The largest problem in worth investing is just not discovering low cost firms, it’s discovering worth the place others don’t see it. With a 9% progress in 2024, it’s price analyzing the information reported to see if is a brilliant determination to have in our portfolios. On condition that the business is at the moment buying and selling at 30x instances, whereas $TMV.DE is buying and selling at 15x now we have to present them a search for the alternatives and an opportunity to show Mr. Market fallacious.
Supply: YT RealWear Acquires Almer Applied sciences, backed by TeamViewer.
Key highlights
TeamViewer ($TMV) reported a 9% income progress in 2024, demonstrating resilience within the distant entry market.
The acquisition of 1E, a frontrunner in Digital Worker Expertise (DEX) administration, for $720M might strengthen TeamViewer’s enterprise choices.
TeamViewer is making daring strikes into North America and APAC. Will this be the important thing to unlocking its subsequent part of progress?
Enterprise Overview
Teamviewer was based in 2005 in Germany and was designed to cut back journey time and permit distant duties on any system. So far, it’s put in in practically 2.5 billion units, with multinational shoppers, comparable to DHL, Coca-cola, Volvo, and BOBST. With 640.000 subscribers worldwide with a powerful retention fee of 100%. Thought-about probably the most salient model amongst IT professionals for distant connectivity options by way of a TMV model survey (2021-2024 n=4000-4400 throughout 5-6 key markets).
Supply: Teamviewer This autumn/24Y presentation
TeamViewer operates on a subscription-based mannequin throughout a number of product classes, together with:
Distant Help Options – Safe distant entry and troubleshooting.
Enterprise Connectivity Options – IT/OT integration for giant organizations.
Digital Worker Expertise (DEX) – Enhancing digital office effectivity.
Frontline Productiveness Options – AR and blended actuality instruments for industries.
By way of its partnership with RealWear, TeamViewer provides augmented actuality (AR) and blended actuality (MR) options to optimize operations in manufacturing, logistics, and after-sales companies, enhancing productiveness and effectivity.
In 2024, TMV reported a income progress of 9% (in fixed forex), reaching €671.4 Million, being €520M from small and medium companies, and €151.4M from enterprises, this newest quantity had a progress of 24% highlighting the technique the place the corporate is searching for increase. The FCF margin has been sustainable by way of the years, with a 35% common.
Supply: Finchat
The latest acquisition of 1E the corporate chief in DEX administration instrument at an enterprise worth of USD 720 million, is trying to place Group Viewer as a broad IT/OT companies supplier. With the combination of each applied sciences and groups, the mixed merchandise are anticipated to extend the full addressable market and the all-in-one supplier.
Moreover, the corporate is dedicated to innovating with AI, this 12 months they launched “Session insights”, a characteristic that routinely summarizes distant help classes and supplies analytics. This characteristic is now built-in into Microsoft Groups and Copilot.
Trying forward, to 2030, the World Financial Discussion board estimated that world digital jobs are going to extend by 25% from 73 Billion to 92 Billion, together with this, firms are looking for extra to boost productiveness, which might enhance the Complete Addressable Market to €22 Billion in 2028 a 13.6% greater than in the present day quantity, and right here is the place we will see the explanation for the 1E acquisition, TeamViewer’s CEO even described it as “the quickest approach of innovation” and this fashion use the momentum of the tech increase to grow to be the IT/OT multi functional platform.
The number of opponents might go from AnyDesk, LogMeIn, or Microsoft Distant Desktop in distant management, in DEX companies, the primary competitor is Nexthink, in different companies we might point out Connectwise, however the principle distinction comes, within the capacity now for the corporate to supply a number of companies with only one supplier. Giant enterprises usually choose to consolidate service suppliers (even at a premium) relatively than managing a number of distributors, which may result in operational inefficiencies
Funding evaluation
By way of the strategic plan and mid-term targets, the administration expects double-digit income progress from 2027 onwards. Supported by the growth of augmented actuality, the revolution with AI in on-line companies, the now ample number of companies supplied with 1E, and the alternatives for growth in North America and APAC. Which makes a TAM growth to €22Bn a 13.6% enhance to 2028.
