Avangrid, Inc.

 
AGR Details

Submission of COP: Avangrid, Inc. (NYSE: AGR) is a sustainable energy company. The market capitalization of the company as on 12 January 2021, stood at ~$14.07 billion. As per a recent update, Avangrid Renewables which is a subsidiary of AGR has submitted a Construction and Operations Plan (COP) for the first phase of its Kitty Hawk offshore wind project on 11 December 2020, to the Federal Bureau of Ocean Energy Management (BOEM).

Q3FY20 Financials Update: The company reported revenue of $1,470 million in Q3FY20 as compared to $1,487 million in Q3FY19. There was a decrease in net income to $87 million from $150 million during the same period under consideration. The decrease in earnings can be attributed to lower results from renewables and high-interest costs. AGR delivered a decent performance in the Networks segment with net income improving to $94 million in Q3FY20 from $88 million in Q3FY19.

Q3FY20 Financial Performance (Source: Company Reports)

Outlook: The company expects its sustainable business model to drive growth through its ESG framework going forward and has set 2021 guidance of $2.15 - $2.35 EPS. It has provided an outlook of 6-8% EPS and adjusted EPS CAGR for 2020 to 2021, inclusive of PNM resources whose merger is expected to close in Q4FY21.

Valuation Methodology: P/CF Multiple Based Relative Valuation (Illustrative)

P/CF Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: AGR is planning to invest in new, cleaner energy technologies and grow its Networks and Renewables businesses. There was an increase in debt-to-equity ratio to 0.58x in Q3FY20 from 0.54x in Q2FY20.  AGR gave a return of 2.15% in the past one week and a return of 1.29% in the past one month. The stock of AGR is trading below its average 52-week trading range of $57.24-$35.62. On a technical front, the stock of AGR has a support level of $44.13 and a resistance level of $47.62. We have valued the stock using a P/CF multiple based illustrative relative valuation and have arrived at a target price with a limited single-digit upside (in % terms). For the purpose, we have taken peers such as CMS Energy Corp (NYSE: CMS), PPL Corp (NYSE: PPL) and Sempra Energy (NYSE: SRE). Considering the limited upside from valuation, increase in debt levels, lower margins, and higher expenses, we would like to wait for catalysts that can drive the stock in an upward direction. Hence, we suggest investors to wait for a better entry level and give an 'Expensive' rating at the current market price of $45.47, down by 1.98% as on January 12, 2021.

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

Mimecast Limited

MIME Details

Appointment of New CIO: Mimecast Limited (NASDAQ: MIME) is an email and data security company. The market capitalization of the company as on 12 January 2021, stood at ~$2.83 billion. As per a recent update, the company has appointed Shahriar Rafimayeri as the new CIO to lead the digital transformation of the company.

Q2FY21 Results Update: The company delivered a decent performance in the given quarter, with an increase in revenues to $122.69 million from $103.35 million in the previous corresponding quarter. It reported a net income of $10.05 million in Q2FY21. Revenue retention rate during the quarter was at 105%. The cash position of the company stood at $230.7 million as on 30 September 2020. MIME had a debt of $107.36 million during the same period end.

Q2FY20 Financial Update (Source: Company Reports)

Outlook: The company expects revenue in Q3FY21 to be in the range of $126 million to $127 million. It anticipates operating cash flow of ~$24 million and free cash flow of ~$16 million during the quarter.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

P/E Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: In a recent announcement, the company has announced that a certificate used by the company to authenticate some Microsoft services was compromised.  MIME gave a negative return of 7.8% in the past three months and a negative return of 7.46% in the past one month. The stock of MIME is trading above its average 52-weeks’ trading range of $59.48-$25.14. On a technical front, the stock of MIME has a support level of $36.75 and a resistance level of $49.01. The company is set to report its 3QFY21 results on 3 February 2021. We have valued the stock using a P/E multiple based illustrative relative valuation and have arrived at a target price with a correction of high single-digit (in % terms). For the purpose, we have taken peers such as Proofpoint Inc (NASDAQ: PFPT), Microsoft Corp (NASDAQ: MSFT), Akamai Technologies Inc (NASDAQ: AKAM), to name a few. Considering the negative returns in the past months, increase in debt levels, higher P/E of 184.88 on TTM basis and key risks associated with some business activities, we suggest an ‘Avoid’ rating on the stock at the current market price of $44.37, down by 13.68% as on January 12, 2021. The reason for the decline can be attributed to the announcement that the company made regarding its certificate being compromised.

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

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