Social media popped to 13x. The highs in 2017 were ~14x, but a more normalized multiple historically has been around ~9x. Snapchat is at 18x after falling from 40x in Q4 2016, and still lost nearly $1bln in EBITDA on $1.9bln of revenue. Pinterest lost $392mm in EBITDA on revenue of $1.2bln but still trades at 18x. Alternatively, the most acquirable of the group, Twitter, trades at 9x but had +$281mm of EBITDA but flat revenue growth.
Traditional marketplace multiples vary widely. Prior to Q3 2018, the sector only had 2 companies and now has 8. The median multiple is now 3.7x, but Etsy is at 12.7x while Fiverr is at 35x. Etsy grows at 60% YOY with $1.1bln of revenue, and a solid 20% EBITDA margin. Ebay is trading at a historically strong 3.6x revenue multiple and even though growth is 3%, they generate significant cash with a 30% EBITDA margin.
Discounts and couponing are dead. Remember when Groupon was a high flier? Well today it has stopped growing (-25% YOY growth) and trades at less than the value of cash it has on the balance sheet. This was one of the fastest growing companies ever that came up during the recession of ’08, and now no one cares. There is a chance it comes back in this environment, but generally your business should not revolve around discounting and couponing.
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 just buy Postmates July 6th for $2.65bln in stock.
Rideshare is bifurcating. Lyft is at 2x revenue while Uber somehow is holding strong at 4.4x revenue. We suspect the revenue multiple for both would be higher, but both businesses light cash on fire; Uber’s EBITDA is -$4bln while Lyft is at -$1.6bln.
Subscription. Subscription has been humbled since 2018, and now trades at 6.2x revenue. Netflix revenue multiple continues to be the outperformer at 9.7x even though accounting magic has resulted in -$663mm of cash burn but $3.8bln of EBITDA. Care.com no longer trades as it got acquired by IAC in December 2019 for $500mm (2.5x revenue). Match fell to 6.6x revenue from 10.0x while Angie’s List (now part of HomeAdvisor) is at 3.3x.
Gaming. The median revenue multiple of 5.4x is strong. SciPlay, the latest IPO in the space, is an underperformer at 0.4x.
Ecommerce is varied. The sector is the least attractive to investors, with a median revenue multiple of 1.7x. There is a big difference between what we would call premium ecommerce like Stamps.com, Carvana, and Amazon (5.8x, 8.3x, and 4.8x), versus weak ecommerce like Blue Apron (0.3x revenue). The latter are far less discretionary than the former. Chewy which is a new, massive non-discretionary ecom player ($5.9bln in revenue) trades at 3.9x, likely because it still loses money (-$195mm). 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 3.2x, and has traded in a tight range historically of 2.0x to 3.8x. Roku is the standout of the group (16x) as it’s growing at a strong 49% YOY. Peloton, the latest entrant, trades at 13.3x on $1.8bln of revenue, but they lose money, even though prior to the IPO they said they were “profitable”. Note that even though Apple doesn’t grow, it trades at 7.2x revenue, in part because of the strong cash flow generation (29% margin) and world class brand.
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