Q: Hi can you please provide an updated opinion on KVYO now that the ipo sizzle has subsided a bit? I'm intrigued that Shopify invested heavily in it.
5i Research Answer:
KVYO operates as a Saas marketing platform that helps customers send personalized, targeted messages and is now trading at 11x times' Price/Sales. The company is still in high-growth mode, still unprofitable, and a type of early-stage investment. The balance sheet is strong, with net cash of around $700M. Based on consensus estimates, sales are expected to grow by more than 25% over the next few years. SHOP’s heavy investment in the company is certainly encouraging (currently owns around 44% of KVYO), and any significant drop in share price could offer SHOP the opportunity to acquire KVYO. Having said that, we would be comfortable with a conservative allocation, we would be okay to average up as the company demonstrates execution.