MNDY is a project and workflow management software made for enterprises and has been punished by the market for fears of AI taking its lunch, with shares having fallen 70% in the past year:

It now trades at a multiple of 2x EV/Sales, a pittance for a SAAS stock

Summary:

• Analysts and equity research reports are under the impression that the rise of AI will take away Monday’s moat and its existence as a workflow management software for enterprises.

• Analysts model a severe growth deceleration in revenues in the next two years, and we think that MNDY’s 1Y -70% share price performance and current valuation is pricing in a future of 0 terminal value and existential fears

• Our research indicates that it is more likely that MNDY’s growth accelerates in the next two years because of the rise of agentic AI

• The same way people thought AWS would kill SAAS businesses(but instead strengthened it), we think agentic AI deployed by enterprises will depend on workflow/project management solutions such as MNDY. MNDY has gotten something of a first mover advantage and has made its applications compatible for AI agents to be run by.

• This is a stark contrast to analyst models, and while our analysis does indicate a chance that AI does kill MDNY’ s business model, we think that the current valuation reflects that the market prices that possibility at about 100%, while we think it is more like 30%.

What the street thinks

Analysts are under the impression that MNDY will go through a rough growth deceleration due to AI eating up their lunch. As per Guggenheim’s recent analyst report, large customers of MNDY are certain that there are no short term displacements in the contracts MNDY holds, but the long term remains uncertain:

As such, Guggenheim is projecting a 19% and 17% YoY Growth respectively for MNDY revenues. This problem of investor pessimism was exacerbated by a CNBC video where MNDY was ‘vibe coded in 15 minutes’ using Claude, further depressing MNDY’s valuation:

The untrained investor may look at this interview with shock and sell his MNDY shares predicting a SAAS doomsday as they fear AI will someday take MNDY’s lunch.

What we think

MNDY is a state-of-the-art workflow management platform trusted by thousands of customers. An impressive thing about MNDY is its high switching costs. While this does not translate to improvement in revenue growth rates, it still does well to call out the stupidity in MNDY’s stock dropping by more than half.

We spoke to a [small] MNDY customer, and they expressed that while they don’t have plans to switch out of MNDY anytime soon, it would be a huge hassle even if they wanted to.

This is because of how deeply rooted MNDY’s platform becomes in a company’s infrastructure, with switching to other platforms needing external platforms such as movebot or outright paying developers to transfer the APIs to other platforms securely. Larger customers with complex workflows would struggle even more to migrate, exacerbating MNDY’s ‘moat’.

However, the primary reason we think that MNDY shares should command a little bit moore of a premium valuation is a mere probability exercise:

• The market, as per us, is valuing MNDY as if it has about a 90% chance of terminal risk, due to it trading at low valuations at 2x EV/sales, while normally SAAS trades at 4x. While this is due to fears of AI adoption, we will prove below how the possibilities of these materialising is way lower than what the market expects

• Agentic AIs, when deployed by enterprises, will need a co-ordination layer. Enterprises will never ever just give up the whole company’s operations to AI; it will be a collaboration exercise between humans and agentic AIs. We think MNDY stands to gain as an integral collaboration layer.

• MNDY is moving on to a subscription + consumption based hybrid pricing model, where the vanilla MNDY’s uses will be accessible for the same per month pricing,k but AI agentic usage will cost extra. This causes MNDY to potentially gain revenues from existing and new prospective customers, as the chances of existing customers switching out en masse are extremely low, especially if they are large enterprises.

• Hubspot CTO essentially validated our thesis that AI will indeed need a co-ordination layer(although he might be a little biased)

The market is punishing MNDY and other SAAS names because of fears of AI adoption and displacing MNDY. Moreover, that little stunt and CNBC where the hosts vibe coded a MNDY clone doesn’t mean anything. I could make a react.js clone of facebook but that doesn’t mean my application will displace facebook: Merely because facebook already has embedded users.

Moreover, IBM Recently published a paper called “The blueprint for agentic operations: How to build an interconnected enterprise”, clearly stating a need for workflow managers:

The main takeaway should be that if enterprises do really want to use Agentic AIs in a meaningful way(which is clearly what the market is predicting will happen with MNDY’s depressed valuations), an orchestration layer as a governance tool and workflow management is absolutely essential

Moreover, the idea above of a ‘digital twin’ already exists in MNDY’s roster:

So, therefore, with the apparent need of an orchestration layer and a digital twin, we think that the market is understating MNDY’s potential importance to enterprises for driving widespread agentic AI adoption.

The beauty of MNDY that it has agentic AIs enabled in its platform. It has the capability to let external agents (such as manus) as well as agents hosted in the platform to use the workflow management platform. This pivot into an ‘AI Operating system for enterprises’ is what makes us bullish on MNDY.

Moreover, something we(and the CEO of MNDY) can agree on is that vanilla SAAS pricing models are dead. MNDY’s CEO shares the same view in this podcast he did:

We think this is the step in the right direction. Given that right now, MNDY’s pricing is hybrid, enterprises will likely use MNDY’s agentic AI offerings at some point if the threat of AI is truly real. This should be tailwinds of some sort to MNDY, as a new revenue stream should be created from present customers as it is unlikely a huge amount of them will switch out to other platforms, and instead would opt to use MNDY’s AI offerings, in addition of course to future prospective revenues.

While this might be a biased take, HUBS CTO purchased about 1.8 million dollars in HUBS shares, and this was his thesis:

Link to whole tweet here. We think Dharmesh knows better than us and more than most people. He here is talking about the same orchestration layer we read in the IBM paper, and we think experts hinting at the need for MNDY’s offerings(indirectly) is bullish, and while AI risks might be real, the risk-reward is in might be in our favour.

Final checks before pulling the trigger

• Talk to competitors how good MNDY is

• Will enterprises truly adopt orchestration layer?

• If orchestration layers are to be adopted, who is gaining the most? HUBS? ASAN?

Any subscriber with expertise or insights on this name, please email me.

Now, onto some of my holdings:

LONG GROW, SHORT JETS

I haven’t released a proper full length write…

Read more

We present to you, $MKTW:

MarketWise is an owner of a few companies that publish in-depth research and due diligence primarily for retail investors. Here are the companies it owns:

Even though we are bullish on the stock, we empathise with the market for punishing the name this long. For instance, revenue growth has been negative for the past few quarters:

However, while the revenue growth has been extremely abysmal, we think that the market has punished the stock too hard, and continues to not appreciate its recent progress at a turnaround and growth. For context, MKTW did 83 million dollars in revenue this quarter. By annualising this, you get a Price-To-Sales ratio of just 0.96x, and a PE of about 4.9x

Nevertheless, we aren’t ones to buy a stock just because it is cheap. Here is why we see tremendous turnaround potential in MKTW’s share price:

We think the worst is behind us. Net billings are up in recent quarter, and search volume for MKTW companies have been exploding lately. The market thinks something terrible has happened to revenues; but we think MKTW’s core business is resilient

One of the main reasons MKTW revenue and KPIs have been suffering is due to them shutting down a relatively big part of their business called ‘Legacy Research’. This gradual wind-down kicked off in mid 2024, and the stock has reacted rather badly to this:

This wind-down of Legacy Research resulted in a rather ugly decrease in Billings in 2024, which puts a lot of the share price action in 2024 in context:

For clarification, total 2024 billings was 240 million dollars

Now while it is true that it did hurt business a little, we think the market taking the stock from about 60 dollars to about 20 dollars is a little bit of an over-reaction, as the market was trying to value MKTW as a company which was losing revenue due to Legacy Research.

However, the most recent Q1 2025 Earnings showed a few things:

Total billings are up both Quarter-over-Quarter and Year-over-Year(by netting out the impact of Legacy Research). Therefore, we think that MarketWise deserves a re-rating in multiple, as it continues to show that the core business is solid, even without Legacy Research.

Moreover, what investors think is an organic decline in revenue and subscriber counts, seems to us as just an effect of the winding-down of Legacy Research, with the core business still going strong. For example:

While investors might be spooked by reading that little passage, here is our takeaway: The only users that are leaving, are the low quality, low ARPU ones.

This is also evident in the fact that quarter-over-quarter ARPU has gone UP while subscriber numbers have gone down. This signals to us that the current customer churn is that of the low-quality Legacy Research users:

Sure. Some subscribers are leaving, and this might be a negative for a business. But to punish it by rerating it to a 0.96x price-to-sales, and a 4.9x price-to-earnings is just absurd to us, and we think this is a product of the market over-estimating core-business churn and confusing it with low-quality Legacy Research users. Essentially, the company went from being priced to perfection, to being priced to achieve nothing!

Now that the winding down of Legacy Research is mostly completed, we think that MKTW deserves a fresh start by the market as a 4.9x PE company with a healthy balance sheet with potential to grow. The market punished the company by taking it to 60$ a share to about 20$ because of the loss of Legacy Research, but we think that this loss is more than priced in, and the market is overestimating the value of Legacy Research that MKTW lost. Now, it is undervalued with lots of potential to grow. In order to put into context how much potential it has, we analysed web traffic data and deduced that the 2 biggest companies MKTW owns are Stansberry and Brownstone Research. Here is how the data looks for the main companies MKTW owns:

Stansberry Research:

A recent jump in organic traffic to Stansberry research

We think a large part of this is due to former NYC mayor candidate and investor Whitney Tilson being an editor at Stansberry:

Moreover, Google trends data shows heightened search activity in Q2 2025:

As can be seen above, the higher relative interest points on the graph fall on dates within the Q2-Q3 2025 range. What we find further encouraging is the following:

50% Increases form the previous time period in relative search volumes for the login pages of Stansberry and the website itself!

Brownstone Research:

Organic Search traffic has risen about 100% since Feb 2025, with Google trends data showing something similarly encouraging:

As can be seen, high search volume relative to that seen in January 2025 has increased in frequency in the Q2-Q3 2025 range, and we think this growth is stable. The most encouraging statistic is what we display below:

Search volumes for the members url has been on a tear, but also the secure site of Brownstone. For context, secure.brownstone.research is the checkout site where users go to pay for their subscriptions!

Management has committed to improving shareholder returns by authorising a 50 million dollar buyback, and has proved that they have shareholder’s best interests in the past. This should help re-rate MKTW from a cheap 4.9x PE stock to a more accurate valuation

A casual look at the balance sheet reveals that net effective cash balance is around 37 million dollars:

79 million cash - 457 Million Total liabilities + 415 million Total deferred revenue = 37 million dollars net effective cash.

Now the company had 97 million dollars in cash in Q4 2024 but it reduced to 79 million due to some initiatives that management took to instil shareholder confidence. For instance, a 10c special dividend on top of a 20c regular dividend:

And even more impressively, a 50 million dollar buyback authorisation:

The best part is that management disclosed that they commenced repurchases in Q2 2025:

We think this is a great decision, because one of the few things that can bridge the valuation gap between a ‘value‘ company and a reasonably priced company is enhancement of shareholder value and improving capital allocation. So, when you take a healthy balance sheet enhancing shareholder return through buybacks along with growing billings and a potential for strong revenue and earnings, you get a buy opportunity!

Mild insider-buying by the CFO:

The insider buy by the CFO is just a 16k buy, but it isn’t nothing, and we thinkt hat him buying this amount in such an illiquid stock trading about 300k USD a day is a good enough vote of confidence to us

How we are playing this:

We plan on buying and selling at around 25-30$, depending on how the rest of the portfolio is doing. If the market has a bad reaction to earnings, we will study it and put out our own interpretation of the earnings and revise our outlook based on what is being reported, and close our position if our thesis is proven invalid in any way.

By reading any of our posts, you agree to do your own due diligence before making any investment decisions. You agree that the authors of this publication are in no way responsible for your investment decisions, and are not liable for any of your possible investment losses, and you also agree to acknowledge that we are do not guarantee any accuracy in our research. You agree to also not proceed with any legal action against us.

