This stock just IPO’d last month and will report earnings tomorrow.
Jamf Holding Corp. (JAMF)
From Canaccord Genuity Research
Jamf is the leading device management platform for enabling Apple devices in the enterprise. The firm’s secret sauce is in preserving the native Apple experience that consumers have come to love while giving IT professionals the ability to provision, manage and secure the devices as is required by large enterprises. This is north of a $10B annual opportunity that is growing> 15% per year as Apple gains share, and Jamf is without a doubt the category leader in terms of combined scale and functionality.
Jamf is growing in the mid-30% range, the business is nicely profitable with FCF margins already in the teens, and we believe the combination of new products, improving customer cohort dynamics, and compelling unit economics paint a picture of sustainable growth and improving profitability. We find JAMF’s valuation at 14.5x EV/R on C2021E palatable in an otherwise expensive space, and we believe investors should have at least some exposure here to participate in Apple’s continued enterprise share gains and to benefit from what’s likely to be a beat-and-raise cadence for the next several quarters. We are initiating coverage of JAMF with a BUY and $45 price target.
Corporations are increasingly adopting bring your own device programs as a means to attract and retain talent. Jamf plays a huge role in this for those who choose to go with Apple. For the employee, they get to enjoy the native Apple ecosystem without the burden of what is typically Windows-based device management technology muddying the user experience. For the employer, over a multi-year period the cost savings can be measured in hundreds of dollars per device based on less IT helpdesk demand and improved employee productivity. And for Apple, who is both customer and partner, Jamf is a key enabler of their growing enterprise presence.
Apple is gaining share in the enterprise. Most stats peg Apple’s share of corporate devices at about 11% in 2019, heading to 14%+ by C2021. This is a natural, organic tailwind to growth. Second, Jamf has added more than 14,000 customers in the last 18 months, bringing the firm’s total to more than 40,000, and there’s still plenty of room to run on the customer acquisition front. Finally, continued innovation and the introduction of new products like Connect in 2018 and Protect in 2019 enables a cross- and up-sell motion that should put upward pressure on net dollar retention that already measures 120 as of the most recent quarter.
Jamf realizes all the benefits that investors have come to love with vertically focused software companies—go-to-market efficiency and attractive unit economics, focused R&D as you don’t need to be everything to everybody, and an ability to super-serve its segment based on the firm’s experience and alignment with Apple. In combination, these factors have propelled Jamf to category leadership and it will be hard for competitors to catch up. Vertical focus is not entirely without risk, as Apple disintermediation and platform unification will always pose a threat, but for now we believe Jamf remains well positioned.
Jamf is a roughly $240M ARR (annual recurring revenue) business that is growing 35%+ as of its most recent quarter. The firm is nicely profitable with gross margins hovering around 80% and uFCF (unlevered free cash flow) margins that are already in the teens. Revenues are >90% recurring, the firm has no customer concentration, and over time we see no reason why this business should not be able to generate 30%+ FCF margins at scale. Software stocks are expensive these days, but JAMF deserves a seat among the premium assets.
We believe the stock can sustain a mid-teen forward revenue multiple which, depending on your assumptions for upside embedded in C2021, gets you a $40-50 stock price—more than enough for a BUY.
David Hynes Jr. & Luke Morison, CFA, Canaccord Genuity Research, canaccordgenuity.com