There was a very interesting talk on Cybersecurity this morning on Twitter @convequity @investiAnalyst. Muji was one of the panelists. I missed the “S vs. CRWD” part of their conversation, but heard most of their “FTNT/PANW vs ZS” and whether SAAS is in a bubble. A few things I gleaned (forgive me if some doesn’t make total sense. I’m new to this so maybe someone can help fill in the blanks):
Is SAAS in a bubble? Who knows? But comparing the gross margins and revenue growth decay of software companies now vs. 2007 (pre-SAAS) showed that gross margins are about 850 basis points higher with SAAS and revenue growth decay is slower. Duh. But it explains why companies like SNOW are still near their 52-week highs. Money managers realize the stability of their growth and don’t want to miss out. All things Saul has stated before.
A couple of the analysts think ZS is over-rated and were very high on PANW and FTNT. What are the problems with ZS? a)According to them, ZS has aging architecture (Muji disagreed) and guys like FTNT are catching up. b) Chaudhry is an excessive micro-manager with extremely high TO, especially in marketing, which is what the comp excels at. c) Pricing is murky (none on website). d) High friction deployment (Muji agreed but thought this was a plus. Seems to me this would create a moat) e) One guy even questioned the “SAAS’iness” of ZS, not cutting edge like NET. f) They said ZS is known to have deployment issues.
Muji said basically the numbers speak for themselves.
Unfortunately, I couldn’t re-listen to the talk to flesh out some of the points. Maybe someone else who heard it can add.