The authors of this publication do not give any buy or sell recommendations and do not ensure any correctness to our claims or findings. Under no circumstances would you hold the authors liable for any investment losses. One should assume that any sentence or statement in our posts can be inaccurate and factually incorrect and should not influence anyone’s investing.
Sincerely,
Ragnarok Research

Today we present to you AEI: Alset Inc. At first glance, the share price performance has been abysmal

AEI’s main business is real estate:

Now, a huge reason for the disappointing share price performance is due to AEI’s pivot into this real estate sector. Before AEI’s full pivot into its current business iteration, AEI served as a ‘solar home maker/installer‘ for none other than Tesla

This undoubtedly was one of the key reasons for the sky high prices of AEI back in 2021. However, for whatever reason, the deal either did not materialize or AEI pivoted away from this, which is one of the primary reasons for the share price drop, and we think shares haven’t recovered due to the illiquidity, and complicated structure in the company. However, in this nanocap valuation, we think AEI is a buy for the following very simple reasons:

AEI, with a market cap of 13 million, has about 20 million dollars in cash. Dissatisfied with where they are trading, the company has announced a 1 million dollar buyback using this cash.

At the most recent Q1 2025 financials, AEI had about 25 million dollars worth of cash:

And a total liability balance of 5 million dollars:

This gives a total net cash balance of about 20 million dollars, a hugely comfortable position for a company with a market cap of 13 million dollars.

However, we all hate cash squatting companies that don’t allocate any of that extra cash for the benefit of their shareholders, which might be one of the reasons the stock is trading so low! The company has not taken any steps to turn the balance sheet value into shareholder value. This was until we saw the following announcement by the company:

This buyback plan, if executed, would retire about 8% of the company’s shares by December 2025. Looks like the company finally got the memo! This is a company actively turning its potential balance sheet value into shareholder value! This is a huge part of why we are long.

Along with this cash, AEI owns about 132 single family residential properties as well, which while we don’t exactly see as ‘liquid’ investments, it still counts for something.

In the extremely unlikely scenario where the company enters a state where it needs to squabble for cash, it still owns about 132 Single Family properties:

Note that the place these homes are located is in Montgomery and Harris Counties, with the median house prices in this region increasing over the past 3 years:

In fact, in late 2024, AEI, through its subsidiary, sold some of its residential properties for 4 million dollars:

While this may not sound a lot, it signals to us that in addition to the copious amounts of cash the company has, some value exists in the residential homes it owns, and the company is committed to return some of this value to shareholders via buybacks!

AEI’s CEO bought a few shares earlier this year, which we love to see, since if management doesn’t believe in their own company, why would investors do so ?

We think insider buys from the CEO in a deep value nanocap shitco is one of the best indicators of outperformance, all things considered.

For everyone who checks insider transactions using Finviz, the following insider buy from just 2 weeks ago is not reported:

Moreover, Finviz actually shows these two huge insider sale bars by the CEO:

When in reality, these insider sales actually pertain to the CEO selling his shares in another public company with ticker IBO:

In addition to the insider buys reported on February 2025 in the screenshot above, insider sale trackers that I, and presumably other retail deep value investors follow don’t seem to reflect this huge insider buy made in April of 2025 either:

The company is so small and obscure and under-followed, that even automatic insider trading trackers have given up on it! We think the consistent buys from the CEO, in addition to the announced 1 million dollar buyback to drive value creation is all the signs that we need that value will be returned to shareholders, and that this deep value shitco could be a pretty good investment.

Conclusion

At the end of the day, ‘sophisticated‘ investors would shun the stock due to an unreliable income source and due to its narrational pivot away from Tesla. However, there is a tremendous amount of value to be found in the balance sheet, and we have initiated a position now knowing that management is committed to return this to value to shareholders. Sure. It is a nanocap shitco. However, that is what deep value investing is about, and we think that this name has more value to offer than the market perceives.

By reading any of our posts, you agree to do your own due diligence before making any investment decisions. You agree that the authors of this publication are in no way responsible for your investment decisions, and are not liable for any of your possible investment losses, and you also agree to acknowledge that we are do not guarantee any accuracy in our research. You agree to also not proceed with any legal action against us.

The authors of this publication do not give any buy or sell recommendations and do not ensure any correctness to our claims or findings. Under no circumstances would you hold the authors liable for any investment losses. One should assume that any sentence or statement in our posts can be inaccurate and factually incorrect and should not influence anyone’s investing.
Sincerely,
Ragnarok Research

NeuroOne Medical Technologies Corp. (NASDAQ: NMTC) is a micro-cap medtech innovator currently trading at sa compelling valuation, with a market cap of approximately $30 million. Specializing in minimally invasive diagnostic and therapeutic devices, NMTC focuses primarily on neurological disorders, especially epilepsy—a massive, underserved, and chronic market. Its flagship innovation, the OneRF Ablation System, is the only FDA-cleared sEEG-guided radiofrequency ablation (RF) platform, offering both diagnostic and therapeutic utility:

The stock is trading at depressed levels due to short-term headwinds: (1) a broad-market selloff on April 3rd linked to tariff concerns, and (2) a recent $7 million equity raise(on April 3rd). These events, while ostensibly negative, provide an asymmetric opportunity for investors willing to look through temporary volatility.

The OneRF system is a major part of NMTC’s portfolio, since it is the only FDA-cleared sEEG-RF system:

This is used to manage and handle epilepsy attacks better, and diagnose the actual origin of the attacks in the brain as well.

Needless to say it possesses remarkable technology with a big TAM, since epilepsy is one of the most common neurological-related diseases(About 3 million Americans at the moment!)

Why does this opportunity exist?

Despite the breakthrough nature of its technology, NMTC’s stock has come under significant pressure in recent weeks, creating what we view as an asymmetric opportunity. The recent decline was triggered by two primary catalysts. First, on April 3rd, macroeconomic fears surrounding tariff implementations led to a broad-based market selloff, impacting even companies with no international exposure:

Second, NMTC executed a $7 million equity raise, diluting existing shareholders. While the market reacted negatively to these events, a deeper dive reveals that neither has any bearing on NMTC’s long-term fundamentals.

Executive Summary:

• Zimmer Biomet signed an exclusive distribution deal for NMTC’s FDA-cleared OneRF Ablation System, paying $3M upfront with potential for $1M in milestones. Zimmer ‘picked’ NMTC’s product to market and distribute
  
  

• Product revenue tripled year-over-year, growing from $0.9M to $3.2M — before Zimmer’s commercial rollout began. Ask yourselves: what will be the impact after Zimmer clusters the platform with the portfolio?
  
  

• Recent capital raise and Zimmer payment extend NMTC’s cash runway through FY 2026, resolving prior liquidity concerns.
  
  

• No tariff exposure — all suppliers are U.S.-based, and NMTC has confirmed no overseas shipping activity.
  
  

• A Fox News segment spotlighted a patient going from 10 nightly seizures to zero using NMTC’s device — underscoring clinical impact and market potential.

• NMCT’s President, CEO, and CFO together have bought about 0.5% of NMCT’s market cap in the open market

• The market is poised to grow, giving NMCT a huge growth runway
  
  

• NMCT’s product has a first-mover advantage, and has other advantages over the products, bolstering our confidence in its growth potential

Theses:

The thesis boils down to the following points:

• NMTC’s device has been ‘picked’ by Zimmer Biomet. Zimmer, a reputable company, has bought the license to market and sell the OneRF ablation system, which should spur future growth.
  As stated in NMTC’s financial statement(Q1 2025):
  ‘On October 25, 2024, the Company entered into the Zimmer Amended and Restated Distribution Agreement (the “Amendment”) with Zimmer pursuant to which the Company granted Zimmer the exclusive right and license to distribute its OneRF Ablation System for an upfront payment of $3.0 million, with eligibility for an additional $1.0 million payment from Zimmer upon achievement of certain specified net sales milestones.’
  The strategic partnership with Zimmer Biomet, a $20 billion medtech co., also represents a critical vote of confidence in NMTC’s technology and its potential to scale. Under the revised agreement signed in October 2024, Zimmer received exclusive rights to distribute the OneRF System in exchange for the upfront cash and a potential additional milestone-based payment. Zimmer’s proven commercial infrastructure and global reach offer NMTC a far more efficient pathway to market than it could achieve independently.

• NMTC’s quarterly product revenue(revenue from selling products unrelated to Zimmer’s license revenue) has grown more than 3-fold from last year
  Now, separate to its agreement with Zimmer Biomet, NMTC’s products have been gaining increased traction externally. Here are the results from its most recent 10-Q:
  

  

  
  In terms of financial performance, NMTC is also showing signs of real traction. Excluding the Zimmer upfront revenue, organic product revenue for Q1 2025 exceeded $3.2 million, more than tripling from $0.9 million in the same quarter of the previous year. This surge in organic sales indicates increasing acceptance of NMTC’s devices within the neurology community and lays a strong foundation for Zimmer to build upon in future quarters.
  
  Thus, we ask readers to consider the following: The product revenue(total revenue - license upfront payment) jumped to 3.2 million from 0.97 million from the year prior. How much more growth is in store for NMCT after Zimmer fully integrates the OneRF system into its portfolio:

  

  
  

• NMTC, in the letter to shareholders, has revealed after the most recent capital raise and the upfront payments from zimmer for the ONeRF system license, it has secured enough capital for it to last through the end of FY 2026

According to the same shareholder letter above:

The capital raise, far from being a negative signal, has materially strengthened the company’s balance sheet. Along with a $3 million upfront payment from Zimmer Biomet—its newly signed exclusive distributor—NMTC now has sufficient liquidity to operate through the end of fiscal year 2026. This marks a significant improvement from earlier financial statements that questioned whether NMTC could sustain operations beyond April 2025:

Source

• There will be no tariff impact to NMTC whatsoever:
  In fact, NMTC has no overseas supply chain exposure whatsoever—all key components and manufacturing are sourced domestically within the U.S., a fact explicitly confirmed in a letter to shareholders, NMTC clarified to investors that they have no tariff exposure whatsoever, since all their suppliers are housed in the United States. All of they key components are sourced and manufactured in the US:

  

  
  

• NMTC’s success story has been featured on Fox news, detailing the story of a girl who went from 10 nightly seizures to 0, with the help of NMTC’s device

Just about 10 days ago, NMTC’s OneRF ablation device was featured in Fox news due to it helping a teenager go from ‘10 nightly seizures to 0’:

The best part is the patient is now completely seizure-free:

Further underscoring the clinical potential of NMTC’s product is the public attention it has garnered. Just over a week ago, a Fox News segment detailed the story of a teenage girl who experienced a dramatic reduction in seizure frequency—from ten nightly episodes to none—after being treated with the OneRF system. This story, while anecdotal, provides compelling human validation of the device’s effectiveness and reinforces its unique position in the therapeutic landscape. NMTC is not just developing technology—it is changing lives, and stories like this one will likely help raise awareness and adoption over time.

• NMCT’s President, CEO, and CFO together have bought about 0.5% of NMCT’s market cap in the open market:
  In a strong vote of confidence, NeuroOne Medical Technologies' President, CEO, and CFO have collectively purchased approximately 0.5% of the company’s total market capitalization in the open market just about 2-3 weeks ago:

  

  
  Insider buying at this scale—particularly from top executive leadership—sends a powerful signal to investors. It reflects management’s conviction in the company’s long-term prospects and their belief that the current share price significantly undervalues NMTC’s true potential. This alignment of interests between executives and shareholders is especially meaningful for a micro-cap company, where leadership plays a critical role in execution, capital allocation, and investor trust. Such open-market purchases serve as a tangible indicator that those closest to the company’s operations view the recent selloff as a mispricing, not a reflection of deteriorating fundamentals.

