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February 15, 2023

Earnings Updates: ABNB, NRDS, TIXT, SEDG, UDMY

Airbnb (ABNB) beat Q4 expectations in yesterday afternoon’s report with revenue of $1.9 billion (+24%) beating by $40 million and GAAP EPS of $0.48 beating by $0.21. Management said that while average rates per night are likely to creep down this year demand remains very high, guests are booking earlier and for longer stays, European guests are booking summer travel earlier, the company is gaining share in Latin America and the Asia-Pacific region is recovering. On the call they talked about perfecting the core offering of hosting stays, expanding beyond that core offering and making hosting mainstream. Sounds good to me. Summer marketing is starting earlier to better match booking trends and while that might weigh on margins in Q1 2023 the company sees margins holding steady for the full-year 2023. Global listings rose 16% to 6.6 million, meaning rental supply continues to grow (that’s good). The company bought back $500 million in shares in Q4 and has $500 million remaining on the buyback authorization. Following this quarter analysts are likely to increase forward estimates. We’re now looking for about 14.5% revenue growth in 2023 and just over 15% in 2024. Moreover, EPS estimates (both GAAP and adjusted) are likely to go up now that Airbnb has streamlined its cost structure and has revenue growing. The stock should act well today. It’s a buy. BUY

NerdWallet (NRDS) beat expectations yesterday afternoon with revenue of $142 million (+42.7%) beating by $2.41 million and GAAP EPS of $0.12 beating by $0.04. Revenue guidance for Q1 2023 of $165 - $170 million (+30% at the midpoint) is well above consensus expectations of $145.3 million. Growth in Credit Cards (+52%) is a real bright spot as is an uptick in areas of Other Verticals (+90%), such as Banking (+280%) and Small Business (+94%). The Loans segment remains weak (not a lot of mortgages these days). A new auto insurance marketplace is beginning to ramp. Segments that were strong in Q4 are factored into the strong Q1 2023 guidance. Credit to NerdWallet management for navigating uncertainties in the current market and investing where opportunities exist (user interface, customer experience, Australia). I think the stock will do well today and hold above resistance in the low-to-mid-14 range. It’s still a buy. BUY

TELUS International (TIXT) reported mixed results last week with revenue of $630 million (+5%) missing by $3.3 million but adjusted EPS of $0.35 beating by $0.03. The softer-than-expected revenue figure was impacted by macro pressures, weakness in Europe and foreign exchange. Management cited delayed commitments across the customer base so it doesn’t appear everything is clicking as we’d like. Forward guidance for 2023 organic revenue growth of 10% to 12% is on the low end of expectations but gets a lift from the WillowTree acquisition, which should push total revenue growth into the 20% to 23% range. That’s offset by a slightly softer than expected profit outlook (partially because of lower-margin WillowTree revenue and associated interest expenses) that has 2023 EPS guidance of $1.20 to $1.25 not great versus prior consensus of $1.34. Big picture, the quarter didn’t do much to offset growth and margin concerns, though it’s still very early as far as WillowTree integration goes. As a conservative growth company TELUS International is more about the long game than just trying to hit numbers in a given quarter. The question for us is whether or not this stock, which we entered with a trading mentality, is a better buy than the other options we have right now. I think not. Let’s go ahead and cut TIXT loose at about the same price we entered the trade and move on to fresher opportunities. SELL

Watch List stock SolarEdge (SEDG) reported Q4 results on Monday that surpassed expectations. Revenue of $891 million (+61.4%) beat by $11.6 million while adjusted EPS of $2.86 beat by $1.27. Management said European and global demand is strong but U.S. residential demand is weak. Supply is still limited, though manufacturing in Mexico is increasing and plans for U.S.-based manufacturing are in the works. Final IRA guidelines from the U.S. Treasury are still not complete. Still interested in the stock but not enough to jump in yet. Keeping on the Watch List

Watch List stock Udemy (UDMY) missed Q4 expectations yesterday afternoon as revenue of $165.3 million (+20%) came in $270,000 under expectations and GAAP EPS of $0.36 missed by $0.03. The quarter showed signs of weakening in the Udemy Business as small business churn offset higher spend by larger customers, which seem to be consolidating education spend on Udemy’s platform. Foreign exchange was a source of some volatility. Management is looking to get to profitability more quickly (10% headcount reduction announced), which is a positive. However, fiscal 2023 guidance of $700 - $730 million (+11.3% to 16%) is well below consensus expectations of 23.5%. The bottom line here is that risks to growth have gone up, not down. This quarter validates having put Udemy on the Watch List and waiting to review the quarter. This result didn’t get it done. Dropping from the Watch List today

Tyler Laundon is chief analyst of the limited-subscription advisory, Cabot Small-Cap Confidential and grand slam advisory Cabot Early Opportunities. He has spent his entire career managing, consulting and analyzing start-up and small-cap companies. His hands-on experience has taught Tyler that the development of a superior business model is the biggest factor in determining a company’s long-term success. Accordingly, his research focuses on assessing the viability of management’s growth strategies, trends in addressable markets and achievement of major developmental milestones.