Social media popped to 13x. The highs in 2017 were ~14x, but a more normalized multiple historically has been around ~10x. Snapchat is at 38x, near it’s IPO multiple of 40x in Q4 2016. They lost -$765mm in EBITDA on $2.5bln of revenue, but continue to grow at 46% YOY. Pinterest lost -$16mm in EBITDA on revenue of $1.7bln and trades at 31x. The most acquirable of the group, Twitter, trades at 15x and has +$562m of EBITDA but flat revenue growth (8% YOY).
Travel marketplaces have made a big comeback. Multiples hit 9x in Q1 which is remarkable for a business that traditionally trades no greater than ~3x. Booking.com is trading at an especially strong 15x and is the only company to maintain its profitability over the last 12 months ($1bln).
Traditional marketplace multiples vary widely. Prior to Q3 2018, the sector only had 2 companies and now has 10. The median multiple is now 13x, but Etsy is at 16x, Fiverr is at 42x, and new entrant AirBnB is at 31x. Etsy grows 111% YOY with $1.7bln of revenue, and a solid 26% EBITDA margin. The multiples for these top performers are very high, whereas flatter growth cash generators like Shutterttock and eBay trade at <5x.
Labor intensive space. The only reason we even include these companies in our analysis is because investors like Softbank insist on labelling these services businesses as tech co’s. At best, they’re tech enabled which isn’t the same thing at all. Remember when Groupon was a high flier? Well today it has stopped growing (-36% YOY growth) and trades at 0.8x revenue. This was one of the fastest growing companies ever that came up during the recession of ’08, and now no one cares. Redfin and Opendoor feel especially overvalued.
Other Outliers. DraftKings trades at 48x its $615mm of revenue. DoorDash trades at 14x it’s $3bln in revenue. Both companies do not generate EBITDA.
Grubhub. Grubhub popped to 4.4x revenue in Q4 2019, but that’s because they announced they’re for sale. We’ll see what happens there. Meal delivery has become increasingly competitive as peers like Uber and DoorDash continue to overspend on customer acquisition as if the market can only support one winner. Uber did buy Postmates July 6th for $2.65bln in stock.
Rideshare is bifurcating. Lyft is at 8x revenue while Uber is holding strong at 10x revenue. We suspect the revenue multiple for both would be higher, but both businesses light cash on fire; Uber’s EBITDA is -$3.7bln while Lyft is at -$1.6bln. Look at the margins. It’s hard to envision either company generating cash any time in the near future given their current market share and very high levels of burn.
Subscription. Subscription trades at 10x revenue. Care.com no longer trades as it got acquired by IAC in December 2019 for $500mm (2.5x revenue). Match is at 17x revenue, Bumbl is below that at 13x, while Angie’s List (now part of HomeAdvisor) is at 5x. Bumbl and Match both have wonderful profitability and high margins (21% and 17% respectively).
Gaming. The median revenue multiple of 6x is strong. SciPlay is an underperformer at 0.2x while Roblox is at a very high 42x while burning cash.
Ecommerce is varied. The sector is the least attractive to investors, with a median revenue multiple of 2.5x. There is a big difference between what we would call premium ecommerce like Stamps.com, Carvana, and Amazon (4.5x, 8.6x, and 4.4x), versus weak ecommerce like Blue Apron (0.3x revenue). Coursera is a big outlier at 24x. Chewy which is a newer ecom player ($7bln in revenue) trades at 4.9x. We would note it has excellent customer retention metrics though and will likely be a premium ecom player for years to come, if not a nice acquisition target.
Hardware is consistent. Hardware is steady at 6x, and has traded in a tight range historically of 2x to 4x. Roku is the standout of the group (27x) as it’s growing at a strong 58% YOY. Peloton trades at 11x on $2.9bln of revenue. Note that even though Apple doesn’t grow much, it trades at 8x revenue, in part because of the strong cash flow generation (29% margin) and world class brand.
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