Tuesday, November 17, 2020

A Small Cap Equity holding: Envestnet, Inc. (ENV, $77.73): “Envestnet Still a Strong Envestment” by: Christian Wilber, AIM Student at Marquette University

Envestnet, Inc. (ENV, $77.73): “Envestnet Still a Strong Envestment” 

By: Christian Wilber, 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) provides intelligent Fintech solutions that empower wealth advisory firms and delivers data analytics solutions that enhance financial institutions. The firm derives revenue from two segments, Envestnet Wealth Solutions (79% of revenue) and Envestnet Data and Analytics (21% of revenue).  

• In Q3 2020, ENV beat EPS guidance by $0.13 and revenue has grown more than 7% YOY.  

• Yodlee, a product of ENV, has recently released Insight Solutions that will use machine learning to show personalized financial statistics and help users plan for the future. 

• A head of international sales was hired this week to increase weak foreign market share. 

• ENV has capitalized on digital trends to become the highest used wealth platform by advisors.

Key points: On November 6th, Envestnet announced better than expected earnings for Q3 2020.  Adjusted earnings were $0.72 per share, beating guidance of $0.59. Reported revenues of $252.6M beat the consensus by 2.5% and have increased over 7% YOY. Q4 2020 guidance was raised to a $0.64 EPS. This continues a long trend of under promising and over delivering.  

Yodlee, which was acquired by Envestnet in 2015, is the leading account aggregation service that allows users consolidate credit card and bank statements, investments, travel rewards, and more to a single screen. In August of this year, Yodlee released Insights Solutions, a hyper-personalized solution for making informed decisions and benchmarking progress. Insights uses machine learning to show the individual predictive cash flow capabilities, alerts for credit monitoring, and analytics of subscriptions and frequently used merchants. 

Currently, 96.8% of total LTM revenue for Envestnet came from the United States. Of the rest, .7% is from China, .2% Japan, and the rest from European nations. This represents an easy opportunity to increase market share, and Jason O’Shaughnessy was appointed as Head of International Sales this week to expand cover and data enrichment across Europe and Australia. 

Envestment has predicted and embraced trends in the digitalization of finance, anywhere from delivering condensed analytics to individuals to providing high quality data to hedge funds. These adaptions have driven them to be the highest used wealth platform with $4.1 Trillion in assets in over 13M accounts. The data and analytics segment now has access with 17,000 sources, with 450 linked consumer accounts.     

What has the stock done lately?

Even after beating Q3 EPS and revenue consensus estimates, shares fell from $83.71 to $77.5 (7.42%) on Nov 6, along with a .96% daily drop in the Russell 2000. ENV established a 52-week high of $92.51 on August 7th, but is still trading well above the low of $45.53

Past Year Performance: 

Over the past year, ENV share prices have risen 20.4% while the industry has declined 1.8%. Additionally, the Russel 2000 has only increased 9% over the same timeframe.  

Source: FactSet


My Takeaway

Envestment continues to be a leader in Fintech and outperforms relative benchmarks. The release of Insight Solutions will finally make data analytics useful to advisors and allow their clients personalized decision-making abilities throughout the month. Management continues to capitalize on consumer and institutional trends by providing useful and relevant solutions. Additionally, they are positioned to capture international market share in the next year after already partnering with 47 of the 50 largest domestic wealth management and brokerage firms. I believe that ENV represents a hold for the fund and will continue to provide alpha long term.

Source: FactSet