Polish roulette
Niall Ferguson sees a low probability that the ruling right-wing coalition led by Law and Justice (PiS) will secure a third consecutive majority on its own in the upcoming election. It is more likely that elections will result in a hung parliament. This will set off coalition negotiations, in which the far-right upstart party Konfederacja is likely to play kingmaker. The best outcome for Polish assets is if PiS falls short of an overall majority by a few seats only. In this case, it will persuade a few Konfederacja MPs to join its ranks. The worst outcome is if either PiS or liberal opposition party Civic Platform falls short of a majority by 8-10 seats or more, forcing either party to rely on Konfederacja for outside support. Such an arrangement may collapse quite quickly, leading to snap elections within 12 months.
Edition: 170
- 29 September, 2023
Technology
Sales have fallen for three quarters, from a growth rate of 51% last June to -23% in the quarter just ended. Margins have collapsed (gross margins down from 48% to 42% and EBITDA margins from 39% to 31%) and the company has added $1bn of debt since 2017. The share price is only down 13% YTD and is still 10% higher than a year ago. Eric Fernandez believes UI warrants a closer look as a potential short candidate with the stock trading at high multiples of both sales and earnings (46x Jun 22 and 35x 2023 earnings). Other companies flagged in Eric's ‘Breaking Estimates’ model are Nutanix, Upstart and Corsair Gaming.
Edition: 137
- 10 June, 2022
Financials
No brand identity or special sauce - UPST is a lending company disguised as a tech company and will end up like other previously "high-flying" FinTech platforms (e.g. LendingClub and Lemonade). Despite a ~65% decline from highs, the stock still trades at ~65x FY22 EPS, ~8x Sales, and ~21x BV. Provides a good setup for going short with expectations high after strong 4Q21. Consensus FY23 EPS is $3.25 but could fall to $1.50 if securitization market dries up. Sees no reason for it to exist in 5 years. TP $10 (90% downside).
Edition: 130
- 04 March, 2022
DoorDash (DASH)
Communications
Clear case to be made that DASH can rise from an upstart restaurant ordering/delivery company into an empire spanning Restaurants, Convenience, Grocery and other CPG categories. Hedgeye believe that the company can easily exceed $70bn in Marketplace GOV in FY24, up over 80% from $37bn in FY21. Their bullish thesis also includes DASH’s opportunity to monetise DashPass (compares it to Amazon Prime/Starbucks Rewards) and its potential to capture substantial market share in the digital advertising space.
Edition: 113
- 25 June, 2021
Upstart (UPST)
Financials
Fintech but trades like a Software company with valuation in “Lala Land” - sees near-term regulatory risk as this AI lending platform's focus on educational background data to predict creditworthiness potentially violates fair lending laws. UPST competes with banks but lacks capital. Overly reliant on Credit Karma (Intuit) to drive business. Also highlights poor unit economics and minimal operating leverage. Is UPST the next LendingClub? TP $15 (85% downside).
Edition: 110
- 14 May, 2021