ServiceTitan Made Waves in Its IPO, But Is the Stock a Buy?

One of the hottest stocks to have its initial public offering (IPO) recently is tech company ServiceTitan (NASDAQ: TTAN). The software company made headlines after its valuation jumped over 42% on its first trading day. However, since its one-day change on Dec. 10, the share price has stagnated, down 1%. On average, Wall Street analysts are still bullish on the name. So, what exactly does ServiceTitan do, and what is the reason for such excitement around the company? I’ll answer those questions and provide my thoughts on the company going forward.

ServiceTitan: Bringing Technology to the Trades

ServiceTitan finds itself in an interesting space. It looks to integrate sophisticated software into industries that have gone years without it. ServiceTitan and many others refer to these industries as “the trades." It includes people who work in plumbing, roofing, landscaping, carpentry, and similar jobs. ServiceTitan’s founders were the sons of trades business owners. They noticed that low-value, repetitive tasks were wasting their parents' time. It hurt their ability to grow the business. They developed ServiceTitan software to meet the needs of tradespeople. It helps them scale and run their businesses more efficiently.

The cloud-based software provides a variety of functions. It includes sales, marketing, and customer service. It also extends to scheduling and assigning jobs, tracking inventory, HR management, and payment processing. Overall, it appears to be a one-stop shop where tradespeople manage their business. The software uses AI to automate processes within these functional areas and lead its customers to the best business opportunities.

Customers clearly like the product once they use it. The company has retained 95% of its customers over each of the last 10 quarters. Those customers are also spending more. The company’s net retention rate is over 110% for the past 10 quarters. This means that, on average, the spending from existing customers has increased by 10% each quarter.

Revenue Streams, Addressable Market, and Growth Strategy

The company generates revenue primarily through software subscriptions and usage-based revenue from payment processing. Subscription revenue was $138 million in Q2 2024, while payment revenue was $47 million. They contributed 71% and 25% to total revenue; professional services revenue made up the rest. Payment volume adds an important driver of revenue growth. As ServiceTitan helps its customers expand their revenues, the amount of payment processing going through the software also increases. This creates a feedback loop and directly aligns ServiceTitan’s interests with those of its customers.

Over the 12 months ending July 31, 2024, ServiceTitan generated $685 million, with revenue growing 24% in the most recent quarter. Overall, ServiceTitan is targeting a total addressable market of $13 billion. The company has been improving its margins substantially but still has a long way to go on a non-adjusted basis. For the six months ending July 31, its operating margin was -24%, but the adjusted margin reached 5%.

The company is looking to expand into its large addressable market by increasing the gross transaction volume (GTV) that goes through its platform and selling add-on products over time. It aims to expand GTV by serving larger customers and expanding its client base into different types of trades.

ServiceTitan: Strong Long-Term Bull Case With Short-Term Risk

Overall, ServiceTitan has a very strong business. The clear customer satisfaction shows that companies are getting significant value from it. The large total addressable market is a huge opportunity. The strong feedback loop between customer success and ServiceTitan's success is also a sticking point.

Growing the business by targeting larger customers would make a huge difference if successful, but it could be challenging. Larger players likely already have significant efficiency built in that smaller players don’t. The company notes the rise of private equity firms in this industry. Boosting efficiency is their calling card. Whether they will look to drive efficiency themselves or contract it out to ServiceTitan is the question.

ServiceTitan is also still significantly unprofitable on a non-adjusted basis. The company is notably trading at elevated valuations versus similar software companies. Still, the long-term case for this stock is strong, although, in my opinion, waiting for a better entry price could make sense. This is especially true given the first-year struggles many newly public stocks often face. The average of 12 price targets released since the IPO implies an upside in the shares of 16% versus the Dec. 9 closing price.

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Netflix: Is This the Perfect Time to Buy a Streaming Powerhouse?

Netflix (NASDAQ: NFLX) has revolutionized how the world consumes entertainment. However, Netflix’s stock has experienced a recent pullback from its all-time high of $941.75, reached on December 11, 2024. The stock is currently trading around $875.00, marking a 1.83% decrease year-to-date. This dip, however, follows a remarkable year in which the stock surged by over 81%.

