Fastly 

Fastly (NYSE: FSLY) helps people stay better connected with the things they love. Fastly’s edge cloud platform enables customers to create great digital experiences quickly, securely, and reliably by processing, serving, and securing our customers’ applications as close to their end-users as possible — at the edge of the internet. 

Key highlights 

• Strong revenue growth: Despite the turmoiled period in 2020, the Company maintained its pace and witnessed the spirited performance in its revenue. We believe the Company is continuously working closely with customers; thus, its presence is increasing along volume, which is appreciable. 

Source: Company 

• Growing customer base: The company's primary source of revenue is the selling of services to clients who are executing contracts with a normal duration of one year, however periods may vary by contract. Over the course of the contract period, the majority of the contracts are non-cancelable. The firm is continuing to expand its number of enterprise clients as well as their average expenditure, which is a significant benefit. These rising numbers, we feel, are a driving elements behind revenue growth.

Source: Company

• Event update: The company will release its financial results for the second quarter of 2021 after market close on Wednesday, August 4, 2021.
  

Financial overview of Q1 2021 (In thousands of USD)

Source: Company 

• In Q1 2021, the company posted Revenue at USD 84.9 million compared to USD 62.9 million in Q1 2020, an increase of USD 21.9 million, or 35%. The revenue increased mainly due to increase in customer’s number.
• On the back of healthy growth in revenue the company posted gross profit of USD 47.3 million in Q1 2021 compared to USD 35.6 million in pcp.
• The group reported higher operating expenses in the reported period which stood at USD 97.3 million against USD 47.6 million. All the line item under operating expenses increased significantly.
• Primarily due to higher operating loss at USD 49.9 million in Q1 2021, the company posted net loss of USD 50.6 million compared to USD 11.9 million in pcp.
  

Risks associated with investment

The company derive its revenue primarily from usage-based fees earned from customers using its platform. Any decline in the average spending from the customers or failure to add more customers and enterprise customers would result in deteriorated financials. Additionally, to stay in the market the company requires upgradation on the regular basis, failing on this could lose the customers count. 

Stock recommendation

The company had another strong quarter, bringing in over USD 85 million in revenue, up 35% year over year. Customers are becoming more interested in its programmable edge computing solution as it continues to introduce new innovations to the edge cloud platform and software-defined contemporary network architecture. As a result, management is optimistic about achieving higher revenue in the range of USD 84 million to USD 87 million in Q2 2021, the revenue guidance range for CY2021 has also been increased to USD 380 million to USD 390 million from USD 375 million to USD 380 million, which is a significant positive. Therefore, based on the above rationale, we recommend a "Hold" rating on the stock at the closing price of USD 50.13 on July 14, 2021.

One-Year Technical Price Chart (as on July 14, 2021). Source: REFINITIV, Analysis by Kalkine Group

Hyliion holdings Corp.

Hyliion holdings Corp. (NYSE: HYLN) manufactures electrified powertrain solutions for the commercial vehicle industry by utilizing the company’s in-house proprietary battery systems, control software and data analytics, coupled with fully integrated electric motors.

Key Highlights:

• Operational Update: The company reported that it has installed ten Hybrid powertrains and already completed winter testing & validation of these. Moreover, the company would be focusing on improving its Hybrid platform in the coming days. Notably, the group expects to report its income from the second half of FY21 onwards.
  

• Joins FTSE Russell 3000 and FTSE Russell 2000 index: Recently, the company reported the listing of its equity shares in the FTSE Russell index. The above index captures 4,000 leading US stocks, which further provided the automatic inclusion in the Russell 2000 Index .The index has worldwide participants from ace investors and is expected to enhance the liquidity, which is a key positive.

• Recent Expansion: The company recently started expanding its Austin headquarters, wherein the group would enhance the facility footprint to 120,000 square feet, which is more than double the current capacity. This would enable the company to undergo simultaneous installation of the trucks. Moreover, the company is also tripling the size of the area of the company’s proprietary battery technology. These updates are encouraging and are expected to improve the company’s upcoming business prospects.
  

