Tobii: A lot of positives offset expected Q3 weakness - SEB
Estimate cuts throughout, partly FX driven
We cut adjusted EBIT estimates by 19% (low base) for 2020, 4% for 2021 and 3% for 2022. Despite this, we hike the valuation range to SEK 41-52.
The reason for our hiked valuation range – several positives
We think the Q2 report contained several positives, which help to offset the negative estimate revisions. First, cash flow was positive – helped by a working capital release. Second, Tobii Tech continues to grow nicely with 60% organic external revenue growth. Third, although vaguely, Tobii outlined the plan towards profitability. After the outbreak of the pandemic, Tobii scrapped its previous target of turning breakeven in 2020. Now, the company comments that its ambition is to achieve profitability shortly after restrictions in society have been lifted. This is naturally a positive, and we argue it could come sooner than expected. Presumably, the development of restrictions in North America (where Tobii has close to 59% of revenues) will be key for this.
Trading at 2.2x 2021E sales with Tobii Tech gaining steam
We believe the big area of concern on Tobii from the investment community has been the ability to turn/integrate eyetracking into a mass-market product. Despite difficult comparatives in Q2, Tech managed to grow external revenues by 60%. Given the exposure is in the early stages, we think there is scope for continued good development ahead, which, in our view, makes the 2.2x 2021E sales-valuation appealing.
https://research.sebgroup.com/pdf/Tobii190820.pdf
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