Just some scattershot thoughts as I’ve been too busy with all the reports to really contribute to the board this week:
2022 top end guidance
as of 5/20: 450m
as of 8/5: 530m (18% raise!)
as of 11/4: 535m (1% raise)
If you saw that coming, congrats. But that’s not what we wanted, as Ethan said. WSM’s post was perfect too. Here’s another way to say what he said:
Q4 2021: 43%
Q1 2022: 41%
Q2 2022: 15%
Not gonna cut it. Of course I sold out, like most of you.
Absolutely crushed it. I was hoping for 265m and they put up 270+. Guide was very good too. We read the tea leaves perfectly on this one – Saul started doing so back in 2020 after the covid quarter! This dog has run fast, and I believe it can run far. I’m not selling a share and I’ll be considering adding more – I’m at 16%+ already, though.
Whether it’s the global shipping issues or the share lockup expiring, this one has been hit hard. I’ve kept my 5% position (much of which I accumulated under $60/share) but haven’t added more…we’ll see if I get a crack at $50/share before Tuesday. I think this might be a sell the rumor, buy the news thing. As of now this seems like a quality business in high demand and hypergrowth. If I’m wrong we’ll find out next week. If they’re significantly short of 90% growth, the shares could get hit on Tuesday after hours. Whether I would be buying more or selling…well that depends what else they say.
As valuations go higher and higher, I’ve thought a lot about why, especially this week. I think clearly the reason companies continue to get bid up is expected (revenue) growth sustainability. Think about it: Lightspeed grew 58% organically and got obliterated yesterday. That’s because no one believes they’ll keep doing that again and again (in fact, there’s real fear that growth will slow a LOT more). Cloudflare turned in a lower number, but the market believes it (~50% growth or thereabouts) will happen quarter after quarter, for years. And it’s gone to the moon.
That thinking led me to add today, even at these levels, to UPST, DDOG, AMPL, and MNDY. This is unlike me. I also took a position in Confluent – thanks so much to nitinkhanna for the post yesterday about their earnings result! Every single one of these companies looks very “expensive.” There’s a reason for that. I can’t convince myself to hold Cloudflare, but I can convince myself (at least for today), that the companies I believe are just as good as Cloudflare can hold their premiums for a long time, no matter how expensive they look. At some point everything will drop – maybe 50% or more – and it will be painful. But good luck figuring out when! Just look at Cloudflare.