Disclaimer – I am no longer in this position.
$CSGP (CoStar Group Inc) has just agreed to acquire $MTTR (Matterport Inc)
The deal is a cash and stock transaction valued at $5.50 per share reflecting an estimated $1.6 billion enterprise value. Matterport stockholders will receive $2.75 in cash and $2.75 in CoStar Group common stock for each share of Matterport common stock they own when the deal closes.
I wasn’t fully sized up in my position but a win is still a win! I was aiming for a 5% weighting but was only half way there. I closed out 12 trades ranging from a 69% to 162% gain. Even had a little 1.3% day trade on top of that for fun. I did choose to sell all my positions on the day rather than hold for the conversion, as I didn’t feel that waiting for the deal to close was worth the extra 15% gain. I also didn’t want to have any CoStar Group stock as it wasn’t something that fit my investment style.
I will leave my original thesis posted here as it may provide some useful insight in to how and why I pick my stocks.
This is my opinion based on the numbers and not financial advice.
Matterport is a developer of a 3D media platform used to establish 3D and virtual reality models.
This is my play on the housing market unlocking in 2024 and 2025, hoping to find some other names i like in this sector but not had much luck yet.
I used this company to help sell my last house and whilst i can’t directly attribute the fast home sale (Less than a week with multiple offers, during a hot market) to using this tool, i was very impressed with it. What i can say is it was VERY fast for them to come scan the house and get the data to market
This stock is very beaten up and due to high rates the fundamentals are in a choppy state but i believe this will improve as the macro does. This could happen fast so i started building my position a little early.
🔹 Income statements:
(Good) Revenue is mixed – Down against last period -1%, annually up 16%, So we can see it’s not doing too bad in this market.
(Good) Operating income is up but still negative – Against last period it’s up 6% , annually 22%, 3-year is awful at -1747%. Heck of a move towards positivity though.
(Good) Net income is mixed too- Against last period is up 8%, annually -79% and 3-year as we would expect, awful with -1322%. As we saw before though. Making great moves to the positive side.
🔹 Balance sheet:
(Good) Assets have been declining but not a shock really given how the market has affected the housing sector. -10% last year and -2% last period. Not bad really.
(Bad) Liabilities are also down – Looking very healthy when compared to assets, hardly a mark on the chart. -15% on the year and – 3% against last period. Love it.
(Good) Equity is down which makes sense given the reduction in assets. -9% for the year and -2% against last period.
(Good) Healthy cash pile and low debt gives them plenty of run way for the market to improve.
(Meh) Shares outstanding is rising but at a steady pace, expect this to change as the market improves.
🔹 Cash flow statement:
(Good) Operating cash flow has been on a very nice up trend for some time. Against last period it’s up 13% , annually 50%, 3-year is -1531%. Great moves there.
(Good) Capital Expenditure has been trending the right direction slowly but surely. Expect this number to continue to improve in coming periods.
(Good) Free cash flow is also seeing trend reversal.
Other things I like:
• Debt is non existent.
• CEO RJ Pittman has great pedigree. He’s held senior positions in some of the best tech companies over the past 25 years. Including eBay, Apple and google. He’s also been a cofounder and CEO of several start ups. You can find more about him here, or check out his linked in profile.
• The business has been able to improve even during a VERY difficult market. The stock price hasn’t reflected this but that gives us a great opportunity. With an impressive revenue CAGR of 36% we would hope this to continue as the market flips. It has flattened lately but the housing market as a sector is still frozen right now.
• This stock also has a lot of potential in the AI field and VR. Not many people are factoring this in but there is HUGE potential here for spacial mapping etc. The company already has a partnership with $META.
• This company falls in with the small caps and the market will get back to going risk on with these assets at some point in 2024 or 2025.
• P/E practically non existent whilst they are growing. P/S ratio of less than 5 which is below their peers.
• Institutional buyers have been building this one up already. Great minds think alike.
Things I don’t like:
• Insider trading has been improving but would like to see more at these low levels. Marked improvement post earnings.
• Price has jumped a whopping 30% in the last few days, which I don’t like since it’s not relating to any news i can find. This appears to be related to a popular youtuber starting a position. Which isn’t the best market driving factor for sustainability. Another bad aspect of this is that now we have to continue to add to our position at a much higher price than we wanted to.
• Stock based comp is high but did have a large drop down, would like to see this staring coming down more though as it’s been a little stagnant.
Guidance:
Looking for a moderate revenue increase during a rough housing market and a very nice bump up in EPS. Getting very close to positive earnings. Love it. That’s what I’m here for,
Q4 2023 highlights:
• Q4 subscription revenue reached $23.7 million, up 23% year-over-year & above guidance range.
• Q4 total revenue of $39.5 million, in line with guidance range
• Total subscribers increased to 938,000, up 34% year-over-year; 120+ enterprise accounts with >$50K ARR.
• Q4 Non-GAAP loss per share of $0.04, a 56% improvement year-over-year
• Net dollar expansion rate increased for the second consecutive quarter to 109%, and the highest level in two years.
• Spaces under management increased to 11.7 million, up 27% year-over-year.
• Announced Property Intelligence is now available, providing automated measurements, layouts, editing, and reporting capabilities.
You can check out the rest of the Q4 2023 presentation here.
Institutional buyers:
Love tracking this, really helps identify when momentum is picking up and sentiment is flipping. As we can see, MTTR is being gobbled up by the big boys. You can find the update chart by clicking here.
The technicals:
What do we love about the charts for this one? It’s been absolutely destroyed since the end of 2021. We can also see how price moved when the market was flush with cash and the housing market was flying. Now we can’t expect this to happen again anytime soon but we can certainly draw a reasonable conclusion that we can at least make a decent recovery. Beaten up stocks are one of my favourite strategies to use. I can’t always be sure of the time frame, but I do know the returns are higher and it suits my personality well.
This is a moderately new stock for me so my position is small. Aiming to get it to around 5% weighting before rates come down. Potentially more if the business continues to execute.
It might be too early to know if this one has bottomed, the massive move up over the past few days doe’s make it a little harder to make new lows any time soon though. Given what’s driven the pump though it is possible.
Price just bounced off the 100 moving average line and back above some historic support. Price has also been bouncing around inside a very long term downward channel, since Jan 2022. That’s a lot of stored up energy. It certainly seems like price is moving closer to wanting to grind up against the top of this channel (Black horizontal line) which is bullish. Even better if it breaks over it.
- Daily RSI is high but does have space to go higher. Bunch of room on the weekly RSI still.
- Daily MACDX is showing the big fish are flushing out retail, this is a good sign of strength. Weekly not showing much change yet though.
- Daily Banker funds inflows are coming in strong. Weekly showing like it wants to flip.
Trim and add targets:
My trim targets are marked on the daily chart in yellow (These do move around as price structure develops – To Keep up to date with this please check out my Etoro wall. I regularly post there on my trading plan, or you can ask me for an update.)
Conclusion:
MTTR as company continues its upward trend and shows management have done an excellent job of steering the ship through the storm. My play on this stock is that there will be a marked improvement when the housing market opens back up and AI/VR platforms start seeing more jumps in the software area, rather than hardware. I would like to have a starting position in this of around 5% before rates start to come down. This is slowed down a little by the big price jump so i am hoping that price falls back down lower again.
This thesis is up to date as of 29/03/2024
Just a reminder this is my opinion not financial advice, please make sure to do your own research.
