Olo: High Switching Cost Business With 50%+ Margin Of Safety

Dec. 21, 2022 6:39 AM ETOlo Inc. (OLO)5 Comments
Marco Atzeni profile picture
Marco Atzeni


  • Olo experienced 67% CAGR over the last three years and its untapped market poses room to further grow the business.
  • The company has a high switching costs, which translates into significant clients' stickiness to Olo modules.
  • After the recent sell-off, Olo trades at a significant discount to its intrinsic value, providing 50%+ margin of safety for the base scenario.
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Investment Thesis

From the peak of the 2021-2022 market sell-off, Olo Inc. (NYSE:OLO) lost about 85% of its market capitalisation, experiencing significant multiple contraction along the way. I believe that Olo has robust competitive advantages such as high switching costs and strong

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Marco Atzeni profile picture
This is Investing Milestone. This represents a journey through which I want to share how I think about Value Investing and how I approach this investment philosophy. In my analysis there aren’t preconceived truths or fixed ideas. Instead, it’s for people who want to look at investing in a rational and critical way with a particular focus on trying to reduce the impact that biases could have on each of us. There are two main pillars that constitute the foundation for this initiative: focus and curiosity. Focus is about ignoring noise and everything that could distract us from what we want to achieve. It’s what enables us to get rid off of good ideas and concentrate exclusively on the one that could lead us toward success. On this, the Scottish philosopher and historian, Thomas Carlyle wrote: “The weakest living creature, by concentrating his powers on a single object, can accomplish something. The strongest, by dispensing his over many, may fail to accomplish anything. The drop, by continually falling, bores its passage through the hardest rock. The hasty torrent rushes over it with hideous uproar, and leaves no trace behind.” The second pillar is curiosity. Curiosity is what I regard to be the engine that incentivise us to create, share and build networks where people are more inclined to welcome different and multifaceted ideas. It’s how we challenge ourselves into being more eager toward expanding our “circle of competence” and as Buffett famously said: understanding “what we don’t know and not get enticed by it”.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. 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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