Investors are left to question if the pullback is a sign of trouble or a golden opportunity to buy into a company with a proven track record and a bold new strategy. A closer look at the technical indicators, analyst sentiment, and Netflix's strategic initiatives suggests that the current dip could indeed represent a buying opportunity for those with a long-term perspective.

Technical Signals Suggest a Potential Rebound

Technical analysis offers some intriguing insights into Netflix's current stock trajectory. One key indicator is the 50-day moving average, which represents the average closing price of a stock over the past 50 trading days. Netflix's stock is currently nearing this 50-day moving average, a potentially significant development. When examining past performance, it's notable that after similar approaches to this moving average following a period of trading above it, Netflix's stock has historically shown a tendency to rebound. In fact, data going back the last few years reveals that such an occurrence has resulted in a positive return one month later, 63% of the time, with an average gain of 4.6%. This pattern suggests that the current pullback might be a temporary dip before a potential rebound.

Further supporting this bullish outlook is the activity observed in the options market. The 10-day put/call volume ratio, which measures the ratio of put options (bets that the stock will fall) to call options (bets that the stock will rise), currently stands at 1.11 across major options exchanges. This ratio is higher than 97% of readings from the past year, indicating a significantly higher-than-usual level of bearish sentiment among options traders. Often, when pessimism reaches such elevated levels, it can be a contrarian indicator. This suggests that the negative sentiment may already be factored into Netflix’s stock price, potentially leaving room for an upward move should the company's fundamentals remain strong. Additionally, the current volatility expectations, as reflected in options pricing, are relatively low. This makes options strategies potentially more attractive for those looking to capitalize on a possible rebound.

Analysts Remain Optimistic Despite Recent Dip

Despite the recent stock price dip, many in Netflix’s analyst community remain optimistic about Netflix's future. The consensus rating for the stock is a Moderate Buy, with an average price target of $824.30. While this target is slightly below the current trading price, it's important to note that several analysts have recently upgraded their ratings and increased their price targets. 

Notably, Pivotal Research has set a street-high price target of $1,100.00, reflecting a strong belief in Netflix's long-term growth potential. Furthermore, 17 out of 31 analysts currently rate the stock as a Hold or worse, suggesting there is ample room for upgrades if the company continues to execute its strategic initiatives successfully. These upgrades and revised price targets often follow positive developments, such as the successful launch of the NFL games on the platform.

A Closer Look at the Fundamentals

Netflix's financial performance provides a solid foundation for its future growth. Netflix’s earnings report for the third quarter of fiscal year 2024 (Q3 FY2024) showed earnings per share (EPS) of $5.40, beating analyst consensus estimates of $5.09. Revenue for the quarter reached $9.82 billion, also exceeding expectations. For the full year 2024, Netflix projects revenue growth of 14-15% and has increased its operating margin forecast to 26%, up from the previous guidance of 25%. This strong financial performance demonstrates the company's ability to generate substantial profits and manage costs effectively. Analysts are projecting an earnings growth of 19.46% in the next year.

Content Remains King

Netflix's live sports streaming has shown early success with NFL Christmas Day games and WWE's "Monday Night Raw." These NFL games drew an average of 30+ million global viewers, becoming the most-streamed in US history. "Monday Night Raw" also attracted an impressive 4.9 million viewers, surpassing recent viewership.

Netflix's vast content library and commitment to original programming remain its core strengths. Shows like "Squid Game" and "Heeramandi" have become global hits, and the company received 107 Primetime Emmy Award nominations. Netflix is also testing a new homepage design and has a strong pipeline of upcoming releases.

A Calculated Risk Worth Considering?

Netflix's recent stock dip, while concerning to some, presents a compelling opportunity for investors with a long-term horizon. The company's move into live sports has proven to be a success, attracting record-breaking viewership and demonstrating Netflix's ability to execute on this new front. This, combined with a solid content strategy that continues to deliver critical acclaim and commercial success, solidifies the company's position as a global entertainment leader. 

Netflix's strong fundamentals, including healthy revenue growth, expanding margins, and a growing subscriber base, suggest the company is well-positioned for continued expansion despite fierce competition in the streaming sector and substantial costs associated with live sports rights and original content production. Furthermore, technical indicators, coupled with the potential for continued analyst upgrades and the inherent value of its growing ad business, provide a bullish outlook for a stock rebound. Investors considering taking a position in Netflix should carefully weigh the risks. Still, the current dip may very well represent a strategic entry point into a company that continues to redefine the future of entertainment.

