Facebook, Inc.

FB Details

Facebook, Inc. (NASDAQ: FB) is focused on developing digital platforms that allow users to interact and communicate with friends and family via mobile devices, computers, virtual reality headsets, and in-home devices. Facebook, WhatsApp, Instagram, Messenger, and Facebook Reality Labs are among the company's products. All of FB's revenue comes from the sale of ad spots to advertisers.

Robust H1FY21 Results: The company reported a sharp uptick of 51.68% in revenues to USD 55.25 billion during H1FY21 (ended June 30, 2021) compared to USD 36.42 billion during H1FY20, primarily due to an increase in both the average price per ad and the number of ads. Net income improved to USD 19.89 billion during H1FY21 from USD 10.08 billion reported in H1FY20. As of June 30, 2021, the company's cash and cash equivalents (including marketable securities) amounted to USD 64.08 billion, with total debt (including finance leases) of USD 556 million.

Key Risks: Targeting and measurement tools that combine data signals from user activity on websites and services are crucial to FB's ad revenue. The company's ability to use these tools may be impacted by changes in the regulatory environment, and third-party mobile operating systems and browsers, resulting in a drop in ad revenue.

Moreover, the company's services are available in over 100 languages and are present in over 30 countries. As a result, any shift in geopolitical events, such as trade disputes and pandemics or any political, social, or economic upheaval in any of its operating regions, might jeopardize FB's operational and financial health.

Outlook: FB indicated in its Q2FY21 press release that it anticipates total expenses in FY21 to be in the range of USD 70 – 73 billion, with investments in technical and product expertise, infrastructure, and consumer hardware-related costs being the main drivers. For FY21, FB expects to invest between USD 19 – 21 billion in data centers, servers, network infrastructure, and office buildings.

Valuation Methodology: Price/Earnings per share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

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

FB Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: FB's share price has surged 44.98% in the past twelve months and is currently trading at a higher band of the 52-week range of USD 244.13 to USD 384.33. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 41.22. We have valued the stock using the Price/Earning-based relative valuation methodology and arrived at a target price of USD 306.12. Considering the significant uptick in the stock price, we believe the strong business fundamentals are adequately reflected at the current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 359.76, up 1.14% as of September 21, 2021, 12:09 PM ET.

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

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

Oracle Corporation

ORCL Details

Oracle Corporation (NYSE: ORCL) provides enterprise information technology (IT) products and services. It operates through cloud and license, hardware, and services business segments. It provides applications and infrastructure offerings delivered through a range of IT deployment models to government agencies, educational institutions, resellers, and other clients.

Driving Growth for Clients' Businesses: On September 20, 2021, Cablenet Communication Systems Ltd, a communications service provider based in Cyprus, implemented Oracle Communications' convergent charging, policy, and billing solutions to monetize new and existing products and improve customer experience swiftly. ORCL's billing and revenue management are cloud-native, thus enabling monitoring of the deployment cost, continual upgrades without disruption, and seamlessly incorporating other systems as per changing business requirements.

Concurrently, ORCL also launched Fusion Marketing, an Artificial Intelligence (AI) powered tool that anticipates when customers are ready to speak with a salesperson and generates qualifying sales opportunities in any Customer Relationship Management (CRM) system. Fusion Marketing assists marketers in executing campaigns that create high-quality sales leads and shorten transaction cycles.

Q1FY22 Results: The company reported YoY growth of 3.85% in total revenue to USD 9.73 billion in Q1FY22 (ended August 31, 2021) compared to USD 9.37 billion in Q1FY21. Net income for Q1FY22 increased to USD 2.46 billion from USD 2.25 billion in Q1FY21. As of August 31, 2021, the company stood with cash and cash equivalents (including marketable securities) of USD 39.31 billion and total debt of USD 82.72 billion on its balance sheet. In September 2021, the company declared a quarterly cash dividend of USD 0.32 per common share, payable on October 26, 2021, to shareholders of record on October 12, 2021.

Key Risks: ORCL is dependent on third parties, the majority of which are based out of the US, for manufacturing, assembly, delivery, and technology of its hardware products, which may hamper its ability to meet product demand and adversely impact the business.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ORCL Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: ORCL's stock price has increased 30.06% in the past six months and is currently leaning towards the higher band of its 52-week range of USD 55.14 to USD 91.78. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 46.00. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 77.06. Considering the uptick in the stock price, we believe the current price adequately reflects the strong business fundamentals and recommend a "Sell" rating on the stock at the current price of USD 87.49, up 1.53% as of September 21, 2021, 2:13 PM ET.

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

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

A10 Networks, Inc.

ATEN Details

A10 Networks, Inc. (NYSE: ATEN) is a major networking hardware and software provider to significant service providers, government agencies, and enterprises to improve cyber security and digital capacities across evolving IT and network environments. The company's product portfolio includes the Thunder Application Delivery Controller (ADC), Lightning Application Delivery Controller (Lightning ADC), Thunder Carrier Grade Networking (CGN), Thunder Threat Protection System (TPS), Thunder SSL Insight (SSLi), Thunder Convergent Firewall (CFW), and other automation tools. ATEN generates money through selling hardware and software solutions.

Expansion of its Security Portfolio Capabilities: ATEN enhanced its security and infrastructure solutions on September 07, 2021, to boost Zero Trust architectures for digital robustness. ATEN's infiltration visibility and protection, granular operational micro-segmentation, and advanced user authentication and verification services have been upgraded to guard its customers against encrypted ransomware and malware.

H1FY21 Results: The company reported a 7.29% increase in total revenues to USD 114.01 million during H1FY21 (ended June 30, 2021) compared to USD 106.26 million during H1FY20, primarily due to an increase in sales across the Americas, Asia Pacific, and EMEA regions. As a result, ATEN improved its net income to USD 9.27 million during H1FY21 from USD 3.51 million reported in H1FY20. As of June 30, 2021, the company's cash and cash equivalents (including marketable securities) amounted to USD 166.81 million, with no outstanding debt.

Key Risks: Purchases by the ten largest end-customers amounted to roughly 36%, 41%, 36%, and 37% of ATEN's revenue in H1FY21, FY20, FY19, and FY18, respectively. Such over-reliance on a few customers for revenue could harm the company's financial status in the long term.

Furthermore, sales to customers outside the United States (such as Japan, Western Europe, China, Taiwan, and South Korea) represented approximately 60%, 63%, 64%, and 55% of the total revenue during H1FY21, FY20, FY19, and FY18, respectively. As a result, any significant worsening in the economic conditions in these regions might harm the company's operations and financial health.

Outlook: ATEN indicated in its Q2FY21 press release that it anticipated Q3FY21 sales to be in the range of USD 60.6 to 63.4 million. It also stated that the growth rate for its bottom-line is expected to be faster than the top-line growth.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

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

ATEN Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: ATEN's share price has surged 94.09% in the past twelve months and is currently trading at the higher band of the 52-week range of USD 6.13 to USD 15.02. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 51.64. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 11.63. Considering the significant uptick in the stock price, we believe the strong business fundamentals are adequately reflected at the current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 13.80, up 0.51% as of September 21, 2021, 12:50 PM ET.

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

*All forecasted figures and industry information have been taken 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.