Bear's quick take on earnings so far

I just thought I’d share my reactions to earnings so far. I’ve really been enjoying the conversation on the board, and will reference it below. But I’m going to start by listing my companies by how much I liked their results:


-Shopify (SHOP)
-Arista (ANET)

These two absolutely knocked the cover off the ball. I opened a small position in Arista.


-Square (SQ)
-Hubspot (HUBS)
-Wix (WIX)
-Talend (TLND)
-Hortonworks (HDP)
-Blackline (BL)
-Teladoc (TDOC)

Couldn’t find much fault here, and in fact some of these were almost as impressive as Shopify and Arista. I added to Square, Hubspot, and Wix, and took small positions in Blackline and Teladoc.
Incredibly, Square, Wix, and Blackline shares all dropped after their results, so I was thrilled to be able to add/buy at a cheaper price.


-New Relic (NEWR)
-Mercadolibre (MELI)
-Mulesoft (MULE)

I was somewhat neutral about Mercado’s results, because they didn’t really do much wrong, but I’d be lying if I said the revenue growth of 59% wasn’t a slight bummer after they grew it 74% last quarter. Still, if that’s a bummer, give me more bummers. New Relic was well summed up by Chris here (…) – it boils down to: adding fewer customers each quarter is not a good trend. Mulesoft, kind of a similar story. They may be getting more and more money from existing customers, but new customers aren’t exactly flocking to them in droves. Much ink has been spilled on this board about whether this is sustainable or not, and I won’t say I’m 100% convinced either way, but my first impression is that the obvious result of this would seem to be: slowing growth for the company at some point. Surely there’s a limit to what customers will spend with them each quarter, so if that’s the only way they can grow, look out.

Anyway, I reduced my NEWR and MULE positions due to my reduced confidence. Just holding tight on MELI – they will be fine, but the rocket ship may have ended.


Some have remarked on the divergent share price results for companies who turned in similar company results. There of course are many reasons for share price moves, but I submit that one is simply that a lot of “our” stocks were priced for perfection:

Example: MULE fell and TLND did not. But before earnings, MULE was at a PS of near 15, and TLND was under 10. So you could say the shares actually converged where beforehand MULE was at a 50% premium to TLND.

Another side of this is that before earnings, Mulesoft and Blackline were at PS ratios near 15. Nothing should be that high, except Shopify, because there are more reasonably priced alternatives (except for Shopify – there are no alternatives for it). If you can grow at 75% you can have a PS of 20. Otherwise, why should your PS be 15 when Wix, Talend, Hubspot, and many others are at 9 or less? Obvious answer: qualitative differences, which when you boil it down, means that future growth should be better, continue for longer, involve greater profit margins eventually, etc etc. But that is all very hard to handicap, and the PS ratio is here staring us in the face.

Before you crucify me, I wholly admit that I could be completely in left field on this, and I’m not saying it’s by any means the whole story, but personally I think that’s part of what happened. BL and MULE would have had to accelerate growth (A LOT) this quarter to even hold their ground or certainly to climb, in this Fool’s opinion. (Of course, I held MULE thinking that is exactly what would happen…so what do I know!?)

Anyway, I still have LGI Homes, Splunk, Twilio, and The Trade Desk to go! I hope everyone has a good week!


PS - All these tickers came to mind immediately without no aid from references, so assuming I got them correct I guess I’m in the same boat as Ant and need to get out more, and get more phone numbers from women in my head instead of strings of letters.


Great reality check Bear.
In hindsight, sometimes things stare us straight in the face and it’s obvious! Good to learn from it. And I guess a lot of it depends on where we are in the global economic cycle to decide what’s a good P/S. Helpful to compare companies with their peers for a sanity check, but sometimes everything is too highly valued and we’re all blind to the truth.

Looking forward to SPLK in a couple weeks. P/S of about 8, and ongoing transition to the cloud.

I’m currently in the process of rebalancing/tuning my portfolio. Finally getting rid of some losers (INFN).

My current buylist is:


Harder deciding what to sell.

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