Cardlytics $CDLX: How Bridg Can Lower FI Revenue Share, My Latest Large Purchases of CDLX with Leverage (Research Notes #154 - #155)
New notes on how Bridg can lower revenue share with the banks (leading to single digit P/E and P/FCF, including P/FCF <1, with no revenue growth), and my latest large purchases of CDLX with leverage.
Market Cap as of 3.30.2023: ~$2.82 / Share x 33.6M Shares ~ $95M Market Cap.
I continue to believe, the downside that many focus on has a very low probability of occurring, given everything that has been discussed in the Research Notes this month (included in the last 4 update emails for updates #133-139, #140-144, #145-149, #150-153).
At a high-level, given the relatively low amount of additional liquidity that could be needed in an adverse situation (which also has a low probability of occurring), there are simply way too many ways for CDLX to get through the Bridg earnouts and the dispute (such as current liquidity, paying Bridg over time with interest, divestures, revenue share deferrals, equity raises, rights offering, new debt, convertible notes, and more).
Therefore, the current market price is far too low from giving too much weight to this fear of a zero (from thinking CDLX cannot make it through the Bridg earnouts / dispute) or from thinking there will be too my dilution (which I addressed in this analysis). This is why I continue to buy more, and in larger quantities through leverage, as discussed in this email at the very end.
And if CDLX gets through the short term like I believe, then the market cap is far too cheap in relation to future cash flow. For instance, Bridg has the ability to help lower revenue share with the banks, which can lead to single digit P/E and P/FCF, all the way to P/FCF<1, even with assuming no revenue growth, as I will show and discuss.
While I prefer to wait longer between update emails for the notes, I want to make sure I deliver timely information to all of you with access to the Research Notes, especially given the all-time-low stock price.
The CDLX Research Notes Updates
At this time, all of the following notes are under
For convenience, I copied over the corresponding sections of the Research Notes and pasted them at the end of this post.
Note, I do tweet out when I make an update to the Research Notes. Therefore, if you want more real-time updates, follow me on Twitter.
The order below matches how I copied them to the end of this post to read.
CDLX Research Notes: Update #155
Added on 3.29.2023
How Bridg Can Lower FI Revenue Share
Leading to single digit P/E and P/FCF
All the way to P/FCF <1
Assumes no revenue growth
This is NOT related to Bridg having higher gross profit margins
That is separate and additive
CDLX Research Notes: Update #154
Added on 3.28.2023
My latest purchases of CDLX (with CDLX closing at $2.60 on 3.28.2023)
Discussion on my use of leverage
Similarities to Buffett’s thoughts when buying GEICO in 1976
From similarities between the two situations
That specific purchase in 1976 ended up being one of his best investments
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For convenience, I copied over the corresponding sections of the Research Notes and pasted them directly below.
The Updates:
(#155) 3.29.2023: How Bridg Can Lower FI Revenue Share (leading to single digit P/E and P/FCF, including P/FCF<1, assuming no revenue growth)
Note: In this section I am not talking about the opportunity of higher overall gross profit margins from Bridg having higher gross profit margins than CDLX. That is separate and additive. This is in regard to Bridg leading to lower rev share with the banks for CDLX which would also increase gross profits (and have a much larger financial impact).
While there has recently been much more focus on the short term, I think it is still important to discuss the long term for CDLX.
For one, if CDLX gets through the short term like I believe, then the focus should shift more to the long term to determine the correct value of CDLX (which is much higher than today’s price, where the current all-time-low price is largely a function of the weight given the the fear of the Bridg earnouts and dispute).
Additionally, the long-term outcome of CDLX is still a function of the investment today. If the future of CDLX wasn’t much more than today, then this would not be a worthwhile investment, and therefore no time would need to be spent focusing on the short term.
The ability for Bridg to lower FI revenue share is one of the larger opportunities for CDLX, that is both more significant (in terms of CF) and much more likely than most realize.