I am long LInkfire and I increased out position by 25% this week.
Five bullet point summary on Linkfire opportunity:
- There are many streaming companies. But there is just one dominating service company that serves most of them with 70% market share. Its name is Linkfire.
- Linkfire connects consumers on social platforms who wanted to download a song to music streaming companies that provide the content. Linkfire collects revenues from both.
- Linkfire revenues have grown at 40%-60% CAGR with a stable 76% gross margin. The growth is accelerating further in 2021.
- Linkfire was a victim of a difficult IPO timing. If it was placed in January or February, its share price would’ve doubled on debut.
- Very strong catalysts in the next six months should cause the share price to double.
Full investment thesis is in the article below:
Pareto Securities bullish on Linkfire
Link to Pareto research summary is below:
Minutes of my call with the Linkfire management
I spoke to the management in late August. The minutes of the call are below:
M&A transaction could happen very soon
During the IPO the management mentioned that they are in negotiations with one of their major competitor. On the call today they mentioned that the transaction is progressing and could be concluded “this year most certainly”. In the below article is speculated that they are about to acquire SmartURL. They should be able to buy it cheaply, because the SmartURL underinvested into its technology and are struggling to compete. Linkfire would be able to materially increase its reach through the acquisition. This transaction is the next major catalyst, that should increase the share price significantly.
“More M&A opportunities than expected“
Linkfire management mentioned, that they see more M&A opportunities than they expected during the IPO. These include both:
- industry consolidation opportunities
- new areas
- revenue enhancing opportunities
New product pipeline
At the moment, Linkfire focuses on Music. They are already started to provide smart links for webcast. The major new area are smart links for Movies. The management mentioned that they already have all the technology build up and they are now signing contracts with studios and preparing the go to market strategy. This will be another major catalysts, that could easily double the share price.
Strong growth expected in H2
The company share price sold off today, because the company did grow 52%, while in the Q1 the growth was 56%. People view that as a sign of slowing growth. I discussed this with the management. The difference is not material.
Last year the company was growing at 43%. In H1 the growth has accelerated to 52%. The company estimates the growth will continue further in H2. They stressed that the best is the Q4, due to the holiday season, when people have more time to listen…
New contract with Apple – more important than reported
On 5 August Linkfire reported a new contract with Apple music. The market viewed it as a contract extension. That does not seem a right interpretation. The press release was very dry, probably due to some legal issues. The contract includes additional services that Linkfire will provide to Apple, they will provide to Apple additional data points and additional services. As a result Linkfire’s revenues from Apple should increase. This is not appreciated by the market.
New Publisher Toolkit – new service announced only on the Q2 call
This new feature was not captured by the market. Based on this smaller music publishers would get a faster access to the service. This should accelerate new client acquisition into revenues.
Higher focus on shareholder communication
The company was listed only one quarter ago. The management appreciates the importance of shareholder communications and is in process of hiring an Investment Relation representative. They said: “We have a lot of stories to tell” and they are working on bringing those to the market.