Datto Holding Corp.

MSP Details

Positive Findings from Commissioned Study: Datto Holding Corp. (NYSE: MSP) is engaged in the provision of cloud-based software and security solutions purpose-built for delivery by managed service providers (MSPs). The market capitalization of the company as on 21 April 2021, stood at ~$3.83 billion. As per a recent update, the company has announced positive findings of a commissioned study by Forrester Consulting on behalf of Datto. The study reveals that MSPs using Datto’s integrated solutions increase employee bandwidth to support more SMB clients, and this led to an average of over $100,000 in business growth on an annual basis.

Introduction of Datto Commerce in North America: On 5 April 2021, the company had announced the commercial availability of Datto Commerce in North America. It is a real-time sales platform that helps in product procurement and increases profitability for the MSPs.

FY20 Results Update: During the year, the company reported ~18% uptick in subscription revenues to $485.3 million, from $412.2 million in the previous corresponding year. It reported a net income of $22.49 million in FY20, compared to a loss of $31.18 million in FY19. The cash position stood at a comfortable level of $168.87 million as of 31 December 2020.

FY20 Financial Performance (Source: Company Reports)

Key Risks: The company is exposed to cyber threats, which may lead to a security breach of the company’s and clients’ confidential data.

Outlook: The company has announced that it will report the results of the first quarter of 2021 on 12 May 2021. It has provided revenue guidance of $142-$144 million for Q1FY21, and $582-$590 million for the full year FY21. It also expects the adjusted EBITDA to be between $45-$46 million during the first quarter, and $130-$135 million for the whole year.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Data Source: Refinitiv, Thomson Reuters, 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.

Stock Recommendation:  On 10 March 2021, the company had announced that it has acquired BitDam Ltd., which is an Israel-based cyber threat detection company. The acquisition is expected to provide revenue comfort and margin opportunities to its 17,000 MSP partners. The stock of MSP is trading below its average 52-weeks’ levels of $33.46-$22.30. The stock of MSP gave a negative return of ~12.06% in the past six months and a positive return of ~0.252% in the past one week. On a technical analysis front, the stock of MSP has a support level of ~$23.02 and a resistance level of ~$24.92. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe the company can trade at a slight premium to its peer median EV/Sales (NTM Trading multiple), considering the positive findings of study, commencement of Datto Commerce in North America and robust guidance for FY21. For the purpose, we have taken peers such as Splunk Inc (NASDAQ: SPLK), Adobe Inc (NASDAQ: ADBE), Microsoft Corp (NASDAQ: MSFT), to name a few. Considering the expected upside in valuation and current trading levels, impressive financial performance, turnaround in profitability, acquisition of BitDam and optimistic guidance performance, we recommend a ‘Buy’ rating on the stock at the closing price of $23.83, up by 1.27% as on April 21, 2021.

MSP Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Harmony Biosciences Holdings, Inc.

HRMY Details

Business Update: Harmony Biosciences Holdings, Inc. (NASDAQ: HRMY) is a pharmaceutical company that develops and commercializes innovative therapies for patients with neurological disorders. The market capitalization of the company as on 21 April 2021 stood at ~$1.59 billion. The company has announced that results from two analyses from the clinical development program for WAKIX will be presented at the 2021 American Academy of Neurology (AAN) Annual Meeting, held virtually between April 17 to 22.

Launch of New Grant Program: On 7 April 2021, the company had announced the launch of a new grant program, Progress at the Heart, that will help in accelerating programs and solutions to address bias in access to diagnosis and treatment in the rare disease and sleep disorder segment. The program plans to award up to $125,000 in grants by September 2021.

FY20 Performance Update: During the year, the company reported revenue growth to $159.7 million, compared to ~$6 million during the previous corresponding period. The increase was aided by the growing sales of WAKIX, with its FDA approval in November 2019, and label expansion during October 2020 to include cataplexy in adult patients with narcolepsy. It reported a net loss of $36.9 million during the period. HRMY ended the year with a significant improvement in the cash position to $228.6 million as of 31 December 2020, compared to $24.5 million in the prior corresponding period.

FY20 Financial Performance (Source: Company Reports)

Key Risks: The company has to incur a considerable amount of expenditure in the R&D activities, and any adverse result from the clinical trials might have an impact on the profitability of the company.

Outlook: The company had a significant year in 2020 and expects to move forward with its strategic objectives into 2021. The successful closing of the initial public offering has given the required bandwidth to the company to support its commercialization efforts for WAKIX and advance its clinical programs. Further, it is actively enrolling patients to its Phase 2 trial in patients with Prader-Willi Syndrome. 

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Data Source: Refinitiv, Thomson Reuters, 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.

Stock Recommendation: The company had announced the appointment of Sandip Kapadia as Chief Financial Officer, which was effective from 29 March 2021. The stock of HRMY is trading below its average 52-weeks’ levels of $52.74-$26.51. The stock of HRMY gave a negative return of ~26.31% in the past six months and a negative return of ~3.71% in the past one week. On a technical analysis front, the stock of HRMY has a support level of ~$26.90 and a resistance level of ~$32.89. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe the company can trade at a slight premium to its peer average EV/Sales (NTM Trading multiple), considering the robust growth in revenue, label expansion and successful close of IPO. For the purpose, have taken peers such as Avadel Pharmaceuticals PLC (NASDAQ: AVDL), Horizon Therapeutics PLC (NASDAQ: HZNP), Supernus Pharmaceuticals Inc (NASDAQ: SUPN), to name a few. Considering the expected upside in valuation and current trading levels, decent financial performance, strong balance sheet to carry out on growth opportunities and label expansion of WAKIX and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of $28.00, up by ~2.12% as on April 21, 2021.

HRMY Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Note: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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