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Market Summary:
The major indices are all trading higher at midday following an active and bullish morning session on Wall Street, with stocks recovering some of last week’s steep losses. Cyclical issues, small-caps, and the Dow have all been showing relative strength this morning, as global growth fears eased thanks to the promising early data on the Omicron variant. The most virus-sensitive issues have also been pulling their weight even as the number of global COVID infections hit its highest level since late-August over the weekend.
Stock Pick Summary:
Today, we are doubling down on one of our high performing pick last year, until it took a severe beating last week. It was down more than 35% after reporting third-quarter earnings that included a more tempered outlook and environment than the market was anticipating. While the company posted impressive growth on both its top and bottom lines, the billings guidance, a key indicator of future revenue growth, came in lower than expected at only 28 which indicates a considerable slowdown from the prior two years. Possibly, the tailwinds from COVID that it enjoyed are beginning to subside. However, we believe it still remains a top quality business that will continue to grow in a more adjusted and normalized growth environment. The fundamentals are as strong as ever, with a strong dollar-based net retention rate of more than 120%. Not only is it onboarding more customers, pulling in 58,000 new users in the quarter, but the number of customers spending more than $300,000 each year with the platform grew 46%. It has been consistently showing its ability to scale posting a solid 16% free cash flow margin last quarter. While the market may be short sighted, we believe this company is still in just an early stage of tapping what could potentially be a $60 billion plus market opportunity, that it could exploit with steady growth in US and internationally. We are excited to take a second position in it today for the long term!
Risk Meter:
Allocation Guidelines:
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