Q1FY21 Financial Highlights:

• HYLN announced its quarterly result, wherein the company posted a higher loss from operation at USD 16.731 million as compared to a loss of USD 3.362 million in the previous corresponding period (pcp). The increase was due to higher research & development expenses coupled with the absence of any income.
• The group reported a net loss of USD 16.562 million compared to a loss of USD 5.562 million in the previous corresponding period. The performance was partially supported by an absence of interest expense in the current quarter coupled with an inclusion of an interest expense.
• Cash and cash equivalents stood at USD 334.718 million, while total assets were recorded at USD 642.408 million.

Q1FY21 Income Statement Highlights (Source: Company Report)

Risks: The company is yet to report revenue and has reported net losses in every quarter, which has resulted in a higher accumulated deficit, which remains a key concern for the company.

Stock recommendation:

The company’s electrified powertrain Hybrid system and Hypertruck ERX systems are unique in nature and is expected to deliver strong traction in the coming days, supported by the nature of its operations. Moreover, the group has upgraded its facility in Austin, which indicates favorable upcoming demand dynamics and is a key positive. The group also expects its income to be generated from the second half of FY21. Moreover, despite the capital-intensive nature of the business, HYLN does not have any debt burden, which reduces the chance of any finance costs. Hence, considering the aforesaid facts, we recommend a ‘Hold’ rating on the stock at the closing price of USD 9.51 on July 14, 2021.

One-Year Technical Price Chart (as on July 14, 2021). Analysis by Kalkine Group

Electrameccanica Vehicles Corp Ltd.

Electrameccanica Vehicles Corp Ltd. (NASDAQ: SOLO) is a development-stage company which is engaged in the designing and manufacturing of electric vehicles (EV). The company operates with its flagship product SOLO, which is a single-seat vehicle, and was launched in August 2020 and currently operates through eleven retail locations across the U.S.

Key Highlights:

• Surge in input costs: The company is going through an expansion stage and is reporting a surge in its capital expenditures due to increasing investments for in-house capabilities. Moreover, the company’s unique product offerings require constant R&D activities, which further led to an increase in its expenses. Additionally, general & administrative expense stood higher in the last quarter and last financial year, respectively and continuation of the above trend would dampen the company’s profitability.

• Increase in Shareholder-deficit: The group reported an increase in shareholder’s deficit to USD 110.51 million in Q1FY21 due to a consistent net loss in the recent past. The increase in share-holder’s deficit would likely to dampen the company’s financial flexibility.

Q1FY21 Financial Highlights:

• SOLO announces its first quarter result, wherein the company posted revenue of USD 0.18 million, increased from USD 0.08 million in the previous corresponding period (pcp).
• Operating loss widened to USD 8.93 million, from a loss of USD 5.14 million in Q1FY20. The increase in loss was due to higher cost of revenue, elevated general and administrative expenses, higher research and development expenses, coupled with a surge in sales & marketing expenses, partially offset by lower stock-based compensation expense.
• The quarter witnessed higher interest expense coupled with a higher loss from changes in the fair value of warrant derivative.
• Net loss lowered to USD 0.18 million due to foreign exchange gains as compared to a net loss of USD 1.42 million in Q1FY20.

Q1FY21 Income Statement Highlights (Source: Company Report)

Risks: The company has reported a surge in input costs, which has dampened the company’s profitability. Continuation of the above trend is likely to drag the overall performance of the group.

Stock Recommendation:

The company received decent order flow from several clients across the globe and is expanding its mark within the EV vehicle segment, and the long-term outlook remains bright, supported by the transition to Electric vehicles from conventional fuel vehicles. The group started manufacturing its unique product SOLO, while the stability of demand depends on several macro factors. Thus, the sustainability of the demand remains uncertain depending on the transition to the EV segment, market share of the product etc. The stock corrected ~19% and ~56% in the last three months and six months, respectively. On the valuation front, the stock is trading at an EV to Sales multiples of 10.0x on an NTM basis, as compared to the industry (Automobiles & auto parts) mean of 4.1x. Hence, considering the aforesaid facts, we give a ‘Watch’ rating on the stock at the closing price of USD 3.53 on July 14, 2021.

