OneStream (OS) a Buy, Rivian (RIVN) a Sell
OneStream (OS) reported Q3 results after the close yesterday that have me increasingly excited about the stock’s long-term upside potential, once we get through next Monday’s lockup expiration.
Recall that OneStream is arguably the best-positioned company to become the standard for cloud-based software used by CFOs, which have traditionally been hesitant to put data in the cloud but are much less so today.
In Q3, revenue grew by 21% to $129.1 million, with subscription revenue growing 39% to $110.7 million. That’s a rare growth rate in software these days.
I’ll let a few quotes from various analysts following the stock tell the bullish story:
JPMorgan: “We continue to lean positively on the longer-term fundamental setup for the company, as we believe it is well-positioned to gain share as a platform consolidator … We reaffirm our positive view regarding OneStream’s ongoing traction with its Sensible ML product, which in our view puts OneStream among the few application software companies clearly booking business for a separately priced AI product … [Sensible ML] is becoming an important part of the story, and providing a pathway for finance teams to evolve.”
BofA: “The 3Q24 results mark the second straight quarter of quality results following its IPO. With a differentiated and developer friendly platform, we believe OneStream is well positioned to be a long-term share gainer in a large $44bn total addressable market. We believe the 3Q24 results are the first to establish what the beat-and-raise cadence could be over the medium-term. We continue to be long-term bullish on the stock.”
Morgan Stanley: “Another quarter of best-in-class execution further highlights OneStream’s differentiated platform. While management called out a consistent market environment QoQ, they did note more of an appetite for transformational projects within the Office of the CFO. Another key call out in the quarter was the faster-than-expected acceleration in SaaS conversions. These conversions are being driven by organizations becoming more comfortable with being in the cloud…”
The only catch here is that lockup expiration is next Monday, November 11. With the stock having done well since its July IPO it’s likely to face some selling pressure. Whether or not shares are absorbed quickly by the market remains to be seen. I’m keeping at buy and advising to look for weakness next week and the week after to add to positions. BUY
Rivian (RIVN) reported after the close yesterday and it is still a messy story. Revenue missed expectations but the adjusted EBITDA loss was less than expected. This is our worst-performing position, by far, and I’ve been reluctant to let RIVN go because I think it’s a long-term winner. However, we now have another potential overhang on the stock in the form of a Trump administration that is less likely than the Biden/Harris administration to keep IRA credits in place. This could put pressure on profit margins, which are already an issue. There has also been some grumbling about rising competition (the Lucid (LCID) Gravity SUV is coming to market any day). One weird dynamic here is that Tesla (TSLA) stock has surged on the Trump victory, and in theory if that EV stock is doing well others should as well. But for a lot of reasons, including an already profitable EV business, the Tesla-Musk-Trump dynamic is different from that of other EV companies and leadership teams. It will be ironic if we ditch RIVN here and it goes higher, but that’s a risk I’m taking. The stock is at risk of tax-loss harvesting pushing it down further. Taking the hit and moving on, reluctantly. SELL
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