Klaviyo (KYVO) Buy – $27.50
3-5 Years, Target $50 to $60. Annual Gain – 16 to 20%
Secular growth story – 4-year forecasted revenue CAGR of 32%
Klaviyo (NYSE: KVYO) is a marketing automation Guru with a 10% stake owned by Shopify (SHOP) with an option to purchase an additional 5%.
Within marketing automation, there are the plain vanilla, single-channel solutions like Mail Chimp and Customer Contact, and one 800-pound gorilla Hubspot (HUBS) which is 3 times its size, and four times its valuation. Taking share from single-channel customers, the smaller Klaviyo is growing much faster at 32% than Hubspot’s 23%.
What’s special about Klaviyo – These are the main competitive advantages:
- Klaviyo’s integrated data platform integrates customer and automated marketing data.
- A full stack of tools to provide customers with complete marketing solutions. Single-channel solutions lack data analytics and personalized experience capacity, while marketing solution providers have no segmentation or data capabilities and cloud warehouses have all the data but zero messaging infrastructure and campaign flows.
- Because of the integration, their targeting is much more precise, scalable, and much faster – this is automated at a large scale and machine-driven for smaller customers to self-operate. Other vendors don’t have that capability or have customers’ data stored across different datasets and databases, which are less user-friendly than Klaviyo’s solution.
- Its close association with Shopify, which contributed to 77% of Klaviyo’s revenue; Shopify itself is growing at 22% – so this advantage should endure for a while.
The metrics are impressive
- High-value customers grew faster, and customers over $50K per year grew 89%, faster than the overall 24% growth for the company.
- The Net Revenue Run Rate stayed high at 119%, the 10th quarter with an NRR over 115%,
- Cash Flow Margin at 15% of sales
- Sticky – 73% of orders were from repeat customers
Importantly, with the solid operating cash generation Klaviyo doesn’t need to choose between growth and profitability, which is a huge deal for a startup. It has a cash hoard of $724Mn. With the advantage of already having and generating even more data, M/L could likely become its core competency, which should allow it to dominate this space in the decade ahead.
Klaviyo is still under the radar and a steal at $28 a share.