.

Market Analysis of Epilepsy

According to a 2024 report by GlobeNewswire (Custom Market Insights), the global epilepsy treatment devices market was valued at approximately USD 526.8 million in 2023 and is projected to reach USD 548.4 million in 2024. By 2033, it is expected to grow to around USD 787.3 million, representing a compound annual growth rate (CAGR) of 4.1% from 2024 to 2033. Key drivers of this growth include advancements in neurostimulation technologies such as Vagus Nerve Stimulation (VNS), Responsive Neurostimulation (RNS), and Deep Brain Stimulation (DBS). These developments involve improvements in electrode design, stimulation algorithms, and integration with advanced imaging and monitoring systems. Additionally, the aging population, improved diagnostics, government initiatives, and a trend toward minimally invasive surgical procedures are propelling demand.

Product Analysis

NeuroOne’s flagship offering, the OneRF™ Ablation System, holds a unique position in the epilepsy treatment market as the only FDA-cleared sEEG-guided radiofrequency (RF) platform that offers both diagnostic and therapeutic capabilities through a single electrode. This technological integration allows for streamlined procedures, which can reduce the number of surgeries required, shorten hospital stays, and even enable bedside ablations. The Evo sEEG and Evo cortical electrode platforms, which are also FDA-cleared, feature thin-film, high-resolution designs that aim to minimize immunological responses and improve signal quality. These electrodes have demonstrated clear benefits in clinical settings, such as at the Mayo Clinic, where they were used successfully for epilepsy mapping and cortical recordings. The thin, flexible design has been praised for conforming securely to the brain surface, reducing trauma, and producing high-fidelity recordings. NeuroOne is also developing new RF ablation systems, including a device for trigeminal neuralgia, with a 510(k) submission planned for early 2025. (BioSpace, 2020–2023; Yahoo Finance, 2021; AInvest, 2025)

Growth Potential

Although NeuroOne Medical Technologies Corp. (NMTC) currently represents a small portion of the epilepsy device market, its projected FY2025 product revenue of $8–10 million would equate to approximately 1.5–1.8% market share based on current figures. The potential for growth is underscored by its FDA-cleared OneRF system, which offers a first-mover advantage in sEEG-guided ablation. Through its exclusive distribution agreement with Zimmer Biomet—a globally recognized MedTech firm—NeuroOne gains access to a well-established sales network, which could accelerate hospital adoption. The company’s long-term outlook also includes expansion into additional indications and markets, such as trigeminal neuralgia and chronic pain, using its proprietary electrode technology.

If NeuroOne successfully penetrates the 200+ Level 4 epilepsy centers in the U.S., it could see significant revenue gains. For example, if 100 centers adopted the system and conducted 10 procedures annually at $10,000–$20,000 per procedure, annual revenues could range between $10–20 million. That alone would push NMTC’s market share toward 2–4% in the total epilepsy device space. With ongoing clinical validation—evidenced by over 90% seizure reduction in treated patients—and new CMS reimbursement codes supporting its usage, the company is well-positioned for broader adoption. (AInvest, 2025; GlobeNewswire, 2024)

Mayo Clinic Connection

NeuroOne has had a longstanding collaborative and financial relationship with Mayo Clinic. The Evo cortical electrode and the Evo sEEG electrode technologies were both co-developed with Mayo Clinic and other academic institutions, including the Wisconsin Alumni Research Foundation (WARF). Mayo Clinic was not only involved in the early development of these platforms but also performed the first human commercial use of the Evo cortical electrode in December 2020 and the first clinical case using the Evo sEEG electrode in May 2023. Both procedures were conducted by Dr. Jamie Van Gompel, a noted neurosurgeon and co-developer of the technology, who praised the products for their thin-film design, secure brain conformance, and high-quality recordings.

In addition to its clinical role, Mayo Clinic made a financial investment in NeuroOne during Q2 2021, acquiring 181,754 shares at an average price of $7.01. This stake represented approximately 1.33% of Mayo’s investment portfolio at the time. Furthermore, Mayo Clinic and Dr. Van Gompel maintain financial interests in the technology, and any revenue received supports the institution’s non-profit mission. (BioSpace, 2020 & 2023; Yahoo Finance, 2021)

Conclusion

Conclusion

NeuroOne Medical Technologies Corp. (NMTC) represents a compelling asymmetric investment opportunity in the medtech space, particularly within the underpenetrated and growing epilepsy treatment device market. Backed by a highly differentiated product—the OneRF™ Ablation System—which uniquely combines diagnostic and therapeutic capabilities in a single, FDA-cleared platform, NMTC is well-positioned to capture share from a $500M+ global market projected to grow at a 4.1% CAGR.

The company’s recent momentum is underpinned by accelerating product revenue, strong clinical outcomes (over 90% seizure reduction in treated patients), and a transformative commercial partnership with Zimmer Biomet, one of the largest players in the global medical device industry. With Zimmer’s infrastructure now driving distribution, NMTC is poised for scalable growth, and its $3.2M in organic Q1 product revenue—before full Zimmer rollout—demonstrates significant early traction. Additional tailwinds include a newly issued CMS reimbursement code, potential expansion into other neurology indications like trigeminal neuralgia, and an extended cash runway through FY 2026 following a recent capital raise.

Beyond financials, NMTC’s credibility is bolstered by its longstanding relationship with Mayo Clinic, which not only co-developed its core technology but also became an early clinical adopter and financial backer. Insider buying by executive leadership further signals internal conviction in the company’s future prospects. Moreover, media attention, such as a Fox News story detailing a patient’s transformation from nightly seizures to complete seizure freedom using OneRF, reinforces the technology’s life-changing impact.

While risks remain—such as execution dependence on Zimmer Biomet, ongoing regulatory hurdles, and limited cash reserves—these are counterbalanced by the company’s unique IP, expanding product portfolio, improving financials, and strong strategic positioning. For investors with a high-risk tolerance and a long-term view, NMTC offers a rare combination of breakthrough technology, clinical validation, and early commercial momentum at a deeply discounted valuation. This makes it a “Buy” in our view.

Why does this opportunity exist?

In December 2024, shares of BioAge Labs (NASDAQ: BIOA) tumbled significantly—dropping by over 76%—primarily because the company abruptly halted its STRIDES Phase 2 clinical trial for its experimental obesity drug candidate, Azelaprag. The trial was discontinued after several patients exhibited elevated liver enzymes (liver transaminitis), a safety signal that raised concerns about the tolerability and risk profile of the drug.

Now, investors thought BIOA has virtually nothing else to offer, prompting in the following share price action:

However, we at Ragnarok Research have bought shares of BIOA because we believe that the 80% dip was a huge overreaction, and that Bioage has an undervalued ‘hidden’ asset that can spur growth in both the income statement in the future, while having a tremendous amount of value in its balance sheet.

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Read Hunterbrook’s original thesis: https://hntrbrk.com/bioa/

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The diagram below should be a testament to how much of ZDGE’s core business’ earnings resilience is being masked by Gurushots:

However, this isn’t a bad thing. We highlighted in part I that because Gurushots is such a drag on ZDGE’s overall bottom line, even a slight improvement in Gurushots’ operating structure should contribute to a material improvement in the holdco ZDGE’s bottom line- mainly via cost cutting and revenue expansion. Thankfully, management has taken notice of these issues, and has announced a cost-cutting initiative, like reducing headcount by 22%, mostly impacting Gurushots. Sure. The PR also talks about ‘Gurushots 2.0’- an initiative to completely reimagine gameplay and monetisation policies to help Gurushots to add value to Zedge, rather than subtract it. Sure, they know exactly how to reduce costs and ‘leanify’ Gurushots- but what about the revenue growth part ? What about inducing exploding growth to Gurushots ?

To answer these questions, we commissioned our own in-house research to see what went wrong with Gurushots via mass surveys and conversations with industry experts. We then shared our findings with ZDGE’s CEO and Gurushots’ Product-head, and gained a lot more insight into how Gurushots 2.0 is going to be executed.

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Since our advice to management, as well as our full interaction with them is embedded in a writeup that is too long for this substack, we have attached the PDF to this post. Please download it to read.

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Disclaimer:

The authors of this publication do not give any buy or sell recommendations and do not ensure any correctness to our claims or findings. Under no circumstances would you hold the authors liable for any investment losses. One should assume that any sentence or statement in our posts can be inaccurate and factually incorrect and should not influence anyone’s investing.
Sincerely,
Ragnarok Research

We see pundits on Twitter yap about margin of safety and undervaluation- but what does it mean ? We think ZDGE symbolises all those attributes of a perfect investment, with a touch of long-activism from us.

ZDGE’s core business is resilient, and management is doing evetrything it can to bolster it up. ZDGE’s failing subsidiary however, needs help, and management launched a cost-saving program pertaining to it. In this deep-dive, we provide readers our reasons for which ZDGE, in a few years, will be a multibagger as per us, and we highlight the reasons why the stock price is down, and if management’s turnaround fails, we still see 50-250% upside in case of a divestiture. In part II of our writeup which will be released soon, we will provide management a roadmap to transform ZDGE from a Doozy into a multibagger. We also highlight how easy it is for a shareholder friendly management, like the present ZDGE management, to transform Gurushots into a money-maker- even if they don’t follow our guidelines.

We also point out the margin of safety- about 50% of the market cap is net cash with miniscule debt- with virtually no possibility of a bankruptcy! In our humble opinion, if management is smart, this investment is so safe that our bear case scenario in an efficient market is up 50% if the turnaround doesn’t work!

Investment thesis Summary:

• Core Business Resilience: Zedge operates a steady and cash-generating phone personalization app business, contributing significantly to its revenues despite the fading COVID-era demand spike.

• Low Valuation & Margin of Safety:
  Valuation metrics are extremely attractive, with a Price-to-Sales ratio of 1.26 and an EV/EBITDA of 12x, indicating a heavily discounted stock.

• Strong balance sheet with $20 million in cash against a $38 million market cap, providing a significant margin of safety.

• Past Challenges: The ill-fated Gurushots acquisition temporarily dragged earnings into negative territory due to high costs and impairment charges. However, these write-offs are complete, removing a major overhang on the stock.

• Turnaround Potential:
  Management has announced a 14% workforce reduction, focusing on Gurushots cost containment, signaling a renewed commitment to profitability.
  
  Gurushots is now a low-risk "call option" within the company, since ZDGE has written off virtually all of Gurushot’s asset value that needed to be removed from its books. Even though Gurushots contributes to almost 100% of ZDGE’s operating losses, effective monetisation and earnings growth from Gurushots can help turn ZDGE into a multibagger.. In the part II of this Writeup, Ragnarok Research will give a blueprint that management can use to turnaround and restructure Gurushots!
  
  

• Value-Generating Initiatives:
  Management is bolstering core business via strategic use of AI to enhance the core business by offering innovative phone customization options (e.g., AI-generated ringtones and wallpapers).
  
  Aggressive share buyback programs—$5 million approved—retiring up to 13% of outstanding shares at current prices.

• Investment Safety: Even in the worst-case scenario, where Gurushots fails to turn around, a divestiture would substantially boost profitability and unlock shareholder value, which we estimate will drive share price 50-250% higher if management gives up on the turnaround and divests gurushots.

• Easy path for management: In this writeup we emphasise how clear of a path management has to implement a turnaround. In Part II, we will release steps management can take, after extensive DD- via testing of the gurushots platform, and conversations with users. Gurushots is a beloved brand in the photography community, especially amateurs, but they hate the pay-to-win aspect of Gurushots and if handled properly, which we believe management will do- especially if they follow our research and guides- will result in a multibagger.

