UBER; Outperform, PT $40
Deep dive on UBER’s HD Mapping technology, which we think is an underappreciated part of the story and is highly topical as mapping ties back to most of the recent developments around M&A (Postmates, Routematch, etc) and a potential sale of a stake in the Freight business.
- HD maps are more important to UBER due to recent events, including M&A that expands delivery services and enhances public transportation relationships (e.g. Cornershop/Postmates/Routematch), along with new experiments around SaaS commercial models.
- Routematch, announced yesterday, adds dispatching/booking/ticketing for public transit agencies for UBER’s multi-modal transportation vision and strikes back at INTC’s Moovit acquisition.
- HD maps can enhance its current advantages when combined with UBER’s data collection on its network (e.g. improved driver/courier navigation, fleet efficiencies) and lead to new business lines.
- HD mapping also enables autonomous vehicle fleets, which should find a best, first use case on the scaled networks of UBER and LYFT.
- UBER’s mapping R&D provides another “optionality” leg as per TomTom’s $1.2B mkt cap and privately-held HERE Technologies’ $3.3B valuation, although its ability to stay on the cutting edge vs. others still bears watching (HERE, GOOGL Waymo, INTC Mobileye, LYFT, Mapbox, NVDA, TomTom).
- Separately, Bloomberg reported this week that Uber is in discussions to sell a $500mm stake in Freight at a $4B valuation, which also supports a number of the themes behind our thesis.
BA; SELL, PT $132
- Downgrade following a final verification of destabilized aerospace channel environment and rapidly falling contact expectations (looking out two years).
- After reassessment of survey data points and secondary communications with 737-program suppliers, we became convinced that the CY21 EPS forecast was too high and the FCF opportunity (for T4 and the Street).
- Bottom line, roughly 40-50% of aerospace contacts are bracing for the BA management team to formally issue surprisingly low 737 MAX production rate guidance.
- Preliminary channel discussion implies 50% downside vs the OEM targets shared with key suppliers about two months ago.
- Albertsons has seen little love since its IPO a few weeks ago, falling over 12% from the IPO price of $16. This brings its EV/EBITDA multiple down to just over 5x our 2021 estimates.
- Even though the equity has suffered, R5 research suggests that business has remained very strong as the impacts of the pandemic drag on.
- Indeed, with 25% of its stores in California, news of the closure of inside dining at restaurants and the decision to keep school online in LA and San Diego portends well for sales in 2Q and beyond.
- While the quarter is just has just gotten underway, our research would place the current comp above this estimate. If this were to continue, we would note that every 1% in additional revenue growth leads to at least $0.10 in earnings.
- Moving beyond the near-term, we see more Food at Home occasions and fewer restaurant visits with higher price points. This should help sustain sales at a higher level even once the pandemic fades.
- Prior to the IPO, R5 Capital conducted a teach in on ACI which is available upon request.
ROKU; BUY, PT $193
- Detailed analysis of the new Platform segment revenue and gross profit structure shows that
- Our current revenue estimates for FY20-22 are doable with fairly conservative assumptions
- Our previous estimates of gross profit and adjusted EBITDA may have been too low.
- We believe our findings support our positive view of ROKU shares and raise PT to $193
DPZ; BUY, PT $505
- Q2 EPS of $2.99, well ahead of our $2.15 forecast and sell-side consensus of $2.27. In addition, full-Q2 U.S. same-store sales rose by +16.1% (with positive traffic and positive ticket)
- This suggests very good momentum heading into Q3 -- for which we take up our full-Q3E U.S. same-store sales forecast by +500 basis points, to +12.0%. If momentum continues, even this double-digit number will look conservative in hindsight.
- Domino's is in the process of rolling out new-and-improved chicken wings at its U.S. stores, and once that process is complete, we should see a formal press release and TV ads.
- Mgmt notes that “it’s a bigger wing” with “exciting flavor profiles” and will be featured as part of the $7.99 carryout promotion.
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