Tuesday, April 18, 2017

A current AIM Fund holding: Envestnet (ENV) by Cameron Butler. "Envestnet's Management Has Ability to Lead into the Future"

Envestnet, Inc.  (ENV, $34.40): “The Cutting Edge”
By: Cameron Butler, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

Envestnet, Inc. (NYSE:ENV) is a leader of unified wealth management technology and services to financial advisors. The company’s technological advancement joins and strengthens the wealth management processes delivering flexibility, ease, precision, and performance. Envestnet solutions transforms wealth management offering unprecedented opportunities for financial advisors to deliver better outcomes.
• Technological innovation has been, and will continue to be a leading focus of Envestnet into the future.
• Now that the Yodlee acquisition has been successfully integrated, the company is beginning to understand how to use the data offered and create valuable information.
• The recent acquisition of Wheelhouse has been an excellent complement to both the strategies of Envestnet and Yodlee.
• 2017 will be a very informative year as Envestnet slows down their acquisitions, realizes synergies, and focuses on their organic growth.

Key points: Technological integration is driving Envestnet’s new focus. Envestnet will focus more on client satisfaction, providing clients with cutting edge apps to help them better manage their investments and attain their goals. Envestnet is still along the cutting edge of technology just as it was in 2000 when their investment technology became the first to operate from the cloud. Their continued strategic acquisitions of technology companies have helped them to remain on the forefront.
The Yodlee acquisition has been successful, however CEO Jud Bergman notes that Yodlee offered too much data, and they are now focusing their efforts on gaining intelligence and information out of the aggregated data. These analytics help derive key insights that advisors can use to help the end client. 

On the acquisition front, Envestnet acquired Wheelhouse Analytics in 2016, a technology company that provides data analytics, mobile sales solutions and online education tools to financial advisors. The technology has proven valuable as it combines the analytical tools of Wheelhouse with the Yodlee data solutions. Wheelhouse is a great compliment to Envestnet as it empowers financial service firms with tools to extract key business insights and evaluate data providing valuable information to financial advisors within Envestnet.

In March of 2017, Envestnet won the Bank Insurance and Securities Association Technology Innovation Award. This award recognizes companies that are on the leading edge of technology within the financial services industry. This award was presented to Envestnet during the annual BISA convention in Florida on March 9, solidifying their role in technology forefront.

Going forward, Management had noted in their annual report that “2017 will be a year of execution including deriving solid organic growth, addressing our identified obligations under Sarbanes-Oxley and delivering on the strategic and financial opportunities with Yodlee.” 2017 should be a very interesting year for the company, as we see how the synergies of the recent acquisitions begin to pay off.

What has the stock done lately?
Within the last two months the stock is down approximately 11%. This may sound like a lot, but within the last week the stock has been on the rise, increasing approximately 7%. The reason for the recent decline in stock prices within the last few months is due to the lower than expected 2017 guidance. Revenue guidance is lower for 2017 than in previous years at 12%-14%. These decreased growth figures are probably attributed to the decreased number of acquisitions that will be executed in 2017 as the company begins to focus on organic growth and hopes to realize some of the synergies from the recent acquisitions. Overall, the increased investor confidence in the short term is the main attributing factor to the increase in the share price throughout the last week.

Past Year Performance: Within the past year the stock has fluctuated dramatically ranging between prices of $28 to $40.82 per share. These fluctuations can be attributed to three things, excellent earnings, poor guidance, and increased investor confidence. The lingering uncertainty of what to make of the recent acquisitions has resulted in the fluctuation of the share price over the last year.

Source: FactSet

My Takeaway
The recent acquisitions have caused some speculation, but they complement Envestnet’s business strategy very well. As the year progresses we should begin to see some of the synergies from the acquisitions. This should lead to an increase in the stock price within the next 52 weeks. As investors begin to gain confidence in management, as well as the successful integration of the acquisitions, we should see the share price start to rise as it has done within the past few weeks. Within the next year look for the share price to continue to rise and rebound back into the mid-$30 and lower-$40 range.
Source: FactSet

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