Trade Alert: Bought Klaviyo $26
Klaviyo (KVYO) Buy $27 – Reiterating long term buy, the drop after market overreaction to earnings beat is an opportunity. 3-5 Years, Target $50 to $60. Annual Gain – 16 to 20%
Klaviyo dropped 10% after earnings ostensibly due to this headline “ Klaviyo falls after Wall Street mulls smaller revenue beat”
I will gladly take a price of $27. Besides, the full year 2024 revenue forecast was intact – in the range of $889M to $897M, V consensus estimate was $893.12M. Longer term revenue forecast is still at 28% in line with my models as well.
I think analysts also didn’t like the aggressive sales and marketing spend in 2024, but Klaviyo needs that because they are going after larger clients, the biggest growth (80%) is coming from clients above $50K in annual revenue. Klaviyo’s free cash flow margins are in excess of 16% so this is money well spent.
There are no discernible changes because of new anti-spam rules, in fact Klaviyo is making it a selling point to ensure that their clients stay compliant.
Here are some of the details from the January recommendation
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 28% than Hubspot’s 19%.
What’s special about Klaviyo – These are the main competitive advantages:
- Klaviyo’s integrated data platform integrates customer and automated marketing data.
- 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 over 20% – so this advantage should endure for a while.
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 $750Mn. 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.