JFrog Ltd.

FROG Details

JFrog Ltd. (NASDAQ: FROG) offers an end-to-end, hybrid, universal DevOps platform. FROG's Continuous Software Release Management (CSRM) platform enables organizations to deliver software updates across any system continuously. It derives its revenue through self-managed subscriptions, which comprises licenses, support, and upgrades and updates as they become available. SaaS subscriptions provide users access to FROG's most recent managed version of its product housed in the cloud. Its products include JFrog Artifactory, JFrog Pipelines, JFrog Xray, JFrog Distribution, JFrog Artifactory Edge, JFrog Mission Control, and JFrog Insight.

Inorganic Growth Initiatives:  On September 13, 2021, FROG announced the acquisition of Upswift, a cloud-based platform that delivers continuous monitoring, visibility, control, and secure, over-the-air (OTA) updates to a wide range of edge and Internet of Things (IoT) devices. This acquisition will enable FROG to create the industry's first complete development-to-device platform, bridging the gap between current IoT software silos and common DevOps processes, including dependency scanning, CI/CD, artefact management, and others.

Previously, on September 08, 2021, FROG partnered with SB C&S Corp. to market its scalable DevOps Platform to customers in Japan, allowing them to release software quickly and safely. This collaboration will make FROG's platform available to over 12 thousand companies at over 43 thousand locations in Japan.

H1FY21 Results: The company reported a YoY surge of 35.37% in total revenues to USD 93.74 million during H1FY21 (ended June 30, 2021) from USD 69.25 million during H1FY20, attributable to an increase in revenue from existing customers as well as the acquisition of new ones. However, its net loss for H1FY21 increased to USD 21.04 million vs. USD 0.43 million during H1FY20. As of June 30, 2021, the company had cash and cash equivalents (including short-term investments) of USD 615.23 million and no outstanding debt.

Revenue By Deployment Type and Non-GAAP Gross Profit and Margin (in USD mn) (Source: Investor Presentation, August 05, 2021)

Key Risks: As of December 31, 2020, FROG's executive officers, 5% or more shareholders, and associated companies owned ~64% of its common stock, thus gaining substantial control over its operations, which constrains the ability of other shareholders to influence corporate decisions.

Outlook: As of Q2FY21, the company expects its Q3FY21 revenue to range between USD 52 – 53 million, with non-GAAP operating loss to the tune of USD 2.6 – 3.6 million. It also forecasts its non-GAAP loss per share to range from USD 0.03 – 0.04. For FY21, FROD expects to generate revenues in the range of USD 202 – 205 million and a non-GAAP operating loss of USD 4 – 5 million. FROG anticipates its non-GAAP loss per share to be in the range of USD 0.04 – 0.05.  

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.

FROG Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: FROG's stock price fell 44.03% in the past nine months and is currently leaning towards the lower-band of the 52-week range of USD 31.17 to USD 95.20. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 50.14. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 41.09. Considering the growth prospects, inorganic expansions, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 34.70, up 3.55% as of October 14, 2021, 12:00 PM ET.

* 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.

ON24, Inc.

ONTF Details

ON24, Inc. (NYSE: ONTF) offers a cloud-based digital experience platform that allows businesses to convert customer engagement into revenue through interactive webinar experiences, virtual event experiences, and multimedia content experiences. The company generates revenue from subscription agreements for access to the platform and other allied services. ONTF was listed on the NYSE on February 03, 2021, at an IPO price of USD 50.00 per share.

Enhancing Value for the Users: On September 08, 2021, ONTF announced additional features for ON24 Webcast Elite live webinars, including the ability to view them directly in the ON24 Engagement Hub, a central content destination for generating demand with prospects engaging customers, and driving partner enablement. Companies can now integrate live and on-demand experiences in one engaging, dynamic content platform that captures audience interest, purchasing readiness, and content performance across all digital engagements by using live webinar viewership to ON24 Engagement Hub.

Q2FY21 Results: The company reported a YoY surge of 43.50% in total revenues to USD 52.12 million in Q2FY21 (ended June 30, 2021) from USD 36.32 million in Q2FY20. The Subscription and Other Platform segment, which represented 85.15% of the total revenue in Q2FY21, expanded 63.78% YoY, whereas the Professional Services segment declined 16.08% YoY. ONTF reported a net loss of USD 2.52 million in Q2FY21 vs. a net income of USD 5.28 million in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents (including short-term investments) of USD 396.36 million and total debt of USD 5.63 million.

Key Risks: ONTF is dependent on data center hosting services provided by third parties for its computing, storage, processing, application integration, and similar services. Furthermore, third-party suppliers also offer content delivery networks (CDNs) and some integration services. As a result, any service disruption or facility damage could severely impact ONTF's operations.

Outlook: In Q3FY21, ONTF expects to generate revenue in the range of USD 47.5 – 48.5 million, with a non-GAAP operating loss of USD 3.0 – 4.0 million. It also estimates a non-GAAP EPS of USD (0.09) – (0.07). For FY21, ONTF expects to clock revenue of USD 201.2 – 204.2 million with a non-GAAP operating loss of USD 1.3 – 4.3 million and non-GAAP EPS of USD (0.13) – (0.06).

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.

ONTF Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: ONTF's stock price decreased 54.89% in the past six months and is currently close to the lower end of its 52-week range of USD 18.70 to USD 81.98. The stock is currently trading below its 50 DMA level, and its RSI Index is at 45.87. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 26.00. Considering the significant correction in the stock price, decent balance sheet, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 20.08, up 0.10% as of October 14, 2021, 3:15 PM ET.

* 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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