No. of Recommendations: 14
First, a correction: "Thank you for the suggestion, homosapien, and for the follow up posts Manlobbi, EVBigMacMeal
, and WEBspired.". Sorry about the omission, purely my error.
As a postscript to my first post, I've known about Constellation for some time, but don't follow them closely and had missed the drop since this summer. I was trying to work out the catalysts, and sharing what I've found the ADR price has dropped since roughly July 3; with a pronounced drop on August 11 and another pronounced drop on September 19. Those appear to line up, respectively, with
- August 8, 2nd quarter earnings release:
https://www.csisoftware.com/category/press-release...- September 25, they announced the Mark Leonard's resignation
https://www.csisoftware.com/category/press-release...My suspicion, with no actual evidence, is that the CEO health issues were picked up by the market prior to the official announcement.
There did not seem to be any correlation in the price with the AI call on September 16:
https://www.csisoftware.com/category/press-release... (transcript:
https://seekingalpha.com/article/4824855-constella...). This was an interesting and unusual call. More unusual than interesting.
Based on my read of the earnings report and some articles discussing the results (like
https://dariusdark.substack.com/p/constellation-so...), it looked like the Q2 results were fine from a cash flow perspective (keeping Manlobbi's comments about earnings, amortization, and cash flow in mind), but earnings disappointed due to non-cash charges in forex (118M vs 4M yoy) and a "IRGA/TSS Membership liability" item related to a spin-out, Topicus,
https://finance.yahoo.com/quote/TOI.V/ (discussed in
https://thecompoundingtortoise.substack.com/p/cons...).
The biggest weaknesses I can see are that the company is already modestly generously valued, complicated, and follows a private equity playbook (minimizing product growth and investment, maximizing cash flow) that relies on the availability of acquisition targets.
I think of two very unrelated things looking at Constellation - niche data and backtesting companies that pop up in Mechanical Investing and Palantir. Some of the MI board companies seem to charge $100 a year and look like they haven't updated their websites since 1998. Palantir has an AI reputation but has also rebranded professional services as forward deployed engineering - it is deeply integrated with customers and supposedly exceedingly sticky as a result (in a NDR sense).
Without Manlobbi's pitch I may have passed, but will keep digging. The share price drop preceded the CEO departure and cumulatively represents about $30B USD in lost market cap, so I'm having a hard time digesting there isn't some fundamental issue. But if there is I haven't found it.
