Fastly, Inc.

FSLY Details

Fastly, Inc. (NYSE: FSLY) runs a content delivery network (CDN), allowing businesses to offer more dependable and faster online content. Rather than simply storing static content, it allows users to program on its platform, allowing edge computing and better handling of more dynamic content. In addition, FSLY established an emerging Infrastructure as a Service (IaaS) cloud platform that allows developers to construct, protect, and distribute digital experiences. As of December 31, 2020, FSLY 17 terabit, a software-centric network, is spread across 56 markets. As of August 05, 2021, the company’s market capitalization stood at USD 5.15 billion.

Global Network (Source: Investor Presentation, March 2021)

Achieving Milestone in App and API Protection: FSLY announced the beta release of the Signal Sciences agent on its Fastly edge cloud platform on July 28, 2021. This marks a significant milestone in Fastly's mission of enabling developers to safeguard apps and APIs in every configuration. Customers will now be able to use sophisticated signal technology to build and release rules in real-time to identify suspicious requests and block attacks faster.

Launching Secure Serverless JavaScript with Zero Cold Starts: On July 21, 2021, FSLY launched the JavaScript in Compute@Edge, which ensures that developers can build with greater flexibility using FSLY's serverless compute environment. The company banks on the appeal of a lesser attack surface, and the absence of cold starts to market this product to modern web developers.

Conversion of Class B to Class A Common Stock: On July 12, 2021, all of the outstanding shares of FSLY's Class B common stock were automatically converted into 1 Class A common stock each. The conversion did not affect the economic rights of holders other than the removal of the two classes’ different voting rights.

6MFY21 Results: The company reported a 23.47% rise in revenues to USD 169.88 million during 6MFY21 (ended June 30, 2021) compared to USD 137.59 million during 6MFY20, due to the acquisition of Signal Sciences Corp. in Q4FY20 and the adoption of modern edge platforms and products. However, FSLY reported an increase in net losses to USD 108.98 million during 6MFY21 vs. USD 26.45 million during the year-ago period. As of June 30, 2021, its balance sheet stood with cash and cash equivalents (including marketable securities) of USD 929.73 million, with a total debt of USD 965.84 million (including finance lease liabilities).

Key Risks: A significant amount of FSLY's revenue comes from a small number of clients. In FY20, the top ten customers accounted for approximately 38% of total revenues, while the top five customers accounted for approximately 27%. Excessive reliance on a small number of customers for revenue could hurt the company's financial health in the long run.

Outlook:

Q3FY21 & FY21 Guidance (Source: Shareholder Letter, August 04, 2021)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(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.

FSLY Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: FSLY share price fell 64.24% in the past six months and is currently trading at the lower-end of its 52-week range of USD 39.47 to USD 136.50. The stock is currently trading far below its 50 and 200 DMA levels, and its RSI Index is at 24.18. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 48.86. Considering the company's growth prospects, new product launch, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 39.93, down 10.35% as of August 05, 2021.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

BM Technologies, Inc.

BMTX Details

BM Technologies, Inc. (NYSE: BMTX) operates as a digital banking platform in the U.S. and offers access to banking services such as checking and savings accounts, personal loans, credit cards, and financial wellness, focusing on innovative, tech-savvy, user-friendly products, and education. The platform operates on the Banking-as-a-Service (BaaS) model, ensuring higher customer acquisition and lower expense than traditional banks. BMTX is a technology company and provides banking services through its partner bank. As of August 05, 2021, the company’s market capitalization stood at USD 127.37 million.

Expanding BaaS Offering: On August 04, 2021, BMTX expanded its BaaS offering to credit unions and community banks. The BaaS offering includes optional interest-bearing savings accounts, access to over 55,000 fee-free ATMs, money management tools, excellent mobile apps, and credit lending. Previously, on June 30, 2021, BMTX collaborated with Array, a credit monitoring and identity protection platform, to offer customizable credit-related capabilities as a part of its BaaS offering.

Collaborating with GoAskJay: On July 07, 2021, the company announced the signing of GoAskJay, a direct-to-consumer insurance & financial marketplace, as its new Workplace Banking platform partner. Under this collaboration, GoAskJay's services will be made available to BMTX's users in the U.S.

Q1FY21 Results: During Q1FY21 (ended March 31, 2021), the company reported a 54.73% increase in revenue to USD 24.38 million vs. USD 15.76 million in Q1FY20, with servicing fees generated from partner bank registering a 96.68% growth YoY to USD 9.37 million. Net income for the quarter was USD 18.89 million (including a USD 15.0 million gain on the fair value of private warrant liability), compared to a net loss of USD 4.53 million in Q1FY20. In addition, the average serviced deposits grew 111.74% YoY to USD 1.32 billion in Q1FY21.

Q1FY21 Performance Metrics (Source: Q1FY21 Investor Presentation, May 2021)

Key Risks: The company generates most of its revenue from limited products and markets. While it plans to expand its portfolio and market reach, it may not succeed, harming its operating results. In addition, BMTX's banking partners are subject to stringent regulatory scrutiny customary to the banking industry. The company must also comply with these regulations as a banking service provider, which is costly and restricts certain activities, including interest rates charged on loans / paid on deposits.

Outlook: As of Q1FY21, the company expects its EBITDA to range between USD 20 – 22 million in FY21. BMTX plans to expand its existing partnerships and add new white label partners. In addition, its pipeline includes launching the BankMobile Google Plex account alongside Google and other product offerings.

Valuation Methodology: EV/EBITDA Value Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

BMTX Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: BMTX stock declined 24.19% in the past six months and is currently leaning towards the lower-band of the 52-week range of USD 8.46 to USD 18.35. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 49.67. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 12.60. Considering the correction in the stock price, recent partnerships, new product offerings, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 10.94, up 4.79% as of August 05, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.  

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