Activision Blizzard, Inc.

ATVI Details

Activision Blizzard, Inc. (NASDAQ: ATVI) is developing and publishing interactive games and services. The company operates in three segments, namely, 1) Activision Publishing, which generates earnings from the sale of complete games and in-games and from licensing software to third-party firms that distribute Activision products. Call of Duty (CoD) is a product of this division; 2) Blizzard Entertainment, generating income from full game and in-game sales, subscriptions, and licensing software to third-party firms that distribute Blizzard products. World of Warcraft, Hearthstone, Diablo, and Overwatch are some of the key products of Blizzard; and 3) King Digital Entertainment, generating revenues from in-game sales and in-game advertising on the mobile platform. Candy Crush is its essential franchise product.

New Product Updates and Launches: On August 19, 2021, ATVI announced its plans to launch CoD: Vanguard on November 05, 2021. This new version delivers an integrated, Warzone experience with massive CoD content. Vanguard offers Campaign, online Multiplayer and Zombies co-operative modes.

Previously on July 01, 2021, it launched a 135-card expansion (Questline cards) by United in Stormwind for Hearthstone, a digital card game played by over 130 million people worldwide. Each of these cards provides intriguing stories of mercenary characters.

Q2FY21 Results: The company reported an 18.84% increase in total net revenues to USD 2.30 billion in Q2FY21 (ended June 30, 2021), compared to USD 1.93 billion in Q2FY20, driven by continued expansion of scope in CoD, World of Warcraft, and Candy Crush, which experienced robust growth even with the lifting of the lockdowns in various countries. Net income for Q2FY21 was USD 876 million vs. USD 580 million reported in Q2FY20. ATVI's net bookings for the quarter were USD 1.92 billion, lower than USD 2.08 billion in Q2FY20. It exited Q2FY21 with a cash balance (including short-term investments) of USD 9.63 billion and total debt of USD 3.61 billion.

Key Risks: The company's largest customers are Microsoft and Sony, which accounted for 28% and 21% of its consolidated gross receivables in FY20. Partial or total loss of business from these major customers might result in a considerable decline in revenues and impact the financial and operational health of the company. Moreover, in July 2021, the State of California filed a complaint against the company, alleging violations of the California Fair Employment and Housing Act and the California Equal Pay. As a result, the company may face adverse publicity, reduced productivity, and other negative consequences related to this filing.

Outlook:

Financial Outlook (Source: Q2FY21 Results Presentation, August 2021)

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.

ATVI Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: ATVI's stock price fell 13.85% and 14.12% in the past three and six months, respectively, and is currently close to the mid-point of the 52-week range of USD 71.19 to USD 104.53. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 46.75. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 99.99. Considering the correction in the stock price, strong fundamentals, product scope expansions, positive business outlook, and current valuation, we recommend a "Buy" rating on the stock at the current price of USD 83.08, up 2.42% as of August 31, 2021, 12:39 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.

Seagate Technology Holdings PLC

STX Details

Seagate Technology Holdings PLC (NASDAQ: STX) is a major data storage technology and solutions company. Hard disc drives (HDDs) and a wide range of data storage devices, including solid-state drives (SSDs), solid-state hybrid drives (SSHDs), storage subsystems, and an edge-to-cloud mass data platform are among STX's core products. It operates in the Asia Pacific, the Americas, and EMEA (Europe, the Middle East, and Africa) regions, with its major customers including original equipment manufacturers (OEMs), distributors, and retailers. STX has production plants in China, Malaysia, Northern Ireland, Singapore, Thailand, and the United States.

Zoom Selects Seagate's Cloud Platform: On August 31, 2021, STX stated that it signed a deal with Zoom, under which Zoom's customers will have access to the Seagate Lyve cloud platform to store meeting recordings. STX created the Lyve Cloud platform to address common storage issues.

Collaboration with NI: STX and National Instruments Corp. (NI), a leading producer of automated test equipment and virtual instrumentation software, announced a new partnership on July 27, 2021, to enhance data storage and transfer services, including a first-of-its-kind advanced driver-assistance system (ADAS) record offering.

FY21 Results: The company reported a slight increase of 1.64% in revenues to USD 10.68 billion in FY21 (ended July 02, 2021) compared to USD 10.51 billion in FY20 (ended July 03, 2020). Net income for FY21 increased to USD 1.31 billion from USD 1.00 billion in FY20. As of July 02, 2021, the company had a cash balance of USD 1.21 billion and a total debt of USD 5.14 billion. On July 19, 2021, STX declared a quarterly cash dividend of USD 0.67 per share, payable on October 6, 2021, to shareholders of record on September 22, 2021.