• Compelling Upside: ZDGE is an undervalued stock which holds a key hidden underperforming asset which management is eyeing to bring back. A turnaround is definitely possible because all that needs to be fixed is the monetisation of gurushots and incentives. In the off-chance that this doesn’t work, ZDGE has a huge margin of safety due to its strong balance sheet, and a resilient core business, which if ZDGE focuses on solely by divesting gurushots, is worth about 50-250% more than it is valued today.

Introduction

Zedge is a 38-million dollar company, valued 12x EV-EBITDA that makes an wallpaper app that you find in google play store, for which you can pay a small amount for custom animated wallpapers, and phone personalisation in general.By phone personalisation, we mean custom notification sounds, wallpapers, ringtones, etc., It isn’t a high-tech, attractive software company, which is partly the reason that it trades at a low valuation (1.26 Price-to-sales, and 8 Price-to-cash). The share price paints a story:

The stock started surging at 2020, the covid era, when bored users started splurging money on ‘phone customisation’, and as the covid hype faded away, the stock cratered. This is where the market made a mistake. The market correlated the stock directly to covid spending. For example, look at ZDGE’s revenue graph:

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Revenue has been steadily rising even after covid effects subsided. In fact, it has tripled since 2020.

But then, surely the market can’t be this stupid, right ? Well, investors first sold ZDGE stock for the covid hype fading, but didnt buy them backdue to Its earnings:

Also its Operating income:

Earnings quickly took a dive and is accelerating down due to an explosion in costs. Operating income 153k in FY 2024, while net income was -9M- mainly due to impairment charges related to the gurushot acquisition(Ebitda was 2.6M in FY 2024). An unprofitable software company(accounting for writedowns) with negative sentiment is a recipe for low valuations, which is reflected in the stock price.

What went wrong ?

The sudden dip in earnings caused by one primary factor: The gurushots acquisition. In April 2022, ZDGE announced that it was acquisiring a company called gurushots. Now gurushots, which you can see for yourself here, is a photography game. It is a pretty good concept- where users compete on who takes the best photos and you ‘move up the ranks’ with different badges. While this is a great concept for aspiring photographers, gurushots is not a moneymaker. The thing about acquisitions is you get a new revenue stream … but in the expense of new costs (salaries of new employees, integration costs, etc.). In ZDGE’s most recent quarter, ZDGE earned 7 million in revenues, of which just 644k was attributed to gurushots. That is basically peanuts as far as materiality goes. In the yearly scale, we see the following proportions:

Dark blue being normal Zedge core business, and light blue being Gurushots.

But we suppose it is not all that bad because gurushots is contributing something to revenues. However, the catch is it is contributing a lot to the costs:

These are figures from ZDGE’s most recent quarter. Earnings this quarter was -457k. However, if we pretended Gurushots did not exist, ZDGE’s income from operations would have been +934k! About 1.3 million more! And this is not counting the exorbitant impairment charges ZDGE has been taking! However, management in FY 2024 10-K revealed that the write-downs related to gurushots are basically over:

Recall how we saw a sudden dips in operating income starting 2023 ? Here is what the chart of ZDGE’s income from operations chart would look like, had ZDGE not acquired gurushots:

Blue: Present Income from Operations of ZDGE
Red: Income from operations without gurufocus

Because of the acquisition, we have seen earnings tank into the negative territory, with management, in FY 2024, taking a 11 million dollar impairment charge relating to gurufocus(which will not happen going forward), not to mention Operating income dipping from about 9 million in 2022 to 153k in 2024 due to the huge SG&A costs related to Gurushots.

But the funny thing is, the PE ratio(here, definition being market cap/net income) had the gurushots acquisition not have happened, would have still been a meagre 6.71(as of FY 2024, if we discount loss from operations from gurufocus, along with its related impairment charge), or more recently 10.17(as of latest quarter, annualised) … a criminal undervaluation for a software company… not to mention ZDGE has 20 million dollars worth of cash against a 38 million dollar market cap, with just about 200k in debt, bringing Price-to-cash to more than 50% … Talk about a ‘safe’ investment!

So … we have a core business which is pretty resilient so far, which is being weighed down by a bad acquisition.… But we believe management can nullify every single thing that is keeping the stock down pretty easily.

The value creation opportunity

Based on the facts stated above, it is clear that the main problem with ZDGE is Gurushots. Now, the two things ZDGE could do is either divest Gurushots, or turn it around and bring back earnings and revenue growth. Below, we dig deeper into each of the value-generating moves we believe ZDGE should make. To be clear, we think ZDGE should/would pick the latter option.

Divest/Sell Gurushots. Impact: Highly positive. Likelihood: Almost 0

Just to be clear, our long-term plan for ZDGE would be to turnaround Gurushots to turn it into a money-generating machine. We want to highlighted divestiture as an option to show how even the worst-case scenario of the gurushots turnaround not working can be a great thing for the share price via a divestiture. This is a great margin of stock since even the worst-case scenario of gurushots would yield a share price appreciation for ZDGE.

Say ZDGE’s turnaround doesn’t go as hoped and management wants to get rid of Gurushots. What happens then ?As high highlighted earlier, ZDGE’s PE ratio without gurufocus is at an outrageous 6x(FY 2024- stripping out gurushocus related impairment and amortization charges and SG&A) or 10x(As of latest quarter annualised). Now that management has already pointed out that there won’t be such large write-downs going forward because about 100% of the assets related to gurushots have been written off, Gurushots is basically a sitting duck:

The only thing Gurushots is contributing to ZDGE, it its sky-high operating expenses such as Gurushots’ employees salaries, etc. The market hasn’t been valuing ZDGE properly because it views ZDGE has a decelerating software company which made a blunder of an acquisition with miniscule operating income, while failing to see the resilient core business. If we strip ZDGE off of Gurufocus via a sale or divestiture and get rid of its operating costs(like SG&A, salaries… etc), we believe the market will re-rate Gurufocus from a 6x to atleast a conservative 15x PE ratio, representing a 50-250% gain from current price levels, mainly due to the realisation that operating income would jump from 0.15million to about 5 million immediately, assuming FY 2024 numbers. Refer to the following chart again:

This is a conservative estimate, considering that a company which has a growth runway (more on this in the next point) ,and flipping into positive earnings is a narrative the market has historically loved. In fact, ZDGE’s EV/EBITDA ratio stands at an attractive 12x, even though EBITDA is set to grow when/if Gurushot’s SG&A base vanishes after the sale/divestiture. The valuation is not the only aspect of this decision. Divesting Gurushots will allow management to focus more on the core business, helping them bring growth back to Zedge’s core business using AI, which I address further below in the writeup later.

However, management is hellbent on not shutting down gurushots, and instead turning it around. Look at CEO’s remarks as of most recent earning call:

This is not to say that management might not consider a divestiture in the future, but I don’t believe we can expect it in the short-term. However, with all the Gurushots related write-downs over, it is fair to give management a shot at turning this dud around, especially considering that they said they have taken steps in the past 6 months or so. The good part is, if management fails to turnaround gurushots, they still have a very undervalued core business, and they can divest Gurushots as a last resort and it would still result in a share price appreciation. More about the Gurushots restructuring below

Gurushots’ Turnaround plan: Management has already announced plans to restructure gurushots and cut costs via reduction of employee headcounts, and also look for ways to overhaul Gurushots to become a growth machine.

With all the write-downs and impairment charges relating to the Gurushots over, Gurushots basically acts as a ‘free call option’ within the company since its asset value is virtually 0. This is amazing because Gurushots is this entity that is worth nothing, but contributes a LOT to ZDGE’s costs. Even if ZDGE cuts SOME of gurushots’ costs, it will help ZDGE a disproportionately amount… and in the case of a total turnaround of gurushots, we can see ZDGE becoming more than a 5-bagger. The best part is even if the turnaround fails, divestiture, as mentioned above, will unlock shareholder value.

On the 21st of January 2025, management announced a restructuring plan to reduce ZDGE’s headcount by 14%, mainly by letting go of Gurushots employees. This is the stripping of costs we were talking about:

Gurushots’ acquisition has contributed so much to ZDGE’s SG&A expenses, and it is one of the primary reasons ZDGE’s operating expenses is miniscule. After layoffs and a sort of ‘leanification’ of Gurushots, management is improving the bottom line of income statement of ZDGE, while preserving the option to exponentially improve both the topline and the bottom line

Next, the restructuring plan involves other cost-savings which will save 1.7 million in pre-tax(this incoludes the layoffs), which implies about 15% of FY 2024’s pre-tax losses(Pre-tax income was -11.37). This makes our analogy of a free call option even better- management seems to be focused on lessening the drag impact Gurushots seems to be having on ZDGE, while preserving all possibility of a turnaround and turning Gurushots into a growth machine!

Other than a divestiture, this will be the highest value-generator for ZDGE in our opinion. Gurushots cannot make money for the life of itself at the moment- but if that changes, we can see a world’s worth of multiple expansion. So- management knows how to cut costs by firing people and lowering user acquisition costs, but what about actually inducing growth to Gurushots ?

Yes, management does say that they are still figuring out the roadmap to turn-around, but Ragnarok Research has done due diligence on this topic and webelieve that Gurushots is one of those ideas that are great for the photographic community, but just hasn’t found the right way to monetise yet. When ZDGE did try to monetise it, players started complaining of it becoming a pay-to-win. Now, management wants to fix it and are confidence about their options. This attitude can be seen in management’s reluctance to divest or shut down Gurushots- because it is a strong brand in amateur photography!

Best part is, management plans to attack this monetisation problem directly:

As stated, Zedge wants to overhaul gurushots and rethink its entire monetisation policy and make a new player experience. This is a step in the right direction, and it is almost undeniable proof of how shareholder-friendly management is. Our main conviction in Gurushots’ turnaround is that the problem is clear: the concept of a competition for amateur until Gurushots became a pay-to-win. This is not a very hard problem to fix because the concept is great and photographers even agree. Look at some trustpilot reviews:

In Part II, we will touch up on how management can actually turnaround Gurushots.

To be clear, we have full confidence in what management will come up with- and this is just our 2-cents. Even if management does not take the steps we list out, we will remain long because management’s docs is at a turnaround of gurushots and cutting costs- which is all we ask for.

Other Value-Generation views management is pursuing right now:

ZDGE has a fairly competent management team, which is doing everything it can to help out shareholders by taking measures to unlock shareholder value in other avenues as well. Here are some of them which makes us confident that ZDGE is a good long-term investment, assuming ZDGE handles Gurushots in either of the two ways highlighted above.

Accelerate growth of ZDGE’s core business. Impact: Positive. Likelihood: Almost 100%
We see great growth opportunities ahead of ZDGE, especially after the most recent earnings call. We all know how Generative AI is taking the world by storm- from Sora, to ChatGPT, etc. ZDGE wants to capitalise on this opportunity. Instead of offering plain wallpapers and sounds to users, ZDGE is transitioning into a paid model where users themselves can create and customise their own sounds and pictures. This sets ZDGE on a path to capitalize on growing AI trends where users are virtually paying for an AI-agent that streamlines the process between giving a prompt, and embedding the end result to your phone via wallpaper, ringtone, or notification sounds:

A valid concern an investor may have is ‘wait, why can’t I use something like Sora myself, and use that as my wallpaper?’. Well wallpapers aren’t the only offering of ZDGE. It specialises as phone-customisation specific products, like AI-made ringtones(Will roll out soon as per management), custom app icons … things that are hard to integrate from an image to the UI of a phone. ZDGE merely streamlines that process.
The most recent quarter actually suffered a decline in advertising revenue due to a one-off, which has been rectified:

So, our latest quarter annualised PE ratio of about 10x is actually inflated due to a one-off advertising bug and some ‘integration complexities’ from adtech partners which is supposed to normalise going forward. Goes to show how undervalued the company is. This decision by management, according to us, will further bolster ZDGE’s core business. Returning growth back to ZDGE’s business can be better done if management is solely focused on the core business, instead of dividing attention between the core, and gurushots. So, we believe this action goes hand-in-hand with the divestiture/sale of gurushots.

