Datto Holding Corp.

Datto Holding Corp. (NYSE: MSP) is a company that sells cloud-based software and technologies. Its platform enables partners to manage and build their operations in the information technology industry for small and medium businesses. Unified Continuity, Networking, and Business Management software solutions are among the company's cloud-based platform products.

Why should Investors Book Profits?

• Deterioration in Cash Conversion Cycle: From 20.5 days in FY20 to 46.1 days in FY21 (ended December 31, 2021), the company's cash conversion cycle has deteriorated. Its cash conversion days are still greater than the industry average of 34.3 days, indicating that it takes a long to convert its inventory to cash.
• Over-Dependence on Subscription Services: Income from subscription services accounted for 93% of the MSP's overall revenue in FY21. As a result, any decrease in new or renewed subscriptions may harm the company's operations.
• Voting Concentration Risk: Vista controlled 69.5% of MSP's common shares as of December 31, 2021, giving it significant control over its activities. Other shareholders' power to influence business choices is hampered as a result.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

MSP's stock price has surged 14.71% in the past month and is currently leaning towards the higher band of its 52-week range of USD 20.76 to USD 28.26. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 24.40.

Considering the surge in the stock price in a short span, global headwinds, over dependency on subscription services, associated risks, and current valuation, we recommend a "Sell" rating on the stock at the closing price of USD 26.75, up 2.29% as of March 29, 2022.

Three-Year Technical Price Chart (as of March 29, 2022). Source: REFINITIV, Analysis by Kalkine Group

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

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

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.