 revenue ranking on the App Annie charts.
- And consider selling after a week long steady slide on the same charts.
GLU Mobile Will Beat Guidance Based On App Store Data
- GLU surprised everyone last quarter when it reported a 60% Q/Q revenue growth due to the successful release of Deer Hunter 2014. The stock jumped 28% that day.
- Based on an analysis of app store data, we forecast that GLU will beat its first quarter guidance, but no blowout.
- While none of the five new releases came close to the success of Deer Hunter 2014, the sum total of all was enough to put GLU over the top.
- GLU's strength is releasing a number of new games each quarter on time and managing their post-release engagement.
Forecasting King Digital Entertainment's Revenue With Daily App Store Data
- App store downloads of KING's franchise game, Candy Crush Saga, are in significant decline.
- Candy Crush has remained #1 or #2 in app store revenue ranking for a year. However, even this qualitative ranking did not prevent a 4th Q/Q revenue decline.
- In early January 2014, KING released Farm Heroes Saga. It has risen to #5 on the U.S. Apple Store revenue list. This is all new revenue for the 1st quarter.
- As a result, we are forecasting an overall Q/Q growth in ("KING") revenue, muted by continuing declines in revenue from Candy Crush. KING is a buy below 17.
'Flappy Bird' Investing Requires Daily App Store Data
- To be successful in investing in mobile game companies like KING, ZNGA, and GLUU, you cannot wait until the next 10-Q release and conference call for buy/sell signals.
- You must begin to use and understand daily download and revenue data provided by data analytics companies who mine app store data.
- We present an ex-post example of how following the daily app store data of the "franchise game" QUIZ RPG by COLOPL (3688:T) could have produced an early buy signal.
Price-Sales Ratios Of Mobile Gaming Companies
- A plot of price-sales ratios against recent sales growth is developed for ZNGA, GLUU, KING, and 4 publicly-held Japanese mobile gaming companies.
- We show that trailing P/S is not very useful alone -- lower isn't necessarily better.
- Based on a combination of P/S and recent growth rates, we rate KING over ZNGA, but rate GLUU over both.
- What Pandora Has To Do To Beat Guidance
- Express Scripts Misses on Guidance of NextRx's Profitability
'Quarterlifers' to Benefit From the Coming Recession
Mar. 2, 2008 • 3 Comments
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