Stock of the Week #1; Altium
Altium launched its new cloud platform Altium 365, expanding its leadership and organisational capacity to drive growth and high performance for market dominance.
In the restructure, it’s separating its cloud operations from its software business and will focus on growing its market opportunity and expansion into the broader electronics ecosystem.
CEO Aram Mirkazemi says the launch of Altium 365 marks a significant turning-point in Altium’s journey, referring to this as “Altium’s Netflix moment” as it makes a hard pivot to cloud.
I put the question to my experts on The Call, Howard Coleman from TeamInvest and Gary Glover from Novus Capital, what they thought of Altium’s latest update.
Gary thinks the restructure will be a good thing for them.
“It’s been a pretty successful business. PE ratio is on a higher end as growth stocks always tend to have a higher PE. The revenue for the year is up 10% which is good in the current market place.
“The thing I don’t like about it the most is the technical indicators on its chart. The volumes are lighter for buyers but there has been an aggressive selling since February. You need to watch the stock around $37 which is a price resistance level and look for strong volume before investing.”
Howard agrees with Gary and thinks it’s a really good business but trading at an incredibly high PE ratio.
“I bought a very small parcel of ALU in March when the share price and PE ratio plummeted to relatively reasonable levels. It’s got all the basic requirements of a wealth winner. It has a very strong strategic thinking board.
“I think in the long term this company will continue to do well. I would love for the share price to get down to around $25, so I can buy some more. I probably should have bought more [in March] but didn’t.”
Stock of the Week #2; Sezzle
Sezzle’s Q3 results excited the market twith underlying merchant sales up 232% YoY to $318 million. It also reiterated an annualised run rate of more than US$1 billion by the end of the year. SZL also outlined plans for expansion into the massive Indian consumer market.
On The Call, we asked Julia Lee from Burman Invest and Rod Bristow from Clime Asset Management whether they think Sezzle still has some sizzle.
Julia believes that SZL was actually conservative with its run rate guidance, saying that she expects it to be achieved next month.
“You have to be pretty impressed with the growth rates that came through… while it is in that payments space it is also exposed to retail and we’re coming up to a very busy time of year for retailers, especially in the US.”
Julia suggests that the aggressive competition in the BNPL sector is something investors should be aware of.
“PayPal, in this quarter, is going to allow its customers to pay in four instalments so [I’m] watching that very closely to see if it does eat into that buy-now-pay-later space.”
Julia says SZL is a buy but she would only allocate around half of what she normally would given the PayPal announcement. Rod is also closely watching the impact on the sector of PayPal’s 22 million customers having access to its BNPL platform but says there is a lot to like about Sezzle.
“It’s a fast follower behind Afterpay, which is the clear leader, but the opportunity in that sector is absolutely enormous. The trend away from credit cards to buy-now-pay-later is a strong driver of value and we quite like that.
“On the flipside, we haven’t seen a lot around loss rates, so that’s something we’d like to understand and what is Sezzle’s own assessment of [PayPal’s] Pay in 4 model.
Rod says at this stage SZL is a hold for him.
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