One-Year Technical Price Chart (as on July 14, 2021). Analysis by Kalkine Group

Gold Resource Corporation

Gold Resource Corporation (AMEX: GORO) is a mining company which is a producer of metal concentrates that contain gold, silver, copper, lead and zinc, and dore containing gold and silver at the Aguila and Alta Gracia projects in the southern state of Oaxaca, Mexico.

Key highlights

• Robust preliminary numbers on production and sales for Q2 2021: In Q2 2021, the Company's Don David Gold Mine produced 6,555 gold ounces and 295,979 silver ounces, a significant increase over the previous equivalent period's 2,411 gold ounces and 185,330 silver ounces. The similar upward trend in output was seen in other metals, which is a significant plus. Furthermore, it sold 9,685 of total AuEq oz in Q2 2021 against 4,333 of total AuEq oz in Q2 2020. The company would report its financial and operating results for the second quarter ended June 30, 2021, on Tuesday, July 27, 2021, after the market close.

Source: Company

• Expanding exploration activity: The company conducted a 262-meter underground development on the southern dedicated exploratory drift project during the quarter. It also completed 14 underground diamond drill holes with a total length of 4,099 meters. Exploration drilling was primarily used to identify new reserves and enhance the mine design by expanding and delineating several high-grade parallel veins.

• Consistent dividend distribution: The Company has an excellent track record of dividend distribution, reflecting resilience and healthy cash flow generation. Recently, it decided to change the frequency with which it would declare and pay dividends from monthly to quarterly. The first USD 0.01 quarterly dividend would be paid on June 30, 2021.

• A healthy balance sheet with no debt burden: The company holds a strong balance sheet with USD 27.2 million in cash as of March 31, 2021, increasing USD 1.8 million since December 31, 2020. On top of all, the company holds no debts in its book. We believe that the company's current liquidity would be sufficient to carry out its activities satisfactorily.

• Prices are taking support at the lower band of the channel: On the weekly chart, GORO stock prices are trading in a falling wedge pattern and sustaining above the lower band of the pattern. On the weekly chart, the momentum oscillator RSI (14-Period) is near the oversold zone (~35 levels), indicating a possibility of rebound in the prices from the lower level. However, the stock is trading below 50-period SMA, which may act as a crucial resistance level for the prices.

Source: REFINITIV, Analysis by Kalkine Group

Financial overview of Q1 2021 (In thousands of USD)

Source: Company

• In Q1 2021, the company posted sales of USD 27.2 million, increased by 23.1% compared to USD 22.1 million in the previous corresponding period. An increase was mainly due to higher sales and higher average realization price of metals.
• On the back of lower cost of sales at USD 18.6 million against USD 22.0 million in pcp, the company registered higher gross profit at USD 8.5 million V/s 0.1 million in the previous corresponding period.
• The company also minimized its operating expenses to USD 3.4 million against USD 4.7 million in pcp; as a result, it witnessed a net income of USD 2.5 million against a loss of 3.1 million in pcp.

Risks associated with investment

The company is prone to many risks, such as risks related to international operations, government and environmental regulations, delays in mine operations, actual results of mining and current exploration activities, and volatility in the price of underlying commodities etc. 

Valuation Methodology (Illustrative): EV to Sales

Stock recommendation

In Q1 2021, the business produced 6,097 gold ounces and 307,610 silver ounces, with a net profit of USD 2.5 million. It would also reinvest USD 5.0 million in Don David Gold Mine exploration and infrastructure enhancements, as its present cash seems to be adequate to carry out its operations successfully. Furthermore, the management shared healthy preliminary numbers on production and sales statistics regarding Q2 2021, which would boost the momentum. Therefore, based on the above rationale and valuation, we recommend a “Speculative Buy” rating on the stock at the closing price of USD 2.30 on July 14, 2021. We have considered Sierra Metals Inc, Fortuna Silver Mines Inc, Fiore Gold Ltd, etc., as the peer group for the comparison.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Analysis Summary

One-Year Technical Price Chart (as on July 14, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.