Communications
OWS continues to strongly recommend this short idea to clients with their latest report focusing on three issues: 1) The fundamental takeaways from SSTK's 1Q24 results (which show their AI disruption thesis playing out). 2) Management's intensifying use of accounting shenanigans to distort results, perhaps to keep up appearances long enough for insiders to cash out. 3) Envato, a once-hot startup whose growth appears to have stagnated and now gone negative, and whose acquisition, perhaps a sign of desperation on the part of SSTK management, adds meaningful leverage to SSTK's once-clean balance sheet. Lowers TP to $27 (35% downside).
Edition: 186
- 17 May, 2024
Communications
OWS’ thesis is playing out - AI disruption is accelerating and management is turning to aggressive revenue recognition to obscure the problems. SSTK missed 4Q23 revenues on weak e-commerce. Even with the miss, DSOs appeared to soar yet again and FCF halved. The company guided to flat Y/Y revenue and EBITDA in 2024, but this assumes an unrealistic rebound in the stock business. Instead of taking a hard and honest look at the structural challenges it faces, and preparing its investors for a difficult transition ahead, management changed its segment reporting hoping investors would ignore the fine print and gave 2027 “targets” that appear fanciful at best. 40% downside.
Edition: 181
- 08 March, 2024
TMT Idea Forum
It was not surprising to hear several AI-related ideas given recent fervour for plays on the burgeoning technology, but it was unusual to see so many hardware / semiconductor ideas presented at a broad TMT event. Participants were focused on stocks that were relatively inexpensive even when valued on GAAP earnings. While most participants did not dispute their fellow presenters’ large earnings forecast deltas vs. consensus, many heavily debated the appropriate multiples to apply to those earnings. The most compelling ideas included:
Corning (GLW) - “Green shoots” emerging from cyclical bottom while margins structurally higher. TP $50 (45% upside).
Nu Holdings (NU) - “The best FinTech in the world” completely mis-modelled by the Street. TP $10 (100%+ upside).
Shutterstock (SSTK) - Leading photo "Arms dealer” with generative AI to drive new leg of growth. TP $150 (100%+ upside).
Edition: 156
- 17 March, 2023
Communications
A large percentage of SSTK's business faces a massive threat that is only likely to accelerate over the next 24 months - generative AI image models, which can create detailed, accurate, and high quality images based on written prompts, represent an existential threat to the stock image industry. One of the leading models, OpenAI's DALL-E 2, recently began an open beta with pricing on a per image basis much cheaper than SSTK. Margins will resume their long term decline. TP $30 (45% downside) represents an EV of 1x OWS’ 2023 and 2024 revenue estimates and 5x their 2023 and 2024 EBITDA estimates.
Edition: 144
- 16 September, 2022