The value generation classic that management is already implementing: Share buybacks. Impact: Positive. Likelihood: Almost 100%

A classic maneuver in the value generation playbook is ramping up buybacks- and the best part is, this is exactly what ZDGE is doing. ZDGE recently just approved a 5 million dollar share buyback program:

This is extremely bullish in our opinion, considering ZDGE just completed a 3 million dollar share buyback last july. This just goes to show how confident management is in their strategy. Even if we disregard that, a 5 million dollar share buyback would retire, roughly 13% of the shares at current prices, making the company even more undervalued and even more primed for share appreciation when funds start valuing it as a profitable, and growing company, assuming the two steps above are also successfully taken.

Risks

One of the main risks to the thesis is Gurushots not turning around as we hoped- but that is also a pillar of the investment thesis. Even if it does nt work out, a divestiture will be extremely value-generative due to the market likely performing a multiple-rerating to price in the resilient core business of Zedge.

Conclusion
We have not seen a company like ZDGE in a long time. This is a software company valued 12x Ev-Ebitda, but with an extremely depressed Ebitda which management is working hard to fix. Soon, market will catch up like it always does and we believe that this has multibagger potential. Sure, the actual turning around of Gurushots might be hard, but even if it all doesn’t work out, it ends well for ZDGE. In our view, this makes ZDGE a strong, screaming buy.

In Part II, we will release a set of guides we think management should/will take to transform solely gurushots. This writeup was to highlight the attractive opportunity in the total entity, which is Zedge Inc,. Nothing more. The part II will be way more comprehensive. An activist bet can’t be made on ZDGE because a majority stockholder controls virtually 70% of the voting rights, so activism isn’t really an option- however sending out Part II into the ethos in hopes that management reads it and gets some inspiration is our goal- other than a fun little exercise to challenge ourselves.

TransMedics Corp is a medical technology company specializing in systems to preserve, monitor, and transport donor organs such as hearts, lungs, and livers. Its Organ Care System (OCS) enables longer preservation of organs outside the body, significantly improving transplant success rates. Over the past five years, TMDX’s stock has surged 300%, fueled by accelerating adoption of its OCS program. Quarterly revenues have risen from $42 million to $109 million in just seven quarters.

However, Q3 2024 marked TMDX's first negative quarterly revenue growth since 2022. Management attributed this to temporary factors, including maintenance on its organ transport fleet, which reduced the number of flights undertaken and caused revenue declines. The maintenance also increased costs as TMDX relied on third-party planes for some trips, further compressing gross margins. Importantly, management indicated in the earnings call that these challenges should normalize going forward, setting the stage for material gross margin expansion in subsequent quarters. Despite this, the stock has dropped ~50% from its all-time highs (ATH), and as of 28th November 2024, almost 30% of the float has been shorted. This presentsa compelling buying opportunity to the contrarian, and intelligen investor.

We are long TMDX for the following reasons:

Investment Thesis:

1. Strong Operational Recovery Points to Record Q4 Performance

In Q3 2024, TMDX reported a fleet of 18 planes for organ transport. Using FAA data and jetspy.com, we tracked monthly flight activity and found the fleet's operations have significantly rebounded in Q4:

• 2024 Flights by Quarter

  • Q1 (14 planes): 661 flights

  • Q2 (17 planes): 1,474 flights

  • Q3 (18 planes): 1,376 flights

  • Q4 (as of Nov 28, 18 planes): 1,012 flights

The reduced number of flights in Q3 stemmed from fleet maintenance, which limited operational capacity and necessitated the use of costly third-party planes. These factors weighed on gross margins and overall profitability. However, with the fleet performing better, TMDX performed 17.4 flights per day in Q4 (as of Nov 28), projecting 1,570 flights for the quarter—a record high. Historically, December sees elevated transplant activity due to alcohol-related accidents, suggesting an even stronger Q4 finish.

Despite low transplant volumes nationally, TMDX’s rising flight numbers signal growing market share and adoption of its OCS technology. The normalization of fleet operations should also lead to lower costs and margin recovery in Q4 and beyond, making us confident in robust earnings growth and outperformance in upcoming reports.

2. Resilience Amid Temporary National Headwinds, Setting the Stage for Explosive Growth

National transplant volumes have declined in Q3 and early Q4 2024 due to cyclical factors. Data from the Organ Procurement and Transplantation Network (OPTN) illustrates this trend:

• 2024 Transplants per Day

  • Q1: 31.64

  • Q2: 32.98

  • Q3: 31.4

  • Q4 (as of Nov 28): 30.07

Such declines are typical during this time of year. Transplant volumes historically peak in December and Q1, driven by seasonal factors like increased alcohol-related accidents. These cyclical lows have weighed on TMDX’s Q3 performance and investor sentiment. However, this temporary dip in transplant activity obscures a critical trend: TMDX has significantly expanded its market share and captured more customers, even during a period of reduced demand.

Market Share Gains Amidst Headwinds

TMDX’s operational resilience and aggressive market expansion are evident in its growing flight numbers. While overall transplant activity in the U.S. has hit yearly lows, TMDX’s fleet activity is on track to achieve record highs in Q4 2024. This signals that hospitals are increasingly adopting TMDX’s Organ Care System (OCS) and shifting transplant orders to the company.

This means that TMDX has signed up new customers during this period, leveraging its technological edge and superior outcomes. These new customers, combined with existing ones, are likely to significantly increase transplant volumes as overall demand normalizes. This sets the stage for a substantial boost to TMDX's revenue in 2025 when seasonal factors drive transplant volumes higher.

Revenue Explosion in 2025 and Beyond

1. More Transplant Orders Despite Lower Volumes: TMDX has demonstrated its ability to grow transplant orders even in a low-demand environment, thanks to its aggressive market share expansion. This growth is particularly significant because new and existing customers will perform more transplants in 2025 when national transplant volumes rebound due to seasonal factors. As transplant volumes rise, these orders will translate directly into a significant surge in earnings.

2. Seasonal Tailwinds: December and Q1 have historically been the busiest periods for organ transplants. With TMDX’s fleet operating at peak capacity and an expanded customer base, the company is uniquely positioned to capitalize on this surge in demand.

3. Widening Adoption Curve: Hospitals that adopt the OCS system during periods of operational stress are unlikely to revert to traditional methods, ensuring sustained growth in transplant orders as demand normalizes.

Mispricing of Growth Potential

Investors have failed to appreciate the strategic importance of TMDX’s market share gains. The company is being punished for temporary cyclical factors, even as it lays the groundwork for outsized growth. The increase in transplant orders during a historically low-demand period suggests that TMDX is becoming a critical player in the organ transplant ecosystem.

As transplant volumes return to normalized levels, TMDX’s outsized market share will magnify revenue growth. This misalignment between the company’s operational performance and market sentiment creates a unique opportunity for investors to capitalize on a temporary inefficiency.

As a side note, the unravelling of the short interest, which we think may induce some buying pressure from short-covering, can be a reason for future short term price appreciation as well. This, coupled with the end of tax-loss selling in 2025, serves as some great ‘technical’ catalysts.

Valuation

TMDX is currently valued at 7.2x trailing twelve-month sales, which reflects the market's acknowledgment of its high growth potential and dominant position in the organ transplant ecosystem. While this multiple is higher than traditional medtech averages (typically in the 3–5x range), several factors make it attractive:

• High Growth Rate Justifies Premium:
  TMDX has grown its quarterly revenue from $42 million to $109 million in seven quarters, an annualized growth rate far outpacing traditional medtech firms. This growth trajectory supports a higher sales multiple, especially given its market dominance in the OCS space. TMDX has a huge growth runway even if we exclude all the analysis done in this writeup. Apart from the Liver segment(accounting for about 70% of revenyes), TMDX is on track to launch its OCS Lung clinical program to drive adoption, and is investing further capital to expand market share on the heart and lung segment as well!

• Market Leadership with Minimal Competition:
  TMDX operates in a niche market with limited competition, providing it with a significant moat due to it being the only FDA-approved solution. The Organ Care System (OCS) is a revolutionary technology that hospitals are increasingly adopting, as evidenced by rising flight activity even in a low-demand environment. This unique position reduces the risk of immediate margin compression or disruption, making the premium valuation more defensible. Since TMDX’s solution is the only FDA-approved product, TMDX can easily expand its solutions to multiple transplant-able organs and gain market share. According to investor presentations, this is its primary goal- to expand utilisation and adoption via its clinical trials for the lung and heart segment. In the Q3 2024 Earnings call, the CEO of TMDX said ‘our clinical programs that are designed for next year is to expand our reach even further in lung and heart and tackle areas that we have not tackled yet’.

• Explosive Revenue Potential Ahead:
  The current multiple does not fully account for the substantial revenue growth expected in 2025. With TMDX signing up new customers, increasing transplant orders, and benefiting from seasonal tailwinds, its revenues are poised for an outsized surge when transplant volumes normalize. This forward-looking growth could compress the sales multiple significantly in the coming quarters, offering upside for investors.

• Gross Margin Expansion and Operating Leverage:
  The normalization of fleet maintenance costs, reduced reliance on third-party planes, and rising volumes will drive significant gross margin expansion. As operating leverage kicks in, profitability will scale faster than revenue, further justifying a higher multiple.

Peer comparison

While TMDX’s 7.2x sales valuation is higher than the medtech industry average, it remains reasonable compared to high-growth, innovative peers in adjacent healthcare technology spaces. Many growth-focused medtech or biotech firms with disruptive technologies trade at 10–15x sales, particularly when they are at an inflection point for profitability. For instance:

Intuitive Surgical (ISRG), a mature leader in robotic-assisted surgery, which is almost at the end of its growth curve, trades at a lofty 24.5x sales

Xvivo Perfusion(STO: XVIVO), A peer of TMDX operating in the organ preservation industry, trades at about 19x sales.

Given TMDX’s unique position, early-stage growth curve, and limited competition, its 7.2x multiple appears relatively conservative, especially as revenues are set to accelerate.

Risks:

• Fleet Maintenance: Persistent fleet issues could increase costs.

• Prolonged Transplant Volume Decline: A delayed recovery in transplant activity would hinder growth.

• Competition: Although minimal now, new entrants could erode market share.

Catalysts:

• Earnings Confirmation: Future reports should validate that growth remains intact.

• Normalization of Transplant Volumes: Seasonal recovery in 2025 will amplify revenue.

• End of Tax-Loss Selling: This temporary pressure should subside post-Q4.

Conclusion:

TMDX represents a compelling opportunity in the medtech space. Despite temporary setbacks, the company continues to expand its market share and demonstrate resilience during a cyclical downturn. With strong tailwinds on the horizon—normalizing transplant volumes, a robust flight recovery, and a misunderstood Q3—TMDX is well-positioned for explosive growth in 2025. At current valuations, it is a screaming buy for long-term investors.

Executive Summary:
Ragnarok Research is long Columbia Banking System, for mainly three reasons:

1. COLB has been punished by the market for missing analyst’s earning expectations in Q4 2023, with the stock being hammered about 30% since Jan 2024, and 24% since its Q4 results date(Jan 24th):
   

   

   
   This mispricing has created an attractive buying opportunity, and insiders are racking up shares since they realise the egregious value proposition which this decline has presented:
   

   

   

(Green dots representing buys, with red dots representing sells. Notice the volume of buying in such a short timeframe has never seen before since 2016?)

