ON24, Inc.

ONTF Details

ON24, Inc. (NYSE: ONTF) is a cloud-based digital experience platform that assists businesses in converting client engagement into revenue through interactive webinars, virtual events, and multimedia content experiences. ON24 derives revenue from subscription agreements with customers for accessing the platform and other allied services. ONTF's common shares were listed on the NYSE on February 3, 2021, at an IPO price of USD 50.00 per share. As of August 09, 2021, its market capitalization stood at USD 1.51 billion.

Zendesk Uses ONTF Platforms: Zendesk, a well-known CRM customer support software supplier, said on July 13, 2021, that it would be delivering a user experience to ONTF that would directly impact its pipeline and revenue. Zendesk is increasing its pipeline and bookings by generating qualified sales leads with the ON24 Digital Experience Platform.

Update to ON24 Virtual Conference: On June 29, 2021, ONTF introduced breakout rooms in ON24 Virtual Conference to cater to the corporate requirement for virtual customer engagement and hybrid event planning. Various globally recognized brands are using this virtual conference platform for large-scale online conferences, tradeshows, and multi-day events.

Q1FY21 Results: The company reported a 2.02x increase in total revenues to USD 50.10 million in Q1FY21 (ended March 31, 2021) compared to USD 24.75 million in Q1FY20, primarily due to an increase in subscriptions for the digital experience platform. However, the net loss increased to USD 2.83 million in Q1FY21 vs. USD 2.06 million in Q1FY20. As of March 31, 2021, the company had cash and cash equivalents (including short-term investments) of USD 391.94 million with total debt of USD 6.11 million.

Key Risks: The company relies heavily on third parties for its computing, storage, processing, application integration, and similar services. ONTF's content delivery networks (CDN) and some integration services are provided by third-party suppliers. As a result, any outages or capacity constraints such as technical failures, natural disasters, fraud, or security attacks, could affect the brand image and ultimately impact its cash flows and operation.

Outlook: For Q2FY21, ONTF expects its total revenues to be around USD 50.5 to USD 51.5 million, with non-GAAP operating income ranging between zero to USD 1.0 million. For FY21, ONTF anticipates its total revenues to be around USD 207.5 to USD 210.5 million, with non-GAAP operating income ranging from USD (2.0) to USD 1.0 million.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ONTF Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: ONTF stock fell 55.23% in the past six months and is currently trading in the lower-band of the 52-week range of USD 31.03 to USD 81.98. The stock is currently trading below its 50 DMA level, and its RSI Index is 37.84. We have valued the stock using the EV/Sales-based relative valuation method and arrived at a target price of USD 39.64. Considering the company's improved margins, effective utilization of its platforms, strong balance sheet, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 32.56, down 0.34% as of August 09, 2021. 

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced 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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