Every week on Industry Focus: Financials, Fool.com contributor Matt Frankel, CFP, and host Jason Moser each discuss a stock they're watching. In this clip from the June 14 episode, hear why Moser has his eye on Adobe (ADBE 1.35%), while Frankel is watching a much younger company that just recently went public.
Matt Frankel: I'm watching a company called VG Acquisition Corp, which no one knows what that is, but it's a SPAC. Ticker symbol is VGAC. They are the one that's taking 23andMe (ME +0.00%) public. The reason I'm watching them this week is because their merger was just approved by their shareholders. It will be finalized this week and 23andMe will start trading under its own ticker symbol on Thursday. Ticker symbol will just be ME, M-E. Once the deal is finalized, 23andMe is going to get $759 million of cash in the deal.
Jason Moser: Wow.
Frankel: $25 million of that is coming from a personal investment from Richard Branson. They're going to have $900 million in total on their balance sheet, and this is a company that is valued at a little over three billion dollars. That's a lot of cash for them to really supercharge their growth. I even bought shares before they announced the deal. I bought more after they announced the deal, and I plan to keep holding this. Healthcare is not usually a sector I really dabble in too much, but I really like what I'm seeing out of this one.
Moser: The danger with some of these SPACs, and given that 23andMe has been around for a while, I would assume 23andMe is not pre-revenue at this point. I have to believe that is a company generating revenue.
Frankel: No, they're not profitable, but they're definitely pre-revenue.
Jason Moser: Good.
Frankel: Oh, no, they have revenue. They're not pre-revenue. They sell a ton of the home DNA test kits.
Moser: Yeah
Frankel: I've used one. I don't know if you have.
Moser: My wife got me one of those things years ago. I was adopted, and so I don't know anything really about my biological background.
Frankel: You're their target customer base.
Moser: I am, I guess. She got me, I don't think it was 23andMe, whatever it was, what was the first iteration when these things started out?
Frankel: Yeah, I know you talked about it.
Moser: I can't remember the name of it now. It was very basic at the time, but I did try it.
Frankel: But now, they're elaborate. They'll tell you if you have a genetic disorder or if you've anything weird going on.
Moser: Yeah.
Frankel: Mine didn't tell me anything that I didn't know. I have a very monotonous family heritage. It told me I was 100% Eastern European Jewish.
Moser: You knew it.
Frankel: I know that my parents didn't lie to me. That's where I come from
Moser: Oh, man. Another Thursday story here about Adobe. Earnings are out on Thursday, and this is just really more in line with 2021 normalizing a bit from 2020. Businesses starting to get a little bit more clarity in spending. Obviously, Adobe seems to have a hand in everything that's being done digitally these days, from a content perspective. Last quarter, a very strong quarter revenues, $3.9 billion. That was up 26%, non-GAAP earnings up 38%. Interesting. They're a little competitor to DocuSign (DOCU 0.69%). I shouldn't say a little, but they're a competitor to DocuSign, the Document Cloud business. That revenue was up 37% from a year ago as well, and they are guiding now for a full-year revenue close to $15.5 billion non-GAAP earnings, closing in on $11.85. Adobe earnings are out on Thursday. Just to be interested to see how the business is progressing based on the benchmarks they set earlier this year and get their take on how they see the business side of the economy continuing to bounce back. Yeah, we'll be keeping an eye on that one.
