⚡️ Everything you need to know this week: Lululemon, Udemy, Crypto Bear Market, Terra & More!Dec 06, 2021
We're bringing you all the news you need to know for this week. This report contains news on the crypto world, stock market & earnings news. We've highlighted the most important topics in each section!
We're skipping the IPO's for the rest of the month, because the end of the year will be quiet. Once January starts, IPO season will be back in play!
Most Important Companies Reporting Earnings This Week:
GitLab (GTLB), December 6th:
Talk about being in the wrong place at the wrong time.
While their IPO was very successful and the stock crushed until mid-November, the Omicron variant came in, said hold my beer, and kicked the entire tech world back over the last few weeks.
Jokes aside, GitLab has had unfair macro pressures forcing their stock price downwards since recent high's just last month. So don't get discouraged by their recent performance.
But as we've been preaching for months now, inflation = raising interest rates. Raising interest rates hurts valuations and for growth stocks like GitLab the value of future cash flows get crushed because of this.
The summary of why this happens is called Time Value of Money. It is a very dry topic but it also is super valuable and basically states that a dollar today is worth more than a dollar tomorrow. The way these future dollars are valued in today's dollars is by "discounting" them back using interest rates.
Higher rates = low current value. Don't shoot the messenger that's just how it works. If you want the long boring answer on why this happens, just click: here
But now that you're up to speed we want to tell you that we still have full faith in the company. Just as we wrote on them during their IPO (see it here), we project their company to grow substantially even though valuations are going to be hurt in the near term.
But over the long term, we're using this earnings call to get more insight into these two things:
- YoY Revenue growth. Coming into their IPO, revenue grew 69% YoY for the latest quarter (equaling over $230 million on an annualized basis). This quarter, it'll be very telling to see if they were able to maintain such substantial growth or if this will be short lived tailwinds.
- The next metric we'll be looking at is their net revenue retention rate. In subscription based businesses this number is beyond important and usually spells success or failure for most mature SaaS platforms. When we analyze their numbers we see that their rate hit 152% most recently. This retention rate would rank them as one of the top public software companies! While we don't forecast for them to do this again, we still are projecting for the number to be industry leading!
The short of all this is that we like GitLab a lot as an investment in the long term! However, we anticipate a ton of volatility for the stock over the coming months as the world continues to battle with COVID.
Udemy (UDMY), December 8th:
Udemy is another recent IPO that we covered earlier this year (see the original analysis here). Just like GitLab they've unfairly been hit with valuation headwinds over the last several weeks.
And similar to GitLab this is another stock that we like over the long term! The same thesis remains true today as it did during their IPO. And that is:
- H1 2021 revenue grew 25% from last year while YoY revenue grew at over 50%. Looking at this earnings call, expectations are high, but our projections have them beating the current estimates.
- When Udemy went public they were valued half as cheap as their biggest competitor. Fast forward to today and this mostly remains truly (a little less than double as of writing this). At their current projected revenue, their valuation is ~7x forward looking revenue. Looking at their closest competitor Cousera, we see that Coursera had half the amount of revenue in 2020 ($293.5 million) but grew at the same rate and has a much higher valuation. This gives us strong resolve that Udemy is undervalued and we believe the delta between the two companies should start to shrink!
- Operating Losses and EBT are still negative but are trending in the right direction. Boring words? Maybe. Extremely important? Without a doubt. Ignoring the jargon for a second, seeing that during their IPO, in such a strong period of growth, signals some positive strength going forward. We anticipate for these numbers to still be negative this time around but we're projecting for them to continue to the trend.
As we feel with GitLab, we like Udemy a lot in the long run. But as we just mentioned, in the short run, we forecast a lot of volatility and therefore will be avoiding it for the time being regardless of how good their earnings call goes!.
Lululemon (LULU), December 9th:
Last we wrote up Lululemon (see analysis here & here) we were extremely excited about their opportunity set going forward. With the stock blowing past our price target, we needed to analyze their chances of continuing the path upwards going into this earnings call.
If you haven't read our recent write-ups, there's a strong cohort of retail stocks who are outperforming their peers this year due to their shifting business models from traditional brick & mortar sales to DTC (direct-to-consumer) sales. Companies like Dick's Sporting Goods, Nike, PVH Corp and LULU are benefiting greatly from this change.
While we believe the trend will continue, their upcoming earnings report should help shed more light on their business model. The key numbers we're looking at are:
- Revenue by channel, geography and category
- Same Store Sales (SSS)
- Revenue & Margin Growth
A lot of what we said during our last earnings update still holds true today! If LULU is able to beat expectations on these numbers as well as provide solid forward looking guidance then we believe the stock will continue to trend higher over the next 6+ months. We've held LULU for the last few years, and we likely will continue to hold off if revenue continues to increase.
Terra ($LUNA) Contends for Top 10 Spot in Market Cap
As for other coins besides the big 2 (Bitcoin and Ethereum), Terra has been making a run at the top 10. A coin we've long been trading in our discord channel (Near $8 entry and today its above $60), Terra is a name that many are starting to become familiar with!
Luna though is an algorithmic stablecoin that uses UST & LUNA. The system runs on a process called seigniorage - which means that to mint new units of UST, the equivalent dollar amount of Terra’s native token, LUNA, must be burned. And alternatively if UST demand decline, then LUNA will be minted while UST is burned in order to keep both coins near one.
However since the update on September 30, a large portion of burned LUNA was rerouted to a community pool and the remainder was supposed to be burned. Since then, the community pool portion has been entirely burned as well, thus reducing the total supply - forcing the price of LUNA up.
While many skeptics are calling for a run on LUNA and UST the co-founder of Terra said that he thinks this will all be avoidable, "because of the vibrant economy that is being built on the Terra blockchain".
Since so much changes here day to day make sure, if you want up to date news, trading information and access to our live chat, be sure to join our FREE discord channel where we give you all this and more.
Just join here -> Crypto Discord Channel
BTC Plummets in Last Week's Trading:
The big news three weeks ago was that crypto tanked on the heels of the Infrastructure Bill being approved. If you want the details on what happened and what it means, just click here.
And now the big news two weeks ago is that crypto kept sliding. As of writing this (December 3rd, 2021) Bitcoin slid all the way down to $46,000 - which is ~30% lower than the high's ($68,000) earlier this month. This marks the third straight week of the downturn
As we said two weeks ago, last week and now this week, we're continuing to buy on any additional weakness. Pullback's wont last forever and it's good to any exposure during these periods. While they may last awhile, they will likely eventually turn.
If you want to see our bull case thesis for bitcoin's price, just click: here