PRIOR RESEARCH SAMPLES
Domino’s Pizza (DPZ) - Hawkshaw Deep Dive Report
October 2022
“Over the last 9 years, DPZ has enjoyed a premium P/E, ranging from 25-35x, due to its high ROICs (80%+) and continuing growth potential, primarily driven by its international expansion and U.S. share gains from independent operators (see pg. 2). The slowdown in growth, however, has knocked its P/E to 22x, its lowest level since 2013. Our research suggests that the post-Covid revenue giveback has stabilized and the heaviest effect of the delivery app competition has passed. Moreover, as the labor shortage alleviates and the countercyclical trade-down benefits kick in, SSS will likely turn positive again. Assuming 2023/24 SSS of 3-5% and P/Es ranging from 25-30x implies 40-80% upside potential for the shares (against 10% bear case downside).”
Hertz (HTZ) - Hawkshaw Deep Dive Report
March 2023
“Our research suggests that HTZ’s current inflated pricing and margins are a function of restricted rental car supply, which is likely to begin normalizing in 2H23 and 2024. As Enterprise and Avis grow their fleets, competition is likely to intensify. Moreover, as the spread between new and used car prices normalizes, depreciation is likely to far exceed expectations. In our base case, 2024 EPS comes in 50% below consensus, which factors in Enterprise regaining some lost share, prices falling modestly (still 35% above 2019), and partial normalization of the new and used pricing spread. Using an 11x P/E implies 50% base case downside. In our bear case, earnings turn negative and the downside is likely 75%+. Note: pre-Covid (2015-19), Avis’ P/E mostly ranged from 7-15x, averaging 11x.”
Pintrest (PINS) - Hawkshaw Deep Dive Report
October 2022
“As PINS bolsters its adtech, it will meaningfully increase its share of advertising budgets, driving 2024 revenue of $5.3bn (vs. consensus of $3.9bn). The natural operating leverage from the dramatic upside to revenues will amplify the profit growth, as EBITDA margins expand to the mid-30s vs. consensus of ~20%. Historically, similarly profitable digital ad publishers (e.g., FB & GOOGL) have traded at ~25x earnings. Accordingly, we apply multiples of 25-30x in our base and bull case, implying 125-350% upside potential, respectively.”
RingCentral (RNG) - Hawkshaw Deep Dive Report
September 2022
“RNG’s adjusted EPS figures are overstated because commission amortization is too low (5+ year amortization schedule) and purchased intangibles amortization is wrongly excluded (even though they’re a form of sales expense). When properly adjusted, FCFs have been significantly negative in each of 2019, ‘20, and ’21. RNG faces a conundrum: either FCFs will remain weak as it continues to buy growth, or its revenue trends will decelerate meaningfully, disappointing investors. We believe this management team is intent on buying growth, even if the economics are suspect. Our base and bear cases suggest 40-60% downside risk, assuming revenues approximate consensus, FCFs continue to heavily trail NI, and FCF multiples range from 20-25x.”