They already warned investors in various investors conferences in December that Q4 will be weak and the prior Q2 and Q3 strengths were due to one-off factors (early customer renewals, Covid tailwind, semi-annual comp plan which spurred sales team to close deals early). They also said that rapid margin improvement in 2021 was due to under-investment in costs because of Covid. That will change in 2022 as it spends more - it soft guided at that time to 40% revenue growth in 2022 and -20% operating margin in 2022.
The point is: management are naturally bullish about their companies; and if they warn about their companies or sound anything less than bullish, this is a huge red flag
On the other hand, if they make bullish utterances about prospects, I would take it with a pinch of salt and will try to look to the underlying numbers and overall narrative for confirmation.
Look at How their Customers are Doing
Due to the nature of their products, many of their top customers are B2C apps which got a bump from consumers nesting at home. A major customer of theirs? Peloton (it was a major red flag for me when the CEO kept talking about Peloton in their earnings call). Also Instacart, Square, Deliveroo, Blue Apron; and those customers are doing poorly and struggling with trying to grow in a post-Covid world (at least for their next few quarters).
Sure - but their customers are numerous and include stalwarts such as Ford, Walmart, UnderArmor and others that were referenced on the board (including others, too, that maybe benefitted from tailwinds but that you didn’t mention like Smartsheet and Atlassian).
I’m not completely turning on AMPL - they’re still small, growing at growth if not as much as was “priced in” (I hate this concept), and have partnerships with firms like Snowflake and AWS; And we aren’t yet sure how lumpy their earnings will be. This firm could still accelerate up and to the left over the next few quarters.
I still maintain deference to valuation and how many sequential ERs as a public company I have to analyze (avoiding small sample size) are the key take homes when thinking of how the board has considered several ‘newer’ entries over the past year.
I’m not completely turning on AMPL - they’re still small, growing at growth if not as much as was “priced in” (I hate this concept), and have partnerships with firms like Snowflake and AWS; And we aren’t yet sure how lumpy their earnings will be. This firm could still accelerate up and to the left over the next few quarters.
One of the things I have learned from this board (and always grateful for) is to always go with the winners and with the momentum. So I personally will not buy or remain invested in hypergrowth stocks that have sold off after an earnings or guidance disappointment. Obviously this does not mean selling immediately at -40% down AH. This is just my approach obviously and people have to act according to what works for them.
Remember Upstart after Q3 earnings last year. Many people were saying in the aftermath of the Q3 earnings that “hey it’s already down 50% from all-time highs and now trading at only 10x EV/Revenue” … but we all know that it proceeded to keep falling for a few months after that. Bottom fishing just does not seem to work that well in hypergrowth stocks (compared to, say, value stocks).
Upstart has DOUBLED since the low a few weeks ago, Cats. Someone analyzing the business (not the “momentum”) and deciding it’s gotten way too cheap would’ve done extremely well. Also, I have no position in AMPL, but this is just about the most obnoxious thread a person can make after a stock gets smashed. It reads like little more than a victory lap.
Upstart has DOUBLED since the low a few weeks ago, Cats.
Yes, right now it is $148.
After their Q3 earnings disappointment on 10 Nov, it fell from $327 to $246 and continued to fall until the 90s in January/February.
People are way better off taking the loss and sell at $246 and buy now after a turn in their earnings (rather than holding on and watch all the gains dissipate; and hope for a turn which may be many months away).
and it’s not a victory lap but nobody can stop you from thinking that way.
The concept here is post earning drift. Once er is done like Newton’s first law it would keep moving in same direction unless there is some new material information.
Upst is prime example. I sold too late but going into earning I had none. Post earning I sold all zi and ampl to go for upst.
Confident team who is investing heavily into future. To increase their headcount aggressively. Stock buybacks to reduce volatility. All the good things I wanted to hear are there. Until next er it’s safe place to park money.
To reduce er risk maybe we could sell half position before er or all of it and buy it back after er. U may lose some shares in process but it will greatly reduce drawdowns. I have experienced bunch of drawdowns. Upst lspd zi and now ampl. Upst was most painful one.
“The concept here is post earning drift. Once er is done like Newton’s first law it would keep moving in same direction unless there is some new material information.”
Totally agree. Observed it many times - stock price won’t go back up and will likely keep going down after a disappointing earnings report. That continues until you get new information - most likely a positive earnings report the next time round (or some other positive developments, like a major new customer win or partnerships or some nuggets of positive information revealed by management in investor conference calls).
I don’t think that selling before earnings is the best thing to do. Best way to reduce risk from my experience is to be very careful with position sizing until a company has a longer track record. Had 0,5% position in amplitude - so not a big deal. I think a company has to earn its spot in my portfolio until my conviction is high enough to carry a bigger position.