Mass Capacity Trends (Source: Q4FY21 Supplemental Financial Information)

Key Risks: STX is reliant on a small number of direct and indirect vendors for certain components that it does not produce in-house, such as recording media substrates, read/write heads, ASICs, spindle motors, printed circuit boards, suspension assemblies, and NAND flash memory. The failure of a significant supplier or a set of suppliers in supplying such components on time could hurt STX's operating performance and cash flows.

Outlook: In its FY21 annual report, STX stated that it expects Q1FY22 revenues to be around USD 3.1 billion (+/- USD 150 million), with non-GAAP diluted EPS of USD 2.20 (+/- USD 0.15).

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.

STX Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: STX's stock price fell 10.85% in the past three months and is currently trading at a slightly higher band of the 52-week range of USD 45.25 to USD 106.22. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 47.72. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 105.92. Considering the company's growth prospects, solid margins, strategic partnerships, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the closing price of USD 87.59, up 0.86% as of August 31, 2021.

* 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.

Scotts Miracle-Gro Company

SMG Details

Scotts Miracle-Gro Company (NYSE: SMG) manufactures, markets, and sells lawn and garden care, as well as indoor and hydroponic gardening products in North America, Europe, and Asia. Its business is categorized into three segments: 1) US Consumer, which includes consumer lawn and garden businesses in the United States; 2) Hawthorne, which includes indoor and hydroponic growing businesses; and 3) Other, which includes consumer lawn and garden businesses outside the United States. In North America, SMG's consumer and lawn business is highly seasonal, with more than 75% of annual sales coming in the second and third quarters.

Strategic Investments: On August 25, 2021, SMG's subsidiary The Hawthorne Collective, Inc. completed the purchase of a USD 150 million unsecured convertible note from RIV Capital Inc., a cannabis-focused investment and acquisition company. Under this investment, three nominees of The Hawthorne Collective were added to the RIV Board. Earlier, SMG completed a USD 33.50 million acquisition of Rhizoflora's nutrients business, including its Terpinator and Purpinator brands, on August 16, 2021. As a result, Hawthorne is now the primary provider of the Terpinator and Purpinator product lines in the US.

9MFY21 Results: The company reported a 29.18% rise in net sales to USD 4.19 billion during 9MFY21 (ended July 03, 2021) compared to USD 3.24 billion during 9MFY20 (ended June 27, 2020), primarily due to an increase in sales volumes, increased prices, and the favorable impact of foreign exchange rates. It reported a net income of USD 561.3 million during 9MFY21 vs. USD 384.4 million during 9MFY20. As of July 03, 2021, the company's cash and cash equivalents amounted to USD 58.3 million, with a total debt of 2.19 billion.

Key Risks: Home Depot and Lowe's, SMG's two largest clients, contributed 44% of net sales and 58% of outstanding accounts receivable in FY20 (ended September 30, 2020). Such undue reliance on specific customers for business could hurt the company's financial health in the future.

Outlook: As of August 04, 2021, SMG reaffirmed its FY21 sales growth estimate of 17-19% in FY21, with the US Consumer segment projected to grow 7-9% and Hawthorne sales expected to climb 40-45%. Further, the company projects its non-GAAP adjusted EPS to range between USD 9.00 to USD 9.30.

Valuation Methodology: EV/EBITDA 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.

SMG Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: SMG's share price fell 27.50% in the past six months and is currently leaning towards the lower-band of the 52-week range of USD 143.08 to USD 254.34. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 37.68. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 192.60. Considering the company's growth prospects, strong margins, robust fundamentals, and current valuation, we recommend a "Buy" rating on the stock at the current price of USD 157.00, down 0.64% as of August 31, 2021, 3:14 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.

Corsair Gaming, Inc.

CRSR Details

Corsair Gaming, Inc. (NASDAQ: CRSR) provides gear and technology for gamers, streamers, and content creators. Its operating segments are 1) Gaming and Creator Peripherals, which provides gaming keyboards, mice, headsets, controllers, capture cards, stream decks, USB microphones, studio accessories, etc., and 2) Gaming Components and Systems, which offers power supply units, cooling solutions, computer cases, DRAM modules, and gaming PCs. CRSR's shares were listed on NASDAQ on September 23, 2020, at an issue price of USD 17.00 per share.

