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Anaplan - Not All Plans Work Out In All Ways All Of The Time

Mar. 05, 2020 11:05 AM ETAnaplan, Inc. (PLAN)11 Comments
Bert Hochfeld profile picture
Bert Hochfeld


  • Anaplan's Q4 was a beat and raise on a headline basis.
  • The company did not make consensus billings targets, and billings growth fell from 59% to 25% sequentially.
  • The shares fell noticeably losing 24% of their value the day after the earnings release.
  • Overall, valuation has fallen to a very reasonable 10X EV/S on a 12 month forward revenues estimate.
  • The company continues to enjoy leadership status in its space and it has an unmatched competitive position within the cloud planning market.

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Some comments about the Anaplan stumble

Just to note-this is an article about Anaplan’s business and its valuation. It is not an article about Anaplan’s (NYSE:PLAN) exposure to the Covid-19 virus. The company has been involved in selling its solutions in the Asia/Pac region for several years. Management called out its leadership in Asia/Pac as being experienced and professional. Growth in Asia/Pac has been outstanding over the last several years. I do not think that anyone can really handicap whether companies selling enterprise software will be materially impacted by the secondary and tertiary impacts of the virus in either the Asia/Pac region or the rest of the world.

Anaplan is obviously not a company focused on consumer interaction. The ultimate impact of the virus on the company’s business is not really knowable, and neither its growth rate nor its profitability are going to be affected in the long term by the virus.

It would be naïve to imagine that the forecast the company provided as recently as last week will not see some impact from the effects of the virus. Anaplan has an exposure to the transportation industry-an important vertical market for the company, and at this point, that business segment is already seeing noticeable impacts from the virus. Economic activity the next two-three months is likely to be constrained. After that, there will be a period of recovery, as the new cases of the virus wane and as aggressive stimulus efforts are felt. Overall, as a business, I do not believe that Anaplan will experience any unusual impact from the disease and investors should not focus on the disease in evaluating the company.

This article was written by

Bert Hochfeld profile picture
Bert Hochfeld graduated with a degree in economics from the University of Pennsylvania and received an MBA from Harvard. Mr. Hochfeld has enjoyed a long career in the tech world, working for IBM, Memorex/Telex, Raytheon Data Systems, and BMC Software. Starting in the 1990s, Mr. Hochfeld worked as a sell-side analyst and won awards from the Wall Street Journal for his coverage of the software space. In 2001, Mr. Hochfeld formed his own independent research company, Hochfeld Independent Research Group, which provided research services to major institutions including Fidelity, Columbia Asset, SAC Capital, and many other prominent institutions and hedge funds. He also operated the Hepplewhite Fund, a hedge fund that specialized in technology investments. Hedge Fund Research, an independent 3rd party firm that specializes in ranking managers, rated the Hepplewhite Fund as the best performing small-cap fund for the 5 years ending in 2011. In 2012, Mr. Hochfeld was convicted of misappropriating funds from a hedge fund he operated. Mr. Hochfeld has published more than 500 articles on Seeking Alpha, all dealing with companies in the information technology space. Highly esteemed for his investment wisdom accumulated over decades, Mr. Hochfeld ranks in the top 0.1% of Tip Ranks analysts for his selection of information technology stocks and their subsequent successes.

Analyst’s Disclosure: I am/we are long PLAN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (11)

European investor 99 profile picture
anaplan is widely used in many businesses that are not really impacted by the virus in long term...
PSalerno profile picture
I bought some cloud stocks in the final hour close to the bottom, betting on a rebound next week.
Bert Hochfeld profile picture
There is a tendency amongst investors to overrate larger, better known companies in a space. One finds that certainly in cyber-security, but really across the board. At one time, the planning space, such as it existed, was dominated by Hyperion. Hyperion got swallowed up by Oracle and promptly ceased to be a leader.
In many ways Workday is an admirable company with strong values and leadership. Buying Adaptive Insights, after struggling with their own planning app for years, was a bold move. But I want to keep coming back to facts. The RPO number rose 49% and 11% sequentially. That is a superset of billings. The CEO talked specifically about the expansion of the pipeline. Usually you do not hear that from companies that need to explain deteriorating win rates because it becomes painfully obvious in just a quarter and will have to be put down to either a management miscue or competitive issues. You can believe this CEO or not-I for one do believe that the pipeline expanded. It is hard for me or anyone else at this point to suggest we know how Q1 might come out. Anaplan certainly has business in Asia/Pac and cutting travel in the US is going to have an impact on closing deals. And for sure, I imagine the travel/transportation vertical, a large user of planning products will not be buying in Q1. So, I can't prove my thesis, because I fully expect that Anaplan's results will be below expectations. But I do not think there is any real evidence that Workday is close to taking market share from Anaplan, and frankly I would be surprised if that changes in the foreseeable future.
Bert Hochfeld profile picture
Please-there was no decline in billings-they rose 25%. And do take a look at RPO-up 49% and up 11% sequentially. It isn't very hard to believe at all. What is a bit harder to believe is that rational investors took the data and sold the shares down more than 30%. But they have, and one can either take advantage of irrational pessimism or not.
The idea that an experienced executive like Frank Calderoni is not doing everything in his power to maximize shareholder values is a bit far fetched...and I would use other terms if not for my dislike of value words. Why and how there might have been some conflict between Calderoni and his erstwhile sales lieutenant is a story I would like to know, and probably never will. But I doubt if it would qualify for some kind of conspiratorial evaluation. People clash. It happens all the time in different ways. What usually doesn't happen and did, was that management talked about billings tracking revenue growth in the current fiscal year. That is extremely positive given what just happened. In a risk off environment, my observation is that people are willing to cherry pick negatives, and then disregard positives said by the same individual at the same time. I see that with the evaluation of the PLAN quarter along with many others.
Rubenslash profile picture
@Bert Hochfeld What is your opinion on the losses and negative margins? They are even on a non-gaap basis still highly unprofitable as opposed to other companies with similar or higher growth (Ayx, ZM, COUP, SHOP,..) Of course PLAN is also cheaper on an EV/S basis because of this.
PSalerno profile picture
@Bert Hochfeld - You are right , I meant "declining growth in billings", not declining billings. Anyway the issue is still present about the credibility of the excusation for this declining growth.
PSalerno profile picture
The stocks looks good after this correction from a technical point of view, but I am afraid the management is hiding something like Nutanix. Hard to believe that management changes are responsible of the shrinking billings.
What is thing of Nutanix ? Tkx
PSalerno profile picture
@ivanlan Few quarters ago, Nutanix tried to justify a miss in billings and result with the transition to ratable accounting. I did not believe the management and I was right. In fact they knew this transition was in place when they gave guidance. The same is happening with PLAN.
Discoverr profile picture
Hi, Bert,
Speaking of its unmatched position in financial planning, I started to doubt that after following WDAY's recent actions. I'm afraid that the drop in billings reflects the competitive pressure as WDAY morphs aggressively from human capital to financial related applications and procurement.

In the meantime, the CEO of PLAN is a professional C suite manager, backing by a few significant shareholders that come from VC or PE industry, this had me struggle as these kinds of mgmt usually care less about shareholder values.
Then sell or don't buy at these reduced levels
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