2. The market has failed to realise that the 20% drop due to disappointing earnings is completely unwarranted, and were due to one-off problems that are likely to never repeat in, say Q1 2024. Management also believes this, as reflected in language used in earning calls and investor presentations, and obviously, insider-buying behaviour. We believe COLB is poised to surprise skeptics in the coming quarters

3. The recent selloff has rewarded investors to buy COLB’s stock at a valuation cheap valuation that presents itself once-in-a-lifetime. The cheap valuation provides an opportunity of asymmetric return, with the discounted price serving as a margin of safety.

4. Ragnarok Research assigns a short-term(2-3 months) Price Target of about 25 US Dollars, representing a conservative 30% gain from current levels. 

Part I: the reason for the decline:
COLB is a relatively simple business, as described in its 10-K:

https://capedge.com/filing/887343/0000887343-24-000089/COLB-10K-2023FY#i6efef15136974c6e93d1638f2fc2e1ba_16

COLB is your typical bank that offers wealth management, financial planning, mortgage, and other services to corporate, institutional, small business, and individual customers. 

It is a financial holding company that, recently, has had a lot of selling pressure due to misinformed investors blowing its recent earnings disappointment out of proportion.

On the first glance, it does seem bad:

A 44% negative surprise in Earnings is something that can scare off any investor bullish on COLB. But what was the reason for the drop in net income ?

Below is quarterly revenue since Q2 2022:

COLB’s revenue actually increased by a tiny amount from Q3 to Q4. The reason for low net income was increased non-interest expense:

Non- interest expense increased by 65 million dollars from Q3 to Q4. 

At first look, this is a dire cause for concern, and a practical, “intelligent” investor would consider closing his/her position in the stock. 

But, what investors faile to recognise is that the increase in expenses is temporary, and COLB is poised to make a killer comeback in the coming months.

For instance, in COLB’s Earning release document:
​​https://s26.q4cdn.com/577104185/files/doc_earnings/2023/q4/earnings-result/COLB-2023-Q4-Earnings-Release.pdf

As the CEO himself said, “one-time” expenses were the perpetrators of the increase in expenses.

First off, COLB has incurred 2 one-off expenses(see highlighted in blue):

https://s26.q4cdn.com/577104185/files/doc_earnings/2023/q4/earnings-result/COLB-2023-Q4-Earnings-Release.pdf

1) Merger related expense(7 Million in Q4) with regards to its merger with Umpqua bank. The expense is decreasing quarter by quarter, and we expect this to turn negligible by the first half of 2024.
2) FDIC Assessments(33 Million in Q4), which can be explained via the 10-K:

Basically, the next time COLB incurs FDIC(Federal Deposit Insurance Corporation) assessment fees(standard probes by a governmental agency) as much as 33 million dollars in a single quarter, it will be at the end of 2024, according to our understanding. This is ample time for COLB to cut back on other one-off expenses, as explained by management in their fourth-quarter earning call:

https://capedge.com/transcript/887343/2023Q4/COLB

As it is clearly said, some expense line items in Q4 2023 were ‘elevated, and not expected to continue at those levels’. 

Bottom line- in Q1 2024, the 33 million FDIC expense would vanish, so would some of the merger expense, and some of the extra ‘expense line items’ as well.

The main perpetrator of the selloff is, ultimately, the FDIC assessment costs- something the market fails to recognise as an expense which will only be incurred at the end of every year, for the next 8 quarters(2 years).

A 20% drop with an increase in revenue can only signal that the market is misinformed about the nature of the expenses, since it was the net income that ultimately ‘disappointed’ the market(EPS disappointed by about 44%, while revenue disappointed by only 3%)

Part II: Absurdly low historic valuations:

Since this writeup mostly focuses on a short-term trade based on the market being slightly ‘misguided’ according to us, we won’t pay a lot of attention to valuation. However, a few figures we just snagged from Simply Wall Street:

(COLB trades at a 2.3x PS ratio, with the average being 5.1x. This implies about 100% upside according to simply wall st.)

COLB, again, trades at 11.6x PE ratio, with peer average being 15.1x. This implies about 30% upside.

If we plot the historic Price-To-Sales ratio of COLB, we get:

A historic low.

Something interesting, however, can be seen with its historic PE ratio valuation:

Wherever there is a callout sign of ‘PE: 11’, those are the points in time where COLB had a PE ratio of about 11. The lowest historic price of COLB when it had a PE ratio of 11 prior to now was when it was trading at about 24 USD per share- implying upside of atleast 20%. The highest price, when COLB had a PE ratio of 11, was when it was trading at about 40 USD a share, implying about 100% upside.

Mr. Market has granted us, regular investors, an opportunity to capitalise by buying a mispriced stock at historically cheap valuations. Best part ? Management realises this, and have been racking up shares.

Part III: Management realises the absurd bargain and the untapped value in the stock

Does this chart need any explanation at all ?

After the sell off post-earnings, management has clearly realised that the market is misguided, and that COLB is poised to make a comeback in the coming months, and just like every other team of executives, they want to get rich(not always good- but in this case, we’ll give them the benefit of the doubt haha)

For instance:

It is pretty evident that the trades were done post-drop.

The cluster buying is by the following executives:

Amidst selling pressure of a stock, the set of people that have the most informed idea of a stock’s future moves, is ultimately management. There’s a saying: “Management can sell stock for any reason, but they buy for onle one: The think the stock price will go up” and what better set of people is there to base trading decisions on ?

Conclusion:

While we do are not pitching COLB as a hold-forever stock, we are sure as hell that it is one of the most attractive short-term opportunities. It provides a positive asymmetric return opportunity, due to all the reasons listed above- and the best part ? Management agrees with me, based on buying behaviour. 

Something interesting is that one of these insider buys were by CEO Stein Clint, and the last time he bought COLB, shares proceeded to rally 100%:

Again, there is always the argument that “markets can stay irrational longer than you can stay solvent”. Well, the margin of safety is the following:

- Even total liabilities deducted from an total assets amount more COLB’s market cap(assetts-liabilites=5B)

- COLB’s annual revenues have been in a constant state of increase since 2017, even though COLB’s stock is down about 55% since 2017:

Revenues going up quarter-to-quarter from 2017 to 2023.

1. We see a lot of similarities between AMZN/BABA a few years ago, and CPNG now. But, Coupang’s narrative is far less optimistic than that. We provide the reasons why the market is underestimating the likeness between CPNG and the other big E-Commerce stocks.

2. One of the reasons for a slight decline in Coupang’s earnings is due to ‘higher content costs’ associated with its ‘Coupang Play’ app. But Coupang Play has very recently exhibited explosive growth in installations and usage, and we think that Coupang Play is on track to earn higher revenues, enabling them to fully cover ‘content costs’.

3. The stock seems to have found a stable support right about current levels, and seems like it is poised for a breakout.

4. Shares have been beaten down so much that they are a bargain at this point

   

Coupang, A Diamond In The Rough

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Vita Coco Company: An overvalued business which has undisclosed Supply Chain problems, coupled with loss of distributors and partnerships with unethical companies.

1) The Vita Coco Company(COCO) is an American beverage company which sells coconut water. It has had an impressive stock boost of about 100% YTD, due to increased revenue and market share. But, we at Ragnarok Research think that this will not last due to upcoming problems.

2) Vita Coco announced that they were losing one of their biggest customers, who were responsible for about 20% of their revenues. Still, the stock is up by an impressive margin. But, our real thesis is that Vita Coco might be having some undisclosed supplier problems, as their main supplier of Coconut water is facing serious litigations in Brazil.

3) Vita Coco is a public benefit corporation and claims to do business by ‘harnessing, while protecting, nature’s resources for the betterment of the world’ and ‘creating ethical, sustainable, better-for-you beverages and consumer products that uplift communities and do right by the planet’.
But, we think Vita Coco has a partnership with a company(which is a part of COCO’s supply chain) which engages in criminal activities and fraudulent business activities by endangering tribal lives in Brazil.

4) Expanding upon the point above, we think that it is not unlikely that Vita Coco has sourced coconuts from entities that may have engaged in Child labour. A good chunk of Vita Coco’s coconuts come from Philippine regions where more than half of the coconuts produced have children involved in the exporting process somehow. Is Vita Coco sourcing from here for ‘cheap labour’ ?

5) Vita Coco has the characteristics of a pump-and-dump, where insiders are looking to cash out. Insiders have a shelf offering to sell 26 million shares of Vita Coco. This is about half the shares outstanding of Vita Coco, which is 56 Million shares.

6) Vita Coco insiders are selling their shares and cashing out.

7) Verlinvest Beverages SA, COCO’s largest shareholder, is the same entity behind the Otaly scam, and there is a lot of influence of Verlinvest in Vita Coco’s Board of Directors.

Reasons why we think COCO’s shares will drop in value in the mid-term:

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1) Problems with Distributor and Supply Chain:

Vita Coco has already disclosed in its most recent quarterly filing that it will be losing one of its biggest customers, which accounted for about 15-20% of their revenues:

This should already have investors worried about Vita Coco’s future outlook.
But there’s more!

Vita Coco heavily depends on its supply chain, which puts it at considerable risk:

They even mention it as a risk factor that any disruptions to their nimble Supply chain could be problematic:

According to ImportGenius(As given above), one of Vita Coco’s top suppliers is an entity in Brazil called ‘Ducoco’, which owns coconut farms and exports coconut water to Vita Coco. As seen in the figure above, Vita Coco depends heavily on Ducoco.

We have recently come across some evidence that Ducoco might present a weak link in Vita Coco’s supply chain due to the amount of litigation it faces.
According to Brazilian media outlets and sources such as News, it turns out that Ducoco has engaged in land grabbing and notary fraud by stealing land from the Tremembé de Almofala Indigenous Land (TI) in the municipality of Itarema.
According to a report ‘Os Invasores: quem são os empresários brasileiros e estrangeiros com mais sobreposições em terras indígenas’ by a rural journalist group in Brazil, one of the properties, Fazenda São Gabriel, has 76.7% of its extension overlapping the IT. The second property, known as Fazenda Aguapé, also has 274.83 hectares within the Tremembé territory. Although the process of demarcation of the Tremembé de Almofala TI began in 1986, the history of the Tremembé territory is centuries old, having been where indigenous people have lived since 1857. The historical relationship between indigenous people and the territory began to be completely disrespected after the company Ducoco, whose headquarters were located in São Paulo.:

We think this is unethical in Vita Coco’s supply chain.
But, the land might be taken away by Ducoco and given to the indigenous people of Tremembé territory.

The demarcation process has already begun, and Ducoco recently appealed to the court for the nullity of this demarcation.
In February 2023, Ducoco requested the nullity of the demarcation process for the TI Tremembé de Almofala. The request was denied by Judge Marcelo Sampaio, of the 27th Federal Court of Itapipoca (CE).
In his decision, the judge found inconsistencies in the company's version, pointing to a possible sign of land grabbing or notary fraud:

This is related to Ducoco. But, due to very recent developments, all companies using tribal land for corporate uses will suffer a loss of assets, since the Supreme Court gave the following ruling:

This, according to us, puts even more pressure on Ducoco since this demarcation operation will be carried out throughout Brazil:

Although there have been efforts to curb the court’s decision by the Senate, Brazilian President Lula is expected to side with the Indigenous People.

We feel that this crucial link in Vita Coco’s supply chain can snap at any moment, considering that the very existence of Ducoco is in question:

We think it’s absurd that Vita Coco would have any ties with such a corrupt and disastrous company.

All in all, this could spell trouble for Vita Coco. We also question Vita Coco’s decision to stick such a disgrace to a company. Ducoco has been accused of violence and destroying the tribal people’s homes. This is a conflict of interest of Vita Coco, considering it is a Public Benefit Corporation.

2) Child labour involved in Vita Coco’s supply chain ?

