My Favorite Stocks in Charts: 1/20/22
Sharing the fundamental progression of my favorite companies right now.
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If you’re new around here, this post might be a good place to start. Then this post further explains my investing philosophies. Finally, this post shares the type of free analysis I share around here.
Estimated Read Time Below: 9 minutes
My Favorite Stocks in Charts
This is going to be more of a ‘once-every-3-months’ series, where I detail very clearly how the companies in my coverage universe are performing fundamentally.
This means their underlying business results — revenue growth, customer growth, international expansion, etc. It might just make more sense to walk through an example together before getting into the weeds.
Asana is a company I’ve been an “early investor” in and quite vocal about since their 2020 IPO. Haha, I even posted this to TikTok jokingly calling their stock “free money.” As you know though — I don’t just say things on the internet without backing them up. I formally introduced the company on Patreon (prior to joining Substack). I originally flagged them pre-IPO here and when they were trading for $24 / share here.
More than 12 months later, I now want to take some time to look back through how the company has fundamentally progressed as an enterprise. You can follow along in their investor materials here to check my work.
Upon IPO, the company reported 2019 revenue of $76.8 million, 2020 revenue of $142.6 million — and now are on track to rake in more than $221 million this year. To put this in perspective, that’s revenue growth of +42% compounded annually. I also don’t foresee this revenue growth slowing down anytime soon as the company will grow revenue by another +50% during 2022.
I don’t know about you, but I see a clear “up and to the right” trend line above.
Revenue is certainly important, but it’s only one component. Let’s now talk about how much of that revenue is realized as “gross profit.” Upon IPO, Asana was running ~86% gross profit margins — today this number is ~91%. Not only did Asana increase their revenue throughout the last 12 months, but more revenue was able to flow down to their bottom line as well.
Let’s now look at their customers. A company claiming they’re a “work management platform” is proven to be successful only when more and more enterprises begin using them.
Fantastic! Asana’s raw number of customers seems to be growing by +20% year-over-year. Even more encouraging — the number of customers paying them a substantial amount of money ($50K or more annually) seems to be growing north of +90% year-over-year.
So not only is Asana onboarding thousands of customers every quarter, but the onboarding of paid customers is growing much faster. Below is a past comment from their CFO regarding performance…
It takes a year or two for enterprises to truly onboard, embrace, and leverage all of Asana’s tools. Once this is done, we see a dramatic increase in money spent on our platform.
To really drive this point home — the chart below shows that Asana’s dollar-based net retention rate is increasing for the folks who are actually spending meaningful amounts of cash with them.
While most only see this company’s stock down -62% from their recent all time high in November — I see a company laying the foundation to deliver long-term shareholder returns throughout the coming decade.
At time of publication, Asana is a ~$10 billion company who will likely rake in $450-500 million in revenue over the coming 12 months — currently trading around ~21X forward revenue.
The last time the company’s stock traded this low in relation to expected forward revenue was late-2020, at around $28 / share. You’re telling me this company grew their revenue, expanded their gross profit margins, onboarded countless enterprises and they’re now trading as if none of that happened? Weird.
This is precisely why, personally, I think it’s best to not invest in a “stock” but instead an “underlying business.” Especially a business founded by the fella who co-founded Facebook back in 2006!
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Next up we have the payment processing masterpiece, Marqeta. As a quick refresher, this company provides modern card issuing and payment processing solutions. Think “just-in-time” funding for Instacart workers, or BNPL services for Affirm Debit+ cardholders.
Here’s a post from November that can bring you up to speed.
Starting with the most important metric — the company has grown their revenue from $143.3 million in 2019 and $290.3 million in 2020, to $497.5 million in 2021.
Understandably, this company’s revenue isn’t growing in quite the most linear line because their revenue is predicated on their total processing volume (TPV). They make money when folks like Klarna, Afterpay, Affirm, JP Morgan, Goldman Sachs, Coinbase, Square, Uber, Instacart and DoorDash spend money using their cards.
As seen above, this company’s TPV has continued to trend up and to the right. According to Cornerstone Advisors, BNPL purchases in the US are pacing for over +300% year-over-year growth in 2021 — broadly adopted by Affirm, Klarna, and Afterpay (now Square).
As mentioned above, all of these companies are using Marqeta to transact within their ecosystem. To me, a bet on Marqeta is a bet on BNPL’s continued adoption. This is something big banks are taking very seriously.
Marqeta is a recent IPO — so we don’t have much historical pre-COVID data to go off of as it relates to valuation multiples. However, at $12 / share (fully diluted) the company trades at ~4X the amount of net cash on their balance sheet. Forget forward looking revenue for a moment.. this company is trading for only 4X the amount of cash they have in their bank account!
Truly insane. Very excited about this one.
Finishing us off with one of our long-term favorites, Upstart. This was arguably one of our biggest winner from the Patreon days — posting this analysis when the stock hovered around $55 / share early-2021.
If you’re not too familiar with the company, here’s a recent post that explains their vision and where they’re headed.
Starting with the most important metric — in 2019, the company did $159.8 million in revenue. In 2020, this number rose +43% to $228.6 million. During 2021, this number skyrocketed +253% to $806.7 million. During this 5X in 3 years, the company also expanded their gross profit margins from ~84% to now ~87%.
A clear trend up and to the right — as well as contribution profit generally following suit. If you know Upstart, you know they’re an underwriting service that uses artificial intelligence to approve qualifying applicants. This means a major fundamental part of their business is the amount of loans their software is underwriting.
Up and to the right. If this company is underwriting 1M loans in 2021, which resulted in $806.7 million in revenue — what happens when it’s doing 4-5M loans / year by 2026? Their current take rate per loan is ~$2.2K, if we extrapolate that out both on the low end to only 4M loans and cut our take rate nearly in half to only $1.2K — we’re still doing $5 billion in revenue.
100M loans are underwritten a year in the USA. Upstart can absolutely do 4% of those considering they have ridiculous growth in auto loans, can seamlessly break into mortgages, and are the authority in the personal loan business.
That’s almost $2 billion in free cash flow in 2026.
Same deal as it relates to the number of dealerships running their “Upstart Auto Retail” loan technology. According to their last earnings call, the company is adding a new dealership, on average, every single day. There’s no reason this figure won’t eventually cross over 1,000 dealers — then 5,000. Below is a quote out of their press release that detailed their acquisition of Prodigy (now Upstart Auto) in early-2021:
Prodigy is the first end-to-end sales software that bridges the gap between how dealerships operate and the new way that people are shopping for cars. More than $2 billion in vehicle sales have been powered by Prodigy at franchised dealers from top brands such as Toyota, Honda, and Ford.
At $106 / share, Upstart is valued around $8.5 billion, or ~7X forward revenue. It’s truly mind blowing to see a company trade at this level when they have: a massive total addressable market, 87% gross margins, and the potential for 40% FCF margins.
I can’t wait to look back at this post in 2026.
Again, thank you all so much for your continued support. I’m thrilled to have the opportunity to share my thoughts and interpretations of companies within our coverage universe with you all.
Before I sign off, I want to leave you all with an awesome tweet I read today.
Up next in this series: Part 2 — including Roku, Monday.com, and Affirm.
Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.