Commentary

In the 18 months since our original report on Korn Ferry, available at kerr.co/kfy, we’ve gained further conviction that the company’s combination of strong revenue growth, attractive incremental margins, and higher subscription revenue mix will continue to drive estimates and multiples higher.

Korn Ferry is the dominant executive search firm and is successfully transforming into a digital-first global consulting organization with a leading technology platform. The company brings an increasingly diversified revenue mix that’s lowered cyclicality in the business, and a scale advantage that is not reflected in its current valuation when comparing KFY to its sub-scale private competitors or firms competing down-market. The company’s recent proxy suggests management wants us to comp the business to commercial real-estate companies like Jones Lang Lasalle Inc. and asset-light dominant franchises like Nielson Holdings plc, and we agree. Korn Ferry’s business model shares many similarities to the commercial real-estate market, including share gains in a fragmented market providing consolidation opportunities, with a growing demand for outsourcing of services benefiting large established incumbents with diversified business segments like KFY. We think shares re-rate from current 8.5x EV/EBITDA multiple to 12 -14x, driving upside for the stock to the $100 – 110 range.

Read our full update here.

In our original report on Principia Biopharma, we emphasized that BTK inhibitors have failed over and over in autoimmune diseases, which we attribute to a basic problem with their mechanism of action: their main effect is to impair the production of new B-cell lineages, leaving the previously established B-cell populations that cause autoimmunity largely unscathed. Alas, Sanofi – the French pharma firm that licensed Principia’s BTK inhibitor SAR442168 for use in multiple sclerosis – doesn’t seem to have gotten the memo. During Sanofi’s recent earnings call, its global head of R&D rattled off what he views as the drug’s key virtues, all the while perpetuating several myths and misconceptions. Here we respond point to point to Sanofi’s paean to SAR442168, explaining why we remain unimpressed.

Read our full update here.

We are short shares of Principia Biopharma. Last week, Sanofi, the large pharma company that has licensed Principia’s BTK inhibitor SAR442168 for use in multiple sclerosis, announced that the drug met the primary endpoint of its Phase 2 trial. In our original report…

Since our last article on Intelsat, newsflow has continued to trend positively and point to major positive catalysts over the course of 2018, yet Intelsat shares have tumbled from the mid $20s to the mid teens. In this article, we provide updates to our thesis and timeline; for background, please also see our original report and 2018 update…

• CMS provides granular detail on the building blocks for reimbursement calculations. The details provide investors with a roadmap to evaluate the ultimate reimbursement rate for the Zio procedures.
• An analysis of iRhythm’s allowance for doubtful accounts implies that the company may be stretching to exceed revenue expectations, and is potentially…

With shares 36% below last year’s highs, we believe an investment in Intelsat (NYSE: I) represents exceptional value ahead of important catalysts as the regulatory process enters its final stages. The bull thesis as laid out in our original, full-length report and subsequent…

Since we released our original, full-length report on Intelsat and SES a month ago, events have unfolded even more rapidly than we expected, and our confidence in the upside potential of these stocks, largely due to the underappreciated value of their US C-band spectrum, has only grown. Below we briefly summarize some of the key developments…

This post is part of a series of additional research that we conducted following our initial report on ViaSat. Please visit factsaboutviasat.com to access all of our research on ViaSat.

ViaSat’s aviation business is a source of market interest and bullishness.  Much like shareholder enthusiasm for ViaSat’s residential broadband business, we believe much of this optimism is misplaced.

Until ViaSat-3 Asia is in service (likely beyond 2022), ViaSat lacks global coverage. This is a non-starter for many international airlines.  If and when all three ViaSat-3 satellites are…

This post is part of a series of additional research that we conducted following our initial report on ViaSat. Please visit factsaboutviasat.com to access all of our research on ViaSat.

A key flaw in ViaSat’s technology path and business model is the lack of backward compatibility.  ViaSat’s newest satellite, upon which the company’s growth prospects hinge, cannot communicate with its current subscribers. Currently installed aviation equipment is also not compatible with ViaSat-2, which is why management recently cited a “pause” in installation…

We remain short shares of Straight Path Communications. As we argued earlier this month, Straight Path is dramatically overvalued relative to the most appropriate comparable transaction: Verizon’s potential future acquisition of XO Holdings’ millimeter-wave (mmWave) spectrum. Reaching this conclusion does not require any particular skepticism about the prospects of mmWave 5G. However, some investors – apparently taking marketing fluff at…

Today we’re announcing that we sent what’s called a Form 3949-A (Information Referral) to the IRS explaining why we believe DISH is violating tax law by taking approximately a billion dollars per year in tax deductions that it isn’t eligible for. These tax deductions stem from DISH’s amortization of the cost of its spectrum purchases. Some analysts value the cumulative savings over time at $6 per share – roughly 13% of DISH’s current equity value. However,…