While the above points detailed our investigation of Brazil, we will now comment on what we think of Vita Coco’s supply chain in the Philippines.

A large part of coconuts from the Phillippines come from a region called Mindanao. We have evidence from the US Department of Labour that shows that there is a lot of child labour schemes in Mindanao:

The DOL also published specifically about coconut supply chains relating to Child Labour.

Even though this data is not exactly conclusive, we shall leave it here merely as a data point which may or may not matter in the future.

3) Is this all a conflict of interest since Vita Coco is a Public Benefit Corporation?

Vita Coco has done a lot of promotion, citing its loyalty to agriculture and the environment. But do these recent claims even hold any value?

We are attaching the following letter to management:

Dear Vita Coco Management,

I am writing to express my grave concern and disappointment regarding Vita Coco's recent business dealings with a Brazilian company, Ducoco, accused of engaging in corrupt practices and causing severe harm to tribal communities in Brazil.

Ducoco has been involved in the Brazilian Marco Temporal Thesis, where corporations have chased indigenous people away from their homes to farm coconuts/soybeans, etc.
Ducoco is also related to various other frauds and corruptions highlighted by Operation Lava Jato.

Vita Coco is a Public Benefit Corporation, promising to protect natural resources, build thriving communities, and champion health and wellness.
You claim to help farmers in countries in your Supply Chain.
Then how is it possible that Vita Coco can have any ties with a company with values and mottos conflicting with yours?

We feel the need to hear a response from your management about this. Please issue a response regarding your involvement with Ducoco, especially since this involvement negates every claim and promotional stunt you have done so far about your ‘ESG Impact’

Regards,
Ragnarok Research

4) Characteristics of a Pump-and-Dump?

Vita Coco has about 56 Million shares outstanding, but Insiders have a shelf offering of about 26 Million. Most of these is by Verlinvest Beverages. Coco’s stock is still up because Insiders owns a large number of shares.
We strongly believe that Verlinvest will sell its shares, and COCO will lose most of its value:

There is a strong intention to cash out, according to us.

5) The Cashing out has already begun:

6) Supplier and Distributor problems are already manifesting:

7) The track record of Verlinvest Beverages:

Verlinvest Beverages own a huge stake in Vita Coco:

But, Verlinvest Beverages is also affiliated with another company:

Oatly is the only other publicly traded Beverage stock that Verlinvest has backed, and it turned out to be a massive scam.

First off, let us re-iterate that out of COCO’s 9 Board members, 4 of them are related to Verlinvest:

Aishetu Fatima Dozie: Elected by Verlinvest
Eric Melloul: Managing director of Verlinvest and Co-chairman of the Board at Oatly
John Leahy: Elected by Verlinvest
Kenneth Sadowsky: Advisor at Verlinvest

The influence of Verlinvest in Vita Coco is evident.
Oatly, heavily influenced by Verlinvest, it was so outrageous that they made a website detailing their own scams, PR failures, lawsuits, and more. They called it ‘Fck Oatly’
A small sample of the site:

Conclusion:

Ragnarok Research believes that Vita Coco, sooner or later, will crash down. A 100% increase from January is completely unwarranted, and we firmly think that this stock will crash. It currently boasts of a PE ratio of 54, while other Non-Alcoholic brands, such as Monster(PE: 35) , Dr. Pepper(PE: 24) are relatively unervalued.
By reading any of our posts, you agree to do your own due diligence before making any investment decisions. You agree that the authors of this publication are in no way responsible for your investment decisions, and are not liable for any of your possible investment losses, and you also agree to acknowledge that we are do not guarantee any accuracy in our research. You agree to also not proceed with any legal action against us.

The authors of this publication do not give any buy or sell recommendations and do not ensure any correctness to our claims or findings. Under no circumstances would you hold the authors liable for any investment losses. One should assume that any sentence or statement in our posts can be inaccurate and factually incorrect and should not influence anyone’s investing.
Sincerely,
Ragnarok Research

Duolingo Inc: An overvaluation unlike no other

Duolingo Inc.(DUOL) is an American education company mostly sepcialised in its language courses. Duolingo’s shares have pumped about 150% YTD, but we think this increase is extremely unwarranted:

1) We have found some weaknesses in Duolingo’s software, which can be detrimental to Duolingo’s revenue if enough users find out about it. Duolingo’s main revenue comes from subscriptions to its premium versions of its language learning app, but we have found vulnerabilities which enable users to access the most valuable perk of the paid version: the Unlimited heart. This showcases a lack of diligence in making a product.

2) We have found potential flaws with Duolingo’s business model and products, and we think that Duolingo’s shares will suffer due to our predicted headwinds on the stock. We also think that Duolingo’s reported metrics such as monthly active users(MAU) might be inflated.

3) We have uncovered both public and anonymous accounts of Duolingo utilising unethical business practices to increase revenue. This includes charging money after a premium account without actually granting the premium account, and in some cases, charging a user the full free after a free trial period ends, without informing them of deduction from their bank account, DESPITE promising to inform the user of this transaction. Duolingo has been known to cease all communications with the user post-transaction.

4) Duolingo’s IPO was backed by Durable Capital Partners LP, but its previous IPO sponsors have had a bad track record:
WRBY stock: -73.25% since IPO
YOU stock: -58% since IPO
Also, Duolingo’s net margins are positive right now mostly due to their interest income, which cannot be sustainable on the long-run according to us.

5) Duolingo has done a lot of promotion using the fact that they have incorporated AI into their Duolingo MAX platform. But, Duolingo MAX costs 30 USD while GPT-4 costs just 20 USD. As time goes on, we think users would switch to GPT-4(given they have released vocal conversations now). We think these LLMs like GPT-4 or Bard will kill Duolingo MAX’s demand.

6) Increased Insider sales. Durable Capital have already started to cash out.

Reasons why we think DUOL will suffer:

• We have found a weakness in DUOL’s software, which might be evidence of Duolingo’s low-quality products:
  According to our research, the primary motivation for users to upgrade from Duolingo’s free version is to be able to earn more than 5 ‘hearts’(where ‘hearts’ are ‘lives’ where a user cannot continue their Duolingo lesson if he/her makes more than five mistakes).
  However, there is an unintentional bug to override this restriction, and we think that this is due to DUOL’s lack of seriousness in making the product.
  Method: Just registering through a ‘teachers account’ and registering a null class with it:
  
  There is an apparent bug in Duolingo’s system where it is pretty easy to gain unlimited hearts.
  It involves swiftly logging in through a ‘Duolingo for schools page, entering a language to learn, and a ‘class name’, which could be anything of a user’s choosing.
  After this, the user is automatically granted unlimited hearts, but our research tells us that most Duolingo users don’t know about this ‘hack’ or ‘bug’.
  
  The lack of verification in Duolingo’s systems could be a method for losses of revenues and also a piece of evidence for the lack of quality in Duolingo’s products.
  

  
  We also have concerns about Duolingo’s safety since it suffered a data breach:

  

  Data about users were released publicly in the format:

  

  The API used to scrape and attain this dataset is still vulnerable, according to us, and it can be used by hackers and scammers for social engineering attacks, such as phishing emails, using the plethora of information disclosed by the breach.
  
  Even though Duolingo was alerted of this API vulnerability in January, no corrective action was taken until the actual release of the dataset. After this release, the only precaution was a rate limit, which is not too effective since some data can still be scraped.
  
  This dataset puts the 2.6 million users at risk of phishing attacks and credential stuffing.

• Duolingo’s potential inflated user metrics:
  Duolingo has reported in its most recent Q2 2023 filing that its MAU ‘Monthly Active Users’ were about 74 million.
  

  

  But, according to our research using third-party software(SemRush, etc.), we believe the number has come staggeringly low, and Duolingo will keep experiencing this dip in MAUs(Unique Visitors):

  

• Unethical business practices:
  We have spoken to users who have experienced events where they pay for a premium subscription, but they are not granted the perks even after payment. Even after numerous attempts to contact Duolingo, they do not answer and keep the money. Since we cannot disclose these interactions due to anonymity, we shall attach some of many similar experiences noted on TrustPilot:

  

  

  

  

  

• Durable Capital Partners’ failed track record:
  Stable Capital has backed a few IPOs, and here are their returns:

  

  
  Durable’s cluster selling of shares of Warby is a behaviour that we speculate will repeat with Duolingo as well:

  

  
  The same goes for its other bad IPO, YOU:

  

  

• Unsustainable net margins:
  An unhealthy part of Duolingo’s net margins increase is due to its increased interest income:

  

  
  It has grown from 669,000 USD to 7,543,000 USD YoY. This is a significant contributing factor to the increased net margins. This is due to the high-rate environment. That will eventually end up putting downward pressure on net margins.
  
  Also, we think it can suffer in the long term due to the increased Stock-Based compensation.
  A lot of its FCF is being eaten away due to this, and if this continues, coupled with the loss of interest income, it could be troublesome for the stock:

  

  

  
  

• The Death of Duolingo MAX:
  Duolingo has done a promotional scheme where they have boasted that they are one of the first corporations to incorporate GPT-4 into their platform. But is this really in the best interest of Duolingo? We do not think so.
  
  We have already demonstrated that there are methods to bypass Duolingo’s ‘hearts’ or ‘lives’ restriction. There are a ton of scripts on Git Hub to earn ‘lingots’ or ‘gems’ (Duolingo’s gamified currency). So, the only ‘appeal’ of Duolingo MAX is their AI incorporation, where there is a roleplay and ‘Exloain-my-answer’.
  
  First, we think the main inconsistency of MAX is that the business may not be sustainable. It costs 30 USD per month, while GPT-4, which has voice activation now, only costs 20 USD per month. The partnership with Duolingo has possibly provided a pipeline of language learning data to OpenAI, which will only be used to bolster GPT-4.
  In the coming months or years, we think users would much instead switch to GPT-4 for the roleplay feature.
  
  For instance, here is an example on Twitter where a user practices his Russian using GPT-4 as a language learning assistant:
  

  

  
  

  https://twitter.com/dmvaldman/status/1707881743892746381
  
  
  We believe LLMs’ increased prowess can kill Duolingo’s AI assistant demand.
  Something similar to Chegg’s 40% stock drop when they announced that ChatGPT is killing its business might happen to Duolingo:

  

  • Insider Sale of shares:

    

    
    As previously stated, Durable Cap will keep cashing out, providing some downside pressure on the stock.

  • The overvaluation:
    We have compared DUOL to other education companies on a Mkt.-Cap/Revenue basis, and here is what we’ve found:
    1) Chegg:
    Market cap: 984 Million USD
    Revenue(last quarter): 182 Million USD
    Ratio: 5.4 (Calculated in millions)
    
    2) Coursera:
    Market cap: 2.87 Billion USD (2870 Million USD)
    Revenue: 152 Million USD
    Ratio: 18.88
    
    3) UDMY:
    Market cap: 1.48 Billion USD(1480 Million USD)
    Revenue: 178.24 Million USD
    Ratio: 8.3
    
    And lastly, Duolingo:
    Market Cap: 7.28 Billion USD(7280 Million USD)
    Revenue: 126 Million USD
    Ratio: 57.7
    
    This shows the sheer overvaluation of Duolingo. The stock price implies revenues that Duolingo will never be able to achieve, owing to competition from LLMs and other factors.
    
    CONCLUSION:
    Ragnarok Research believes that Duolingo, sooner or later, will crash down. A 150% increase from January is entirely unwarranted, and we firmly think that this stock will hit. We highlighted the sheer overvaluation in this write-up.
    By reading any of our posts, you agree to do your due diligence before making any investment decisions. You agree that the authors of this publication are in no way responsible for your investment decisions and are not liable for any of your possible investment losses. You also agree to acknowledge that we do not guarantee any accuracy in our research. You agree to also not proceed with any legal action against us.
    
