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Papa Tech 1, New Cloud Generation 0 (Cestrian Stocks Bulletin #9)

Papa Tech 1, New Cloud Generation 0 (Cestrian Stocks Bulletin #9)
DISCLAIMER: This note is intended for US recipients only and in particular is not directed at, nor intended to be relied upon by any UK recipients. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Cestrian Capital Research, Inc., its employees, agents or affiliates, including the author of this note, or related persons, may have a position in any stocks, security or financial instrument referenced in this note. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note’s date of publication and are subject to change without notice. Companies referenced in this note or their employees or affiliates may be customers of Cestrian Capital Research, Inc. Cestrian Capital Research, Inc. values both its independence and transparency and does not believe that this presents a material potential conflict of interest or impacts the content of its research or publications.

Another One Bites The Dust
In our ‘Fundamentals’ service we have three areas of focus - cloud software and services at large, cybersecurity software, and space. We focus on these sectors in the service, and invest in the sectors in staff personal accounts, for one simple reason: growth. Each offers the potential for multiple names growing at way-faster-than-market rates of revenue growth, ramping profitability and cash generation, and a degree of investor excitement to propel the stocks upwards with lofty valuation multiples.
In amongst the rock-star ‘New Cloud Generation’ names we cover - - think ZScaler, CrowdStrike, Spire Global - we pepper in a few older names. Some properly Grandpa Tech - we wrote up Oracle recently - and some just Papa Tech. Old enough to be making proper money (you know, a big ol’ gusher of barbarians’ favorite tipple, unlevered pre-tax free cashflow), but not so old that they would rather go sailing than dial for dollars.
One of our Papa Tech cybersecurity picks, ProofPoint, announced yesterday that it was being acquired. Longtime software buyout shop Thoma Bravo has agreed to buy PFPT for a 34% premium to last Friday’s closing price. This is a great outcome for PFPT shareholders in our view, and with that in mind, we happily sold our staff personal holdings into the 30-something percent pop that followed.
We flagged to our ‘Fundamentals’ subscribers back in February this year that PFPT could very well get picked up by a bigger friend. Here’s a snapshot of that note.
Highly specific insight from Cestrian Capital Research
Highly specific insight from Cestrian Capital Research
More Consolidation To Come?
We think, but don’t know, that there is more in the way of software consolidation to come. There’s been a rash of new name IPOs in recent years, and some of them are maturing a little faster than they likely expected. Okta, for one; and watch out for our coming-soon note on MongoDB. Lofty valuation multiples, amped-up investor expectations, plenty of free M&A money still flowing, and a few cracks in the growth edifice here and there? We think that amounts to a steady stream of opportunities for strategic and financial buyers alike. We’ll call them as we see them in our various services.
How To Access Our Best Work
Rather selfishly we charge money for our best work. Fortunately, not very much money.
Here’s a couple ways you can access the good stuff.
  • Real-time continuous coverage of cloud, cyber, space and defense stocks? Try Cestrian Fundamentals. $199/month until 1 June, whereupon the price rises to $299/month. (For new members joining 1 June or later. We never hit existing members for a price rise, ever). Take a 2-week free trial here.
  • Daily stock ideas, short snippet form, charts and some numbers, nothing too taxing? Cestrian Elements. $29/month. Check it out here.
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Cestrian Capital Research, Inc - 27 April 2021.
DISCLOSURE: Cestrian Capital Research, Inc staff personal accounts hold long position(s) in CRWD, NSH, NSH.W and ZS.
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