ORBCOMM Inc

ORBCOMM Inc (NASDAQ: ORBC) is a US based innovator and global leader in the IoT (Internet of Things). The Company’s solutions help the businesses to connect with their assets to deliver better operational efficiency.

Investment Highlights - ORBCOMM Inc – Expensive at USD 7.68

• Despite the improvement in performance, the Company reported lower revenue and increased loss in Q3 FY2020.
• As per valuation metrics, Price/Earnings multiple of the ORBCOMM Inc is currently higher as compared to the corresponding multiples of the Telecommunications Services industry, reflecting overstretched valuations.
• The Company has reported a negative ROE (return on equity) of 2.5%, which is lower than the industry median. The Company’s ROE remained in negative zone from past three years.
• From the technical standpoint, 14-day RSI is supporting downward movement (around 66 level), which means the stock price could decline in the short term.

Key Risks

• The current market volatility and geopolitical environment can severely affect business operations and might have a negative impact on the stock performance.
• The Company’s operations are impacted by risks related to market trends, political change and change in the regulatory authority.

Recent News

On 17 December 2020, ORBCOMM announced that Lloyd’s List Intelligence has extended contract for their AIS (Automatic Identification System) data through 2023.

Trading Update for Q3 & 9M FY2020 (30 September 2020) (released on 28 October 2020)

(Source: Quarterly Report, Company Website) 

• The Company witnessed improvement in total revenue, adjusted EBITDA and EPS (earnings per share) for Q3 FY2020 versus Q2 FY2020 performance and was ahead of consensus.
• The Company reported record $18.7 million of cash flow from operations. The cash flow from operations surged by $8.8 million versus same period of previous year.
• The Company extended partnership with Inmarsat to enhance Satellite IoT Strategy.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown a decline in financial performance in the third quarter and nine months period of FY2020. Both the top-line and the bottom-line performance declined, while profitability margins remained in negative zone. The Company reported higher cash balance, while balance sheet remained poor. The operating expenses in the Q3 of the financial performance has increased, which needs to be controlled unless it will reduce the financial performance in long run and will also impact operational performance as well. ORBC operations were impacted by the outbreak of covid-19 pandemic and have been focusing on strengthening its balance sheet and return with capital discipline and reducing its costs. At present, the Company is not able to estimate the extent on covid-19 on business performance. Presently, the company is trading near a 52-week high, raising doubts at its upside potential at current prices. The stock made a 52-week low and high of USD 1.24 and USD 8.00, respectively.

Based on the factors as highlighted above, we believe the stock of ORBCOMM Inc is “Expensive” at the closing price of USD 7.68 (as on 7 January 2021), with support from few catalysts needs to be evaluated at a later stage such as increase in operating cash flow and extension of partnerships.

Pinduoduo Inc

Pinduoduo Inc (NASDAQ: PDD) is a US based e-commerce platform operator, providing interactive shopping options and value-for-money merchandise.

Investment Highlights - Pinduoduo Inc – Expensive at USD 180.12

• Despite the improved financial performance in Q3 FY2020, the Company’s operations remained impacted by covid-19 and is not able to provide guidance for FY2020.
• As per valuation metrics, Price/Earnings and Price/Book Value multiples of the Pinduoduo Inc are currently higher as compared to the corresponding multiples of the Software & IT Services industry, reflecting overstretched valuations.
• The Company has reported a negative ROE (return on equity) of 2.7%, which is lower than the industry median. The Company’s ROE remained in negative zone from past five years.
• From the technical standpoint, 14-day RSI is supporting downward movement (around 62 level), which means the stock price could decline in the short term.

Key Risks

• Failure in cybersecurity and a critical data breach could hamper the operation as well as the reputation of the company.
• Changes in government policies and regulations could affect the overall business of the Company.

Recent News

On 21 December 2020, Pinduoduo announced to raise $500 million through private placement to a global institutional investor.

Trading Update Q3 FY2020 (30 September 2020) (released on 12 November 2020)

• In the third quarter of FY2020, the GMV surged by 73% to RMB1,457.6 billion.
• The total revenue for the period surged by 89%, with an increase of 50% in average monthly active users.
• In Q3 FY2020, the active buyers surged by 36%, with 27% increase in annual spending per active buyer.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown improvement in financial performance in the third quarter of FY2020, while for nine months period the financial performance declined. The Company’s profitability margins remained in the negative zone for the period. During the period, the Company continues to make investment in user engagement to achieve stronger growth in active buyers and MAUs. PDD continues to make changes in strategic priorities in accordance with consumer habits. PDD operations were impacted by the outbreak of covid-19 pandemic and are not able to provide any meaningful guidance for full-year. Presently, the company is trading near a 52-week high, raising doubts at its upside potential at current prices. The stock made a 52-week low and high of USD 30.20 and USD 187.70, respectively.

Based on the factors as highlighted above, we believe the stock of Pinduoduo Inc is “Expensive” at the closing price of USD 180.12 (as on 7 January 2021), with support from few catalysts needs to be evaluated at a later stage such as increase in recurring revenue and  continuous investment made.

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