Zebec Research

1Q20 results:  Alphabet posted solid 1Q20 results, all things considered.  Advertising results sounded strong in January and February but saw an abrupt drop off in March.  Search increased 9% for 1Q but ended March down at a mid-teens rate.    While search activity increased, the searches were focused on less commercial topics.    And advertisers reduced spending.   YouTube ad revenues grew 33% but declines accelerated to a high-single digit rate by the end of March.    Brand advertising accelerated in the first two months of the quarter but saw headwinds beginning in mid-March, while direct response advertising was strong across the quarter. Google Network ads grew 4% in the quarter.    Growth was solid during the first two months but ended March with a low-double digit decline. Non-ad related revenue remained strong throughout driven by Google Cloud. Overall, the ad declines were not as bad as we expected.  Goo...

We initiate on Okta with a  Buy Investment Rating and  fair value of ~$150, 27% upside.  ( Link )  Per leading Technology Research firms, Okta is the leader in the IAM industry due to several competitive advantages.  As a result, we think Okta is well positioned to take share from competitors due to aggressive investments in its products, which has resulted in a best-in-class offerings. We estimate Okta currently has only a 5% share of the IAM market. The attractive market growth and Okta’s leading position suggest a long runway for growth for Okta. Our DCF and EV/Sales models point to a fair value for the stock of ~$150+.  This valuation is supported by Okta’s potentially to be an acquisition candidate for a legacy provider. Originally published on 12/11/19.