Archer-Daniels-Midland Company
ADM Details
Archer-Daniels-Midland Company (NYSE: ADM) operates as a human and animal nutrition company engaged in the origination and processing of agricultural products. It delivers agricultural goods using its vast global asset base, including connections to markets in more than 200 countries. Its operating segments are Ag Services & Oilseeds, Carbohydrate Solutions, and Nutrition.
Latest News:
- Progressing Towards Sustainability: On October 25, 2021, ADM signed a memorandum of understanding (MoU) with Gevo, Inc., engaged in transforming renewable energy into low-carbon, energy-dense liquid hydrocarbons to support the production of sustainable aviation fuel (SAF) and other low-carbon hydrocarbon fuels. Under the agreement, Gevo would process about 900 million gallons of ethanol produced at ADM's dry mills to produce 500 million gallons of SAF and other renewable hydrocarbons.
- Investment in Acies Bio: On October 22, 2021, the company announced an equity investment in Acies Bio, a Slovenian biotechnology company focused on developing synthetic biology and precision fermentation technologies for food, agriculture, and industrial applications, made via its venture capital unit, ADM Ventures.
- Sale of Peoria Dry Mill: On October 21, 2021, ADM agreed to sell its ethanol production complex in Peoria, Illinois, to BioUrja Group. ADM expects to restructure its portfolio by redeploying the transaction proceeds to other strategic growth initiatives, expected to close in a few weeks.
Q3FY21 Results:
- Significant Growth in Revenue: The company reported YoY growth of 34.47% in revenues to USD 20.34 billion during Q3FY21 (ended September 30, 2021) from USD 15.13 billion during Q3FY20. The Ag Services and Oilseeds segment, which represented 77.13% of the total revenue in Q3FY21, reported YoY growth of 36.11%.
- Surge in Profitability: ADM reported a sharp uptick in net income to USD 526 million during Q3FY21 vs. USD 225 million in Q3FY20.
- Cash and Debt Position: As of September 30, 2021, the company had cash and cash equivalents of USD 1.08 billion and total debt of USD 8.93 billion.
Key Risks:
- Product Concentration Risk: In FY20, sales from soybeans accounted for 18% of the total revenue. Hence a change in the availability and prices of these commodities due to weather, government policies and programs, global demand, or living standards could have a detrimental impact on the company's operations.
- Energy Price Risk: ADM's power generation facilities are fueled by electricity, natural gas, and coal, the pricing of which is highly volatile and unpredictable. Therefore, significant increases in the cost of these products, including any costs associated with greenhouse gas regulation or taxation, could negatively impact its financials.
Outlook:
- Q4FY21 Expectation: As of Q3FY21, ADM expects strong Q4FY21 performance based on continued momentum.
Valuation Methodology: Price/Earnings 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.
ADM Daily Technical Chart (Source: REFINITIV)
Stock Recommendation:
ADM's stock price rose 12.93% in the past three months and is currently leaning towards the higher end of its 52-week range of USD 45.68 to USD 69.30. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 71.19. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 74.98.
Considering the company's market dominance, strong top and bottom-line performance, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the current price of USD 66.46, down 0.26% as of October 26, 2021, 11:18 AM ET.
* The reference data in this report has been partly sourced from REFINITIV.
* All forecasted figures and industry information have been taken from REFINITIV.
The Trade Desk, Inc.
TTD Details
The Trade Desk, Inc. (NASDAQ: TTD) is a technology company that operates an ad-buying platform. TTD provides a cloud-based platform that enables ad buyers to create, manage, and optimize data-driven digital advertising campaigns across ad formats and channels on many devices, such as computers, mobile devices, and connected television (CTV). As of October 26, 2021, the company's market capitalization stood at USD 36.43 billion.
Latest News:
- Strategic Collaboration: On October 20, 2021, TTD announced a first-of-its-kind global collaboration with Xiaomi, a smartphone manufacturer, allowing marketers to reach Xiaomi's global audience directly through TTD's mobile ad services, thus realizing the potential of the open internet. With this global agreement, advertisers can reach 454 million monthly active users outside of China and connect with audiences programmatically throughout Xiaomi's exclusive mobile ecosystem.