The enterprise is dedicated to creating shareholder worth by way of share buybacks of €137.7m in 2024 and debt reimbursement of €85m.
For enterprises switching prices are excessive and with 23% of the shoppers being high-value enterprises, a quantity that elevated in 2024 by 24%, now we have to contemplate this as an element to long-term dedication from their shoppers and the flexibility in pricing energy, offering Teamviewer with a robust aggressive MOAT.
Supply: Teamviewer This autumn/24Y presentation
The worth/earnings ratio for TMV.DE is 15x. We’ve created three completely different situations giving the corporate a a number of of 15x (the typical of the market), within the optimistic situation we used the estimation that the corporate expects a 70% progress of their web revenue from now to the 12 months 2028, as they stated of their outcomes This autumn/2024. This could imply a web revenue margin of 20%.
Within the low vary, within the pessimistic situation, we estimate the worst-case situation the place the corporate doesn’t obtain its objectives and can also be harmed by competitors and macroeconomic components. On this one, we might receive a lack of -11% given a web revenue margin a bit excessive in contrast with their worst two years in 2021, and 2022 respectively 10% and 11%.
However the almost definitely situation making an allowance for its kind of enterprise: is subscription-based. The place they’ve long-term contracts with blue chip firms, and due to this we imagine their estimations are reliable and achievable. The difficulty right here is that if we belief within the functionality of the corporate to implement and execute appropriately the plan, scale back prices, and create shareholder worth, on this case, we are going to obtain a return of +68%.
Dangers
Macroeconomic occasions: In 2021 after the pandemic, the retention in subscriptions fell from 100% to 88%, affecting the income of the enterprise and this made the value of the share fall 75% in only one 12 months. I contemplate that, due to these dangers, TMV.DE focuses extra on enterprise progress than industrial progress.
Technological competitors: Within the IT companies business, there are fixed improvements that might make our firms lose their aggressive benefit. The priority with TMVW is that the acquisition of 1E was due to stagnation of their functionality to provide innovation by themselves, their product is not related, or they’ll’t preserve the income progress, or it was a method to create an ecosystem in IT companies sector to boost the shopper expertise.
Valuation of 1E acquisition: The valuation for the acquisition was $ 720M, with a $77M Annual recurring income, which implies slightly greater than 9x Gross sales. A quantity that appears aggressive for my part, however right here the query is, was the administration seeing hidden synergies that justify the value?
Solvency dangers: with a debt/fairness ratio of 6.5 they’re above the utmost accepted, that is attributable to the brand new acquisitions they usually’re dedicated to decreasing the debt within the coming years.
Market growth dangers: the brand new goal within the North America and Oceania growth might current challenges, with cheaper opponents (comparable to Connectwise, and Anydesk with their growth plan) and excessive advertising and gross sales expenditure.
Failure within the execution of the plan: With any plan, firms have the danger of the objectives not being achieved, this is the reason now we have to be very conservative when analyzing their estimations.
Conclusion
Expertise is the long run, advances in the way in which we work and talk, all the time trying the enhancements in our high quality of labor, effectivity in journey time, with digital entry to manage any system worldwide, with using AI throughout our conferences to create reside studies, and using AR to enhance logistic procedures.
TeamViewer is commonly neglected because of its measurement and growing competitors, however its stable income progress, share buybacks, and enterprise focus recommend it’s removed from being an out of date firm. The acquisition of 1E provides new capabilities and provides of companies but in addition raises valuation issues. The important thing query stays: Is TeamViewer’s imaginative and prescient of an end-to-end IT/OT ecosystem sufficient to take care of progress? I do imagine so, that’s why TMV is a big a part of my portfolio.
What do you consider TeamViewer’s future with this information I gave in the present day? Let’s talk about this in my profile!
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