Series of New Launches: On August 20, 2021, CRSR launched a newly designed CORSAIR HS80 RGB WIRELESS Gaming Headset compatible with PC and console, which offers SLIPSTREAM WIRELESS technology that provides users with 24-bit audio within the range of 60 ft. This news follows the August 17, 2021 launch of Xbox SCUF Instinct and Instinct Pro, a wireless performance controller designed primarily for Xbox Series X|S by SCUF Gaming, a subsidiary of CRSR.

Q2FY21 Results: The company reported YoY growth of 24.32% in total revenues to USD 472.90 million in Q2FY21 (ended June 30, 2021) compared to USD 380.41 million in Q2FY20. The Gaming Components and Systems segment, which accounted for 67.19% of the total revenue in Q2FY21, reported YoY growth of 17.56%, whereas the Gamer and Creator Peripherals segment improved by 40.90% YoY. Net income for Q2FY21 increased to USD 27.75 million from USD 22.60 million in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents of USD 134.57 million and total debt of USD 270.01 million.

Key Risks: In H1FY21, CRSR's top ten largest customers accounted for 50% of its total revenue. In addition, revenue from Amazon represented 24.6% of the total H1FY21 revenue. Hence, the loss of any of these key customers could hurt the company's financials.

Outlook:

FY21 Guidance (Source: Q2 FY21 Earnings Presentation, August 03, 2021)

Valuation Methodology: Price/Earnings 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.

CRSR Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: CRSR's stock price decreased 17.29% in the past six months and is currently trading in the lower band of its 52-week range of USD 14.09 to USD 51.37. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 60.17. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 35.13. Considering the correction in the stock price in the past six months, decent balance sheet, recent product launches, associated risk, and current valuation, we recommend a "Buy" rating on the stock at the current price of USD 29.32, up 3.57% as of August 31, 2021, 12:53 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.

Albany International Corp.

AIN Details

Albany International Corp. (NYSE: AIN) is a leading developer and manufacturer of engineered components, leveraging its advanced materials processing and automation capabilities. Its operating segments are 1) Machine Clothing (MC), which provides permeable and impermeable belts used in the manufacture of paper, paperboard, nonwovens, fiber cement and various other industrial applications; and 2) Albany Engineered Composites (AEC), which comprises Albany Safran Composites, LLC (ASC), in which its customer SAFRAN Group owns 10% minority interest. AEC provides highly engineered composite structures based on its technology to customers in the aerospace and defense industries.

Secondary Public Offering: On August 10, 2021, AIN closed an underwritten secondary offering of its Class A common stock with a par value of USD 0.001 per share. The offering was made up entirely of secondary shares sold by Standish Family Holdings, LLC, and J.S. Standish Company, who received ~USD 119 million as the total proceeds of the offering. J.P. Morgan Securities LLC served as the sole underwriter for the offering.

Strategic Collaboration: On July 06, 2021, AIN announced a technical collaboration with two subsidiaries of Spirit AeroSystems Holdings, Inc., a manufacturer of aerostructures for commercial airplanes, defense platforms, and business/regional jets. Under the collaboration, both the companies will leverage their expertise to develop a spectrum of innovative solutions to support development in the hypersonic program. In addition, this collaboration aids the industry's ability to scale cost-effective hypersonic thermal protection systems.

Q2FY21 Results: The company reported YoY growth of 3.77% in total revenues to USD 234.52 million in Q2FY21 (ended June 30, 2021) compared to USD 225.99 million in Q2FY20. MC segment, which accounted for 68.19% of the total revenue in Q2FY21, reported YoY growth of 4.23%, whereas the AEC segment improved 2.81% YoY. Net income for Q2FY21 reduced to USD 31.40 million from USD 32.35 million in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents of USD 253.33 million and total debt of USD 350.00 million.

Key Risks: In FY20, AIN's top ten largest customers accounted for most of its revenue for the MC segment.  In addition, Safran (an individual customer) represented 30% of the AIN's AEC revenue. Hence, the loss of any of these key customers could hurt its financials in the long run. In addition, AIN is dependent on a limited number of suppliers for its raw material and manufacturing equipment needs. Therefore, any lag in the supply of the requisite quantity or quality could distort its operations and negatively impact the overall performance.

Outlook:

FY21 Outlook (Source: Investor Presentation, July 2021)

Valuation Methodology: EV/EBITDA 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.

AIN Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: AIN's stock price decreased 12.37% in the past three months and is currently leaning towards the higher end of the 52-week range of USD 48.57 to USD 93.43. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 45.92. We have valued the stock using the EV/EBITDA multiple-based relative valuation methodology and arrived at a target price of USD 94.30. Considering the correction in the stock price in the past three months, decent balance sheet, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the current price of USD 78.18, up 0.01% as of August 31, 2021, 3:34 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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