The largest problem in worth investing will not be discovering low-cost firms, it’s discovering worth the place others don’t see it. With a 9% development in 2024, it’s value analyzing the info reported to see if is a great determination to have in our portfolios. On condition that the trade is presently buying and selling at 30x instances, whereas $TMV.DE is buying and selling at 15x now we have to offer them a search for the alternatives and an opportunity to show Mr. Market fallacious.
Supply: YT RealWear Acquires Almer Applied sciences, backed by TeamViewer.
Key highlights
TeamViewer ($TMV) reported a 9% income development in 2024, demonstrating resilience within the distant entry market.
The acquisition of 1E, a pacesetter 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 development?
Enterprise Overview
Teamviewer was based in 2005 in Germany and was designed to scale back journey time and permit distant duties on any machine. To this point, it’s put in in practically 2.5 billion units, with multinational shoppers, corresponding to DHL, Coca-cola, Volvo, and BOBST. With 640.000 subscribers worldwide with a powerful retention charge of 100%. Thought of probably the most salient model amongst IT professionals for distant connectivity options via 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 big 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 affords augmented actuality (AR) and blended actuality (MR) options to optimize operations in manufacturing, logistics, and after-sales providers, enhancing productiveness and effectivity.
In 2024, TMV reported a income development 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 development of 24% highlighting the technique the place the corporate is in search of develop. The FCF margin has been sustainable via the years, with a 35% common.
Supply: Finchat
The current acquisition of 1E the corporate chief in DEX administration device at an enterprise worth of USD 720 million, is trying to place Group Viewer as a broad IT/OT providers supplier. With the mixing of each applied sciences and groups, the mixed merchandise are anticipated to extend the entire addressable market and the all-in-one supplier.
Moreover, the corporate is dedicated to innovating with AI, this yr they launched “Session insights”, a characteristic that robotically summarizes distant assist 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 Whole Addressable Market to €22 Billion in 2028 a 13.6% greater than at the moment quantity, and right here is the place we are able to see the rationale for the 1E acquisition, TeamViewer’s CEO even described it as “the quickest manner of innovation” and this manner use the momentum of the tech growth to turn into the IT/OT multi functional platform.
The number of rivals might go from AnyDesk, LogMeIn, or Microsoft Distant Desktop in distant management, in DEX providers, the primary competitor is Nexthink, in different providers we might point out Connectwise, however the primary distinction comes, within the skill now for the corporate to supply a number of providers with only one supplier. Giant enterprises typically 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 development from 2027 onwards. Supported by the growth of augmented actuality, the revolution with AI in on-line providers, the now ample number of providers 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 via 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 think about this as an element to long-term dedication from their shoppers and the power 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 eventualities giving the corporate a a number of of 15x (the common of the market), within the constructive situation we used the estimation that the corporate expects a 70% development of their internet revenue from now to the yr 2028, as they mentioned of their outcomes This autumn/2024. This could imply a internet 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 targets and can be harmed by competitors and macroeconomic elements. On this one, we might receive a lack of -11% given a internet revenue margin a bit excessive in contrast with their worst two years in 2021, and 2022 respectively 10% and 11%.
However the most probably situation taking into account its sort of enterprise: is subscription-based. The place they’ve long-term contracts with blue chip firms, and due to this we consider their estimations are reliable and achievable. The problem right here is that if we belief within the functionality of the corporate to implement and execute accurately the plan, scale back prices, and create shareholder worth, on this case, we’ll 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 yr. I contemplate that, due to these dangers, TMV.DE focuses extra on enterprise development than industrial development.
Technological competitors: Within the IT providers trade, 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 supply innovation by themselves, their product is not related, or they will’t preserve the income development, or it was a method to create an ecosystem in IT providers 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 a little bit greater than 9x Gross sales. A quantity that appears aggressive in my view, 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 lowering 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 rivals (corresponding 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 targets not being achieved, because of this now we have to be very conservative when analyzing their estimations.
Conclusion
Expertise is the long run, advances in the best way we work and talk, all the time wanting the enhancements in our high quality of labor, effectivity in journey time, with digital entry to manage any machine worldwide, with using AI throughout our conferences to create stay stories, and using AR to enhance logistic procedures.
TeamViewer is commonly missed as a result of its dimension and rising competitors, however its stable income development, share buybacks, and enterprise focus recommend it’s removed from being an out of date firm. The acquisition of 1E provides new capabilities and affords of providers but additionally raises valuation considerations. The important thing query stays: Is TeamViewer’s imaginative and prescient of an end-to-end IT/OT ecosystem sufficient to take care of development? I do consider 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 at the moment? Let’s focus on this in my profile!
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