Piper Sandler Tries to Call the Bottom in Growth Tech Sees 5 Names Cheap Enough to Go Private
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Piper Sandler analyst James Fish believes the growth selloff is at or near the bottom and reiterated Overweight ratings on six companies highlighting them as possible private equity takeout candidates. Taking a traditional measure of growth stocks, Equity Value to Revenue, then adjusting this metric for Growth, he has come up with a metric that, he believes, creates a standardized way of gauging the market's appetite for risk. Reviewing this measure historically, the market is not only back to pre-pandemic levels, we are at the lowest level since 2018. We're at the point, where public investors may have to compete with Venture Capital since companies are trading below the legacy 5x recurring revenue benchmark for potential private equity deals.
Companies that he views as takeout candidates include:
LiveVox Holdings (NASDAQ: LVOX) and Bandwidth, Inc. (NASDAQ: BAND) trading between 1 and 2x Recurring Revenues. LiveVox in particular stands out because 80% of the shares are still held by PE companies.
Nutanix (NASDAQ: NTNX) trades between 2 and 3x Recurring Revenues with a Bain Capital investment that implies ~10% ownership already and the Market is not crediting the subscription transition.
Lastly, Zoom (NASDAQ: ZM) and Fastly, Inc. (NYSE: FSLY) which are less likely because 1) both are slightly more expensive at 4-5x Recurring Revenue and 2) both are in the midst of transitions, ZM moving "beyond video" and FSLY initiating a CEO Search.
Shares of LiveVox Holdings closed at $2.47 yesterday.
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