Asset Manager Investing in Global Technology Sector

We're an asset management firm allocating our capital into asset classes benefiting from technological innovation and applications globally. We serve as a family office of a tech professional who has spent over a decade as an entrepreneur, operator, and venture investor across Asia and the US.

Our small team is made up of diverse investment professionals who research, identify, and execute relevant opportunities. We occasionally share some of our investment memos, insights, and analysis here.

Friday, June 5, 2020

Q2.2020 - Cornerstone OnDemand: Saba Acquisition Should Deepen Its Moat

  • The ~$1.3 billion Saba acquisition will generate FCF of ~$225 million, more than Cornerstone's last two years of FCFs combined.
  • With the goal to be a $1 billion-a-year business, the combined entity will deepen its moat in the enterprise LMS market.
  • The stock is now down ~65% from its YTD-high, potentially factoring in a CEO change in the midst of COVID-19 and two major corporate actions.
  • At ~$38 per share, the price is fair.

Cornerstone (CSOD) is one of the long-time players in the enterprise LMS (Learning Management System) market. The company has been in business for over 20 years. Since its IPO in 2011, growth has decayed from +60% to +7.5% today. Considering the $1.3 billion Saba acquisition that will produce a combined entity with a +$800 million of revenue and steadily expanding double-digit FCF margin, Cornerstone presents an interesting investment opportunity. Furthermore, the added risk factors as a result of recent corporate actions and COVID-19 headwinds have also put pressure on the stock to create a good entry point opportunity. Currently, the stock is down ~65% from YTD-high.

No comments:

Post a Comment