Malibu Boats, Inc.

MBUU Details

A Renowned Player in Recreational Boats: March 2020 Quarter Update: Malibu Boats, Inc. (NASDAQ: MBUU) is involved in the designing, manufacturing, and marketing of performance sport boats. The company’s core pillars which include operational excellence, vertical integration, and industry-leading new product innovation, allow it to flex its cost structure and preserve its margins in the event of a prolonged lower demand environment.  During the March 2020 quarter, the company’s net sales stood at $182.3 million, down by 8.8% on pcp, mainly due to precautionary suspension of operations at all of the company’s manufacturing facilities commencing on March 24, 2020 as a result of the COVID-19 pandemic. Overall consolidated net sales per unit increased 6.3% to $101,509 per unit, as compared to pcp. The company’s net income stood at $23.9 million in Q3 FY20, up 7.5% on pcp.

Q3FY20 Results (Source: Company Reports)

Settlement of The Patent Infringement Case: On 21 August 2020, the company announced that it has settled the patent infringement case brought by Malibu Boats against Go Surf Assist, and as per the settlement terms, Go Surf Assist will make a one-time payment to the company, and will sign a license agreement for the future payment of royalties for surf systems which are sold by Go Surf Assist using the licensed technology.

Key Risks: The company is exposed to the risks related to Covid-19 pandemic as it could impact the company’s operations and financial results. In addition, the company’s results are also dependent on its ability to grow its business through acquisitions; its reliance on network of independent dealers and increasing competition for dealers.

What to Expect: Looking ahead, the company expects the Covid-19 pandemic to continue to impact its operations and financial results, including during any recovery period. With flexible cost structure and ample liquidity, the company believes that it is well placed to withstand the current economic environment. Due to the uncertainty regarding the COVID-19 impacts, the company cannot estimate the long-term impact of COVID-19 on its liquidity, results of operations, and financial condition. The company is scheduled to release its Q4 FY20 financial results on 27 August 2020, after the market closes. 

Stock Recommendation: In the last one year, the stock of MBUU has provided a return of 111.99%. On a YTD basis, the stock has provided a return of 35.53%. The stock is currently inclined towards its 52 weeks high price of $63.88. On the technical analysis front, the stock has a support level of ~$49 and a resistance level of ~$56.6. Considering the aforesaid facts, current trading levels, decent returns in the past and uncertainty regarding the impacts of COVID-19, we suggest investors to book profit and give a “Sell” recommendation on the stock at the closing market price of $55.5, up 2.78% on 26 August 2020.

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

Pinterest, Inc

PINS Details

June 2020 Quarter Highlights: Pinterest, Inc. (NYSE: PINS) is a technology-based company, which operates in visual discovery engine which is used by end-users for discovery of information. For the June 2020 quarter, the company reported total revenue of ~$272 million, up 4% on pcp. From the US, the company reported revenue of $232 million, down by 2% on pcp. From International business, the company reported revenue of $41 million, up 72% on pcp. The Global Monthly Active Users (MAUs) grew 39% year over year to 416 million in June quarter. During the quarter, the company incurred a GAAP net loss of ~$101 million.

June Quarter Results (Source: Company Reports)

Board Appointment: The company recently appointed Andrea Wishom, President at Skywalker Holdings, and former Executive Vice President at Harpo Productions, to its Board of Directors.

Key Risks: The company is currently exposed to the risks and uncertainties related to COVID-19 Pandemic. Further, the company is also exposed to the risks related to the general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth. The company is exposed to the risks associated with new products and changes to existing products as well as other new business initiatives.

What to expect: Due to the uncertainties related to the ongoing COVID-19 pandemic and the rapidly shifting macroeconomic conditions, the company has not provided FY20 revenue or Adjusted EBITDA guidance. The company expects that its revenue in the September 2020 quarter will grow in the mid-30% range year over year. Looking forward, the company intends to remain prudent in the near-term while ensuring it invest in and prioritize the long-term growth of the company. The company intends to release its Q3 FY20 results on 29 October 2020.

Valuation Methodology: P/BV Multiple Based Relative Valuation (illustrative)

Price to Book Value Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Over the last three months, the stock of the company has provided a return of 75.95%. In the last one month alone, the stock increased by 39.81%, due to which the stock is currently inclined towards its 52-week high of $38.23. On the technical analysis front, the stock has a support level of ~$32.96 and a resistance level of ~$35.9. We have valued the stock using P/BV multiple based illustrative relative valuation method and arrived at a target price with a correction of low-double digit (in % terms). For the said purposes, we have considered Snap Inc (NYSE: SNAP), Twitter Inc (NYSE: TWTR), Facebook Inc (NASDAQ: FB) to name a few. Considering the aforesaid facts, valuation, stock performance in the past, current trading levels, we are of the view that most of the positives are factored in at the current juncture. Hence, we suggest investors to book profits at current levels and give a “Sell” recommendation on the stock at the closing market price of $34.31, up by 0.7% on 26 August 2020.

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

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