Call Details:
Date & Time: Wednesday 9/26 @ 2:00PM ET
Dial-In and Webcast Information: To be provided prior to the call
Add Call Details to Outlook Calendar: CLICK HERE
It’s been a good summer for our Shorts: MCHP, DBX, and ADT were all strong performers on the SHORT side through the summer. Our Longs, Sony and CREE, were admittedly more mixed. But after a little late-summer dry spell, we are back with a new Short.
AVLR: New Best Idea Short
Avalara is a newly IPO’d (June 2018) maker of software for the sales tax automation market. The company is considered somewhat of a leader in the category, and there is excitement from a top down perspective because of the battle by states to retrieve more sales tax revenue, especially as cross-state e-commerce joins the sales tax mix. A greater push by states towards collection can force more interest by companies in automating the sales tax process.
Sound pretty good so far? We are typically bullish on stocks like this. We like being LONG small software companies that are automating a manual process. Over time we think that process wins. We like stocks that have a large potential addressable market, even if growth is slow and steady. We featured BL (BlackLine Inc.) on this trend just a few months ago (HERE).
But something is amiss in the case of Avalara. We found so much hair in this process that we couldn’t stomach being LONG a stock like this even though it typically falls right into the sweet spot of our Long idea generation.
What We Don’t Like:
- ...is a long list of yellow to red flags that we unearthed in our research
- An example is the slide below: the biggest competitive threat to the company – Intuit – was removed from the competition section of the official S-1 (5/11/18) after being present in the draft S-1 less than 2 months before
- come hear the other 11 reasons on Wednesday September 26th at 2pm
A Mixed Setup
Don't worry, for the bulls involved, we will also share bullish elements we discovered including DR y/y growth, billings growth, and revenue per sales headcount, among other bullish takeaways. It won't be a one-sided presentation, especially since we see some n-t upside risks in 2H. Ultimately, we think bad companies succumb, especially in low barrier to entry markets with rising competition and less durable market penetration opportunities than advertised...
Oops, said too much. See you Wednesday.
Ami Joseph
Managing Director