    The authors of this publication do not give any buy or sell recommendations and do not ensure any correctness to our claims or findings. Under no circumstances would you hold the authors liable for any investment losses. One should assume that any sentence or statement in our posts can be inaccurate and factually incorrect and should not influence anyone’s investing.
    Sincerely,
    Ragnarok Research

Innodata Inc: The biggest AI joke of the stock market

1) Innodata Inc.(INOD) is an American data engineering company advertising its involvement in AI to drive up the share price. Even though it claims to be in the AI space, we think that Innodata’s recent increase of 287% YTD is an atrocious pump-and-dump scheme facilitated by its false claims of being an AI company.

2) Innodata, a while ago, was just an ebook business. Its business involved turning paperback books into digital e-books by transcribing them manually and delivering them to e-book services:

They were essentially a business digitising documents. That’s it

3) So that begs the question, how did Innodata Inc., run by a 62-year-old executive at the tail end of his career, turn from an e-book data transcriber into a ‘cutting-edge AI’ platform?
We think it didn’t, and the market is unaware of this.
In multiple points in history, INOD has changed business themes, pump its stock price, and witness a huge crash.

4) Innodata’s revenue has been mostly flat throughout the ‘AI revolution’. There has been no growth in the business, and it does not actually play any part in the AI wave, but it sure is trying to be a part of it. Its DDS segment(Digital Data Solutions), which it advertises as its ‘AI division’, has its revenues in a decline:

Reasons why we think Innodata Inc. is an imposter among the AI companies and why we think it would fall to the Earth:

• INOD’s main ‘AI’ business is just basic data collection and annotation:
  Just like its e-book days, the only thing Innodata is involved in is merely helping with the data collection process and merely ‘correcting’ and ‘editing’ some of the potentially faulty data, and definitely not being involved with ‘Generative AI transformation’ as it claims to be:
  

  

  

  
  
  
  Even their ‘success stories’ page has no information about any AI involvement in their services:
  

  

  
  Under INOD’s ‘Applied AI’ section on their website, there is more evidence that INOD is just a data company associating itself with AI. The solutions they provide are hardly related to AI for the most part:
  

  

  
  
  Innodata’s website’s ‘AI chatbot’, which we think is an example of the ‘Conversational AI’ shown in the image above, is just composed of a few if-statements rather than actual Generative AI:
  

  

• Innodata is essentially just a Business Process Outsourcer, instead of using AI solutions as a company.
  Innodata has offices in numerous regions, with most of them concentrated in the Philippines, India, and Sri Lanka:
  

  

  
  
  However, we have evidence from numerous sources that Innodata, rather than having AI models to help with its business, outsources work to these regions, where engineers are sitting day and night transcribing data from different sources. We feel it is pathetic that Innodata is hoarding around as an AI company while its core operation is having its Asian employees just convert data from one format to another, and maybe some occasional annotation:
  

  

  

  
  Source: JobIndex, Innodata Phillippines
  
  Source: Google, Innodata Sri Lanka

• Insider Sales are up through the roof:
  Rapid insider sale of shares is one of the most bearish things a company could do. If Innodata is an AI company, why would the insiders sell their stake in their company at a point in time when AI development is expected to explode even more going forward? What’s concerning is even the CEO and CFO have been involved in this; it’s not just the company's directors.
  

  

• Innodata’s concerning money management:
  Innodata’s earnings have been depreciating at about -41% annually, while revenues have been increasing at about 7% annually. ROE sits at about -63%, ROA at -22.7% and ROCE at -35%. So, it is clear that Innodata’s money management is poor.

• Innodata has crafted an impressive story of its inclusion in the AI space, by constantly reminding investors of its ‘AI contracts’, but we think all of this is a hugely glorified piece of crap:
  

  

  

  

  

  
  
  
  It is pretty clear that Innodata has been driving up the share price by using these headlines with ‘AI’ as the buzzword, but it is pretty evident that Innodata is hugely overestimating its involvement with the Artificial Intelligence industry, just like they have done in the past

• Innodata has exhibited pump-and-dump-like behaviours in the past, by potentially misleading investors and glorifying themselves:
  From the image below, it is clear that Innodata has had a lot of bubbles in the past, where the share price rallied a huge amount and comes back crashing down:
  

  

  
  I used WayBack machine to capture how Innodata’s website looked during each of these bubbles:
  1) Bubble #1: 2001, INOD is an ‘Outsourcing partner’
  

  

  
  
  
  2) Bubble #2: 2005, INOD is into ‘Knowledge management and ‘Publishing, Media and Information Services;
  

  

  
  3) Bubble #3: 2008, INOD is into ‘Knowledge Process Outsourcing’
  

  

  
  
  4) Bubble #4: 2009, Same as previous
  
  5) Bubble #5: 2012: Innodata is into publishing.
  

  

  
  6) Bubble #6: 2021: INOD slowly morphs into an ‘AI company’:
  

  

• Innodata, an American company, is being audited by BDO India:
  

  

  
  This, for us, is a huge red flag. There are so many inconsistencies that could arise from this. We think it is very odd that Innodata, the self-proclaimed maker of ‘data for the world’s most valuable companies’, is being audited by a BDO office that is not even from the US.

• Innodata is trading at a huge overvaluation relative to its peers:
  Higher-than-perceived overvaluation.
  In 2023 Q1 Earning transcript, we can see the following interaction between an analyst and INOD’s CEO:
  

  

• This is a pathetic analysis since I’m guessing the analyst is comparing INOD to the big AI companies, like MSFT, NVDA, GOOGL, META, etc.
  
  But, when we compare INOD to its peers(Data engineering companies), we see a different picture:
  

  

• Assuming this ‘analyst’ is saying that INOD has a market cap 2x of annual revenue, let’s compare INOD with the names above(companies that ACTUALLY are in the same field as INOD):
  INOD mkt/Rev ratio: 4.64
  FiscalNote Mkt/Rev ratio: Slightly less than 3
  UIS crop: Mkt/Rev ratio: Annual Revenue more than the Market cap

• Ealixir Inc: Mkt/Rev ratio: Annual revenue more than the Market cap
  BBAI: Mkt/Rev ratio: 1.6

• III: Mkt/Rev ratio: Annual Revenue more than the Market cap
  CTLP: Mkt/Rev ratio: 2.6

• CTG: Mkt/Rev ratio: Annual Revenue more than the market cap

• Conclusion:
  Innodata is not an AI company. It is hardly a data company that just outsources its work to a bunch of people in Asia to do their ‘copy-paste’. It is astounding how such a crappy company as Innodata has managed to augment its involvement with Artificial Intelligence and drive its share price so high.
  Its insiders are dumping shares nonstop, and they certainly don’t seem too shy about it. This could be the most overvalued AI stock in the stock market, as it is up 287% YTD. The market has not yet realised that this is a joke of a company, and it is just trying to falsely ride the AI wave. Not one sane person would buy this stock if they knew of the insane overvaluation and its business background. Even after a collapse of about 50-60%, we would deem it overvalued. We have seen pump-and-dumps in this stock, and now it has completed its pump. The only thing left is for it to fall back to its ‘regular’ price of about 2-3 dollars per share.

You know the thing in physics where light behaves as a wave and a particle ? And you have no idea why or how because you have 10 braincells?

Yeah, I relate…

But, this idea reminded me of a Nvidia stock, since I have seen a lot of people(very smart ones) give amazing justifications to their bullish and bearish outlooks for the stock.

That leaves us, the dumb people with no opinions.

So, let’s discuss

Exibit A: The bulls

This is, in a way, a no-brainer. With all the Generative AI fiasco, NVDA has risen by a lot, since their products are essential for the AI industry in general. Nothing runs without these procoessors. So, the AI boom obviously meant a boom for NVDA, resulting in this:

That is insane… Imagine shorting that and you just see it edging higher and higher.
As of now, Generative Artificial Intelligence is limited, and is not in access to everyone.

But, imagine when it is.

Imagine all the AI data centres needing these processors. The demand would shoot right up, and that would be just insane for Nvidia.

Imagine Nvidia’s earnings. That would be explosive. The fact that its market cap is 1.1T, and there is a chance that it’s just getting started? Goddamn that’s a huge buy.

Even analysts across wall street love this stock. I mean, can you blame them really ?

AI model upgrades demand more hardware. With NVDA controlling 80% of AI processors market, you can deduce that NVDA would benefit from this phenomenon.

The model upgrades are growing exponentially as a matter of fact.

I’ve read predictions that NVDA’s processors will be the backbone of autonomous driving. Elon even said that he’ll be mass ordering shit from NVDA.

Looks great for the business doesn’t it ?

But, what about the stock?

Exhibit B: The Bears

Both the bulls and the bears agree that NVDA’s business is a money printer, but the stock ? This is where the disagreement comes in.

The bears think NVDA is overvalued. In fact, Ashwath Damodaran, the dean of valuation himself, thinks NVDA is overpriced.

When Damodaran speaks, you listen

But, let me lay out my understanding of NVDA’s valuation.

NVDA’s Price to Earnings ratio right now is 232, with the stock at 446.
That high a PE ratio is crazy.

Now, tech stocks on average have a PE ratio of 25-30.

Just to prove me point of how much speculation is baked into NVDA, I’ll perform calculations by assuming that NVDA’s PE ratio will revert to 30.

Assuming NVDA’s stock remains the same, and assuming NVDA’s PE ratio should revert to 30, that can mean 2 things:
- Stock falls by almost 8 times

- Earnings grow by almost 8 times.

Well obviously it doesn’t exactly work like that, but it’s my understanding of NVDA’s crazy valuation.

Crunching some numbers as per this video, Assuming we hit NVDA’s guidance of quarterly net income of 4.15B then we hit an annualized figure of 16.6B

So, even if NVDA hits the absurdly ambitious guidance number(for reference, the last 12-month net income is 4.79 Billion), we have a PE Ratio of 60.

So, to sum it all up, in order for the stock to be sustainable by assuming the PE ratio will revert to 30 over time, Annualised earnings should grow to about 32 Billion, about 8 fold from its current value, and 2 fold from its quarterly guidance annualised.

Is this possible? It is very hard to say.

When investors pile their money in NVDA, they are betting that a Trillion dollar company can grow its business many times over.

This would've been more probable for a small-cap stock… But NVDA ?! A trillion dollar company growing its business many times over ??!! Ehhhh.

Past examples of absurd valuations

Let’s look at Tesla:

It had a PE as high as 1.2k once… totally insane.

This stock desperately needed a correction.
But… when ? A lot of people knew Tesla had to come back down, but they lost money since they could not time it correctly.

Notice a white mark on the chart ? This was when Tesla entered a trillion-dollar valuation. That is also the time that Tesla started declining.

Is there a mechanism that the market understands that a company cannot its business many times over after it hits trillion-dollar status ? IDK.

I could definitely see in all trillion-dollar companies that growing earnings by huge margins is extremely difficult, cuz the company is huge already.

Maybe this effect applies to NVDA ?

Conclusion:
I can interpret it the following way:
1) NVDA has a great business and MOAT
2) NVDA has an overvalued stock, and it may decline
3) Both of these 2 possibilities can co-exist

NVDA is going to be a huge AI player. That’s for sure.

But the stock ?

I think the market won’t crash, but will correct aggressively.

We will prolly see the maturity of a hugely bullish growth stock, to a GARP stock(Growth At Reasonable Price)
We can already see it happening since momentum has slowed down.

Should you listen to me ?
Hell, no.

I’m a 15 year old teenager who doesn’t know what the hell I’m doing. I’m just having fun here, mate. Nothing more.

I can be dead wrong, or I can be sooo right for the totally wrong reasons.

After all, would you trust a kid with gambling issues ?
Prolly not.