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Goldman Sachs Unveils 3 Massive Opportunities for 2025 Investors

When the trading year comes to an end, some of Wall Street’s biggest firms tend to start rolling out their projections and outlooks for the coming year, and Goldman Sachs has been the latest one to do so here. Investors need to keep track of what these big firms are doing and recommending to their audiences, as some might be bluffing, and some might be insiders "talking their book" just to get the masses to adopt their view.

Based on several economic indicators and other trading indicators, it looks like Goldman Sachs is talking its book right now rather than bluffing the market into a positioning or behavior that benefits the bank at the expense of Main Street. Knowing this, investors will want to grab a pen and paper for this analysis, as a lot of what has been said in the bank’s 2025 macro outlook report is not what it seems.

At the end of the day, these are the three main areas that Goldman Sachs wants you to be in (and support their positions). Bonds, through the iShares 20+ Year Treasury Bond ETF (NASDAQ: TLT), energy stocks through the Energy Select Sector SPDR Fund (NYSEARCA: XLE), and even industrial stocks made up of net exporters in the United States through the Industrial Select Sector SPDR Fund (NYSEARCA: XLI).

Stocks Might Be Overvalued, Buy Bonds

Goldman Sachs could have just said this, but they decided to break it all apart in a very dry and cut corporate way. However, it all becomes clear for those willing to dissect the report’s language. Goldman talks about the difference in bond yields today compared to S&P 500 yields, which led them to believe there’s an overvaluation in stocks.

According to the data compiled and explained in the report, there are higher chances of a stock market decline than of another bull run. They also mention that today’s bond yields are not in line with where United States GDP growth rates and inflation will be in 2025, so a mispriced opportunity is present.

So how do investors know whether this is bluffing or what they think? There’s no way to know for sure, but the Commitment of Traders report is a great start. This report measures the future inventory levels of big commercial institutions and other participants in the market, so it is an important gauge to track.

Turns out, a lot of the commercials (big banks and prime brokers) are now as short S&P 500 futures as they’ve been since 2007, and everyone knows what happened next. At the same time, inventory levels for 10-year treasury bonds are on the rise, it would seem that Goldman is part of this crowd shorting stocks and buying bonds.

Oil: The Best Commodity Bet

Goldman also mentions that commodities might make a great addition to portfolios in 2025. Still, they decided to focus on one specific product. Crude oil, as they point out, has a lot of supply shock tail risks, which is English for a high probability of supply becoming tight and sending prices higher.

No wonder Warren Buffett has bought up to 29% of Occidental Petroleum Co. (NYSE: OXY) over the past two quarters, or why J.P. Morgan Chase has decided to build a $730.8 million stake in the energy ETF as of December 2024. Even Paul Tudor Jones said in a recent CNBC interview that oil is unbelievably cheap.

While most investors would look to gold in this situation, the precious metal has showcased a significant premium in recent months, which is now cooling off as the prospect of inflation wanes alongside geopolitical conflicts. Therefore, on an apples-to-apples comparison, oil offers the best risk-reward ratio in the world of commodities.

In recent weeks, hedge funds have also been heavily positioned in oil futures, making aggressive bets that the price per barrel could soon pop above its resistance. This article provides the entire breakdown and list of stocks that might be better suited for market-beating returns.

Net Exporters Will Outperform in 2025

The most surprising part of this report is how Goldman spoke about currencies. They expressed that the local currency, the dollar, has built tail risks that would send emerging currencies and stocks higher if they become realized. What this means is that stocks like Alibaba Group (NYSE: BABA) in China will see a monster rally if the dollar falls.

No wonder Michael Burry and David Tepper have made it their biggest portfolio position. But what happens with a lower dollar as well? Foreign buyers now have a relatively stronger buying power to purchase American exports, so the manufacturing sector becomes a good place to be.

According to the latest manufacturing PMI report, new orders were the most explosive segment in the past 26 months, meaning that many industries in the United States are getting ready for a new potential exporting wave. Investors can also note that Wall Street is boosting these three stocks on the back of this exporting theme.

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