AAPL 184.35 1.1134% MSFT 411.6876 2.364% GOOG 145.3444 1.0459% GOOGL 144.175 1.14% AMZN 174.33 3.4047% NVDA 784.65 16.2927% META 486.18 3.878% TSLA 197.565 1.435% TSM 129.25 3.1195% LLY 769.655 3.1834% V 283.785 2.5383% AVGO 1304.8 6.3017% JPM 183.325 1.3405% UNH 525.425 0.6619% NVO 124.57 3.01% WMT 175.35 0.9499% LVMUY 182.36 1.7066% XOM 104.775 -0.0715% LVMHF 909.7617 1.9427% MA 471.85 2.7884%

small-cap

Should You Exit This NYSE-Listed Software Stock – ONTF

Mar 02, 2022 | Team Kalkine
Should You Exit This NYSE-Listed Software Stock – ONTF

 

ON24, Inc.

ON24, Inc. (NYSE: ONTF) is a cloud-based digital experience platform that helps businesses turn consumer interaction into revenue by hosting interactive webinars, virtual events, and multimedia content experiences. The company makes money through subscription agreements to access the platform and other linked services. ONTF was listed on the NYSE on February 03, 2021, at an IPO price of USD 50.00 per share.

Why Should Investors Exit?

  • Declining Fundamentals: Net revenues fell 2.35% YoY to USD 52.03 million in Q4FY21 (ended December 31, 2021) from USD 53.29 million in Q4FY20. It also reported a net loss of USD 9.51 million in Q4FY21, compared to a net profit of USD 9.51 million in Q4FY20.
  • Dependence on Third Parties: ONTF relies on third-party data center hosting services for computing, storage, processing, application integration, and other services. Third-party suppliers also supply content delivery networks (CDN) and integration services. As a result, any service interruption or facility damage could severely impact ONTF's operations.
  • Reported Negative Net Margin: The company reported net margins of -19.0% in Q3FY21 (ended September 30, 2021) compared to the industry Median of 10.9%, indicating significant stress on the bottomline performance.
  • Technical weakness:ONTF shares are hovering in a steep bearish zone, with stock traded well below its crucial long-term as well as short-term support levels of 200-day, 100-day and 50-day SMAs, implies a long-term bearish trend. Further, the leading momentum indicator Moving Average Convergence Divergence (MACD) is falling, with the spread between 12-day and 26-day EMAs is negative, a bearish indicator. Also, the MACD oscillator hovering below its 9-day SMA signal line. Further, on daily price chart ONTF stock is forming a lower top and lower bottom kind of price pattern, another bearish indicator.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

ONTF's share price has declined 29.92% in the past six months and mostly tilted towards its 52W low, indicates bearishness in the stock. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 13.83.

Considering the company’s declining financials, weak margins, current valuation,  technical weakness and associated risks. we recommend a "Sell" rating on the stock at the closing price of USD 15.60, up 3.17% as of February 28, 2022.        

One-Year Technical Price Chart (as of February 28, 2022). Source: REFINITIV, Analysis by Kalkine Group

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.