Hello and welcome back to Pitch The PM, where we debate high-conviction investment ideas with top PMs using our 10 Step Variant View Investment Checklist.
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2-2.5x Return Potential. Post the COVID stock bubble, a laser-focused management team at Zoom worked to transform from a single-product company to an Enterprise platform. Revenue growth acceleration from low single-digits to high single-digits could be the catalyst for positive earnings revisions and potentially multiple re-rating.
In the second episode of Pitch the PM, ex-Citadel Analyst & Millennium Senior Portfolio Manager Doug Garber is swayed by Sean Emory’s ZM pitch. Sean has high conviction in his ZM thesis with a mid-teens weight in his portfolios. After more research, Doug also took a position.
10-Step Variant View Investment Checklist
[00:00] Intro
[02:29] What ACTION do I want the Portfolio Manager to take?
- Buy
[12:06] Do I UNDERSTAND this business and industry?
- Yes, Sean uses it for his business.
[21:51] Is the stock available at a REASONABLE price today?
- Yes, at 10x EV/EBITDA and at the low end of the Enterprise Software peers.
[32:48] Why is this stock MISPRICED?
Low growth at 3% as the Online Segment churn at 2-3%/month has reduced the overall company’s growth rate from the Enterprise Segment.
[35:57] What is my VARIANT VIEW vs the street?
- Growth accelerating to high single-digits from low single-digits.
- Adoption of Zoom phone and Zoom Call Center and stability from the Online Segment.
[38:34] What is my EVIDENCE?
- AlphaSense expert calls demonstrate the uplift from Zoom Phone can be 3x for an Enterprise client.
- And AlphaSense expert calls also discuss the strong, founder-led culture that is laser-focused on winning in UCaaS.
[51:58] What are the CATALYSTS for the street to realize my view?
- Quarterly results with accelerating Enterprise revenue growth and stable Online revenue.
[55:35] What is the company WORTH if my bet is right?
- $100 - $210 based on $5-$7 in FCF/share at 20-30x P/FCF.
[57:38] What is the OTHER SIDE of the bet?
- Competition makes it hard for Zoom to accelerate Enterprise growth and/or the Online Segment churn increases.
[1:02:54] Is management ALIGNED with ownership?
- Yes, this is a founder-led company with 8% insider ownership and a laser focus on being the best in UCaaS.
[1:04:51] Kill Criteria
[1:08:16] Short Interests
[1:09:27] Variant View Checklist
[1:22:25] Outro
Thank you for tuning in. We would be grateful for your comment or like!
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▶️ MORE EPISODES:
BNED: 3x Return Potential Post Recaphttps://youtu.be/P6xy67DtqQ4?si=S7RyvfnPceYAmJGx
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Avory & Company - Investing Where The World is Headed. Avory & Co runs a high-conviction growth equity strategy focusing on quality, well-led companies offering long-term sustainable growth. Sean Emory earned his degree at Yale. He was a co-founder of Blink App and founder and current CIO of Avory & Co.
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⚠️ Disclaimer: This is for educational purposes. It is not investment advice. Contact your financial advisor for suitable investments for you.