H1FY21 Results:
- Surge in Revenue: The company reported a YoY surge of 66.58% in revenues to USD 499.78 million during H1FY21 (ended June 30, 2021) compared to USD 300.02 million during H1FY20, attributable to an increase in the number of advertising campaigns executed per client.
- Growth in Profitability: TTD reported an increase in net income to USD 70.34 million during H1FY21 vs. USD 49.17 million in H1FY20.
- Robust Balance Sheet: As of June 30, 2021, it had cash and cash equivalents (including short-term investments) of USD 705.06 million and no outstanding debt.
Key Risks:
- Ownership Concentration Risk: Each share of TTD's Class B common stock has ten votes, compared to one vote for each share of its Class A common stock. Thus, as of June 30, 2021, its executive officers, employees, and directors, and their affiliates, together held ~51% of the voting power, which constrains the ability of other shareholders to influence corporate decisions.
Outlook:
- Revenue & EBITDA Estimate: As of Q2FY21, TTD expects to clock revenue of at least USD 282 million in Q3FY21, along with an adjusted EBITDA of ~USD 100 million.
Valuation Methodology: Price/Sales per share 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.
TTD Daily Technical Chart (Source: REFINITIV)
Stock Recommendation:
TTD's stock price rose 2.56% in the past six months and is currently leaning towards the higher end of its 52-week range of USD 46.71 to USD 97.28. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 52.97. We have valued the stock using the Price/Sales-based relative valuation methodology and arrived at a target price of USD 84.17.
Considering the company's growth prospects, recent collaborations, solid margins, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the closing price of USD 76.78, up 0.88% as of October 26, 2021.
* The reference data in this report has been partly sourced from REFINITIV.
* All forecasted figures and industry information have been taken from REFINITIV.
Zendesk, Inc.
ZEN Details
Zendesk, Inc. (NYSE: ZEN) operates as a software development company that offers software as a service (SaaS) solutions to enable businesses and their customers to build better experiences. The company provides various product solutions, including Zendesk Support, Zendesk Chat, Zendesk Talk, Zendesk Guide, Zendesk Gather, Zendesk Explore, Zendesk Sell, and Zendesk Apps.
Q2FY21 Results:
- Significant Growth in Revenue: The company reported YoY growth of 29.01% in revenues to USD 318.22 million during Q2FY21 (ended June 30, 2021) from USD 246.66 million during Q2FY20, attributable to expansion from the existing accounts as of June 30, 2020, and acquisition of new accounts.
- Reduction in Net Losses: The company's net loss decreased to USD 58.41 million in Q2FY21 from USD 64.66 million in Q2FY20.
- Cash and Debt Position: As of June 30, 2021, the company had cash and cash equivalents (including short-term investments) of USD 938.37 million and total debt of USD 1.09 billion.
Key Risks:
- Dependence on Third Parties: ZEN is dependent on various third parties such as technology partners, channel partners, and professional services partners for several key features and functionality of its platform. For example, the features offered on Zendesk Support are highly dependent on the technological integration with Alphabet Inc.'s products. Therefore, any discord with these third parties could adversely impact its operations.
- Ownership Concentration Risk: As of June 30, 2021, ZEN's directors, officers, significant shareholders, and their affiliates owned ~30% of its common stock, thus gaining substantial control over its operations, which constrains the ability of other shareholders to influence corporate decisions.
Outlook:
- In Q3FY21, ZEN expects to generate revenue in the range of USD 332 – 337 million, with GAAP and non-GAAP operating income (loss) ranging between USD (43) – (39) million and USD 22 – 26 million, respectively.
- For FY21, ZEN expects to clock revenue of USD 1.31 – 1.318 billion along with GAAP and non-GAAP operating income (loss) of USD (164) – (159) million and USD 96 – 101 million, respectively.
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.
ZEN Daily Technical Chart (Source: REFINITIV)
Stock Recommendation:
ZEN's stock price rose 2.84% in the past month and is currently trading close to the mid-band of its 52-week range of USD 103.28 to USD 166.60. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 53.60. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 146.64.
Considering the company's growth prospects, decent fundamentals, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the current price of USD 125.92, down 4.77% as of October 26, 2021, 2:23 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.
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