I believe these metrics can help explain valuation - sort of. There have always been extremely overvalued companies, and most of them have had conventional business models.
I notice, that for example, Mongo has a very low number on sales efficiency from the numbers uses. Yet Mongo has kicked the butt of practically every other stock in the universe during the last year or so.
I thank Saul for brilliantly explaining the 605 and 606 differences. I did not sell Alteryx because I think it is going to crash or anything. I just wanted the money for something else. I see Alteryx as starting to turn into a more “mature” stage vs some other companies. Absent what I see as a FUD or otherwise just too good to be ignored opportunity i am not going to say what I put it towards. Could be SMAR, Elastic, more Mongo…perhaps to convert my world’s largest collection of frog species back into a swimming pool, who can say. But I decided to do so. Nothing to do with the upcoming earnings call.
Btw I do consider SMAR to be in a less mature growth period that Alteryx is now. For whatever that is worth.
But back on topic here, I still think it comes back to CAP and growth. On Saul’s board the top 3 companies on a metric used there (that better synced with me) - I forget it now, turned out to be #1 ZS, #2 MDB, #4 ESTC. Not much different than when Nvidia and ANET were #1 and #2 on IBD (just happened to be that way) and then SHOP - one just had to say JUST BECAUSE with SHOP. On every metric SHOP was the most expensive and had clear business metric issues. Yet still, SHOP still out did them all.
One aspect I think, and I’ve used this before, is singular. Could anyone else do what Home Depot was doing once they were first mover? In retrospect of course not. In real time, back then, I am sure we would not understand what HD was doing. But with our experience I believe we can now identify a company like Home Depot (tech or not tech) who is doing something no one else will ever be able to equal - absent a discontinuous disruption. Even Microsoft got theirs at some point. Intel got theirs. No one is immune. But absent that…
Mongo…can anyone else do what Mongo does? We have studied that in-depth and the answer is no. And Mongo continues advancing its product. Mongo does not need to have 100% of the market, just dominate its sphere. Btw/ that new type of SQL database we discussed a few days ago, Mongo already has that covered. Mongo added SQL query capabilities, if I recall correctly (unless I mixed it up with Elastic).
Where would the world be without Mongo? Working with hybrid solutions, as no one still has a true general purpose NoSQL database.
Zscaler…answer is the same, where is the world without Zscaler? Sure, sure, someone else may have got around to it, but they did not, and it is Zscaler that did.
TTD - yeah, yeah, yeah. One i let go. But seriously, where would the world be without TTD. There would be no one to seriously challenge the walls and the giants. TTD is the sole outsider with any scale and neutrality.
TEAM - the product sold itself and is still selling itself. TEAM recreated the way the industry does business, just like VEEV did in the CRM healthcare industry.
What we have now are some new comers. The three are Elastic, Smartsheets, and Zoom. It appears that Elastic is singular like the above. Where is the world without Elastic? Someone else would need to step up, but they did not. So it is an Elastic world. The talk about Elastic is can it take marketshare from Splunk? Splunk is really the only alternative. The other talk is can Elastic make hordes of dough giving away most the product like it does? To date it has grown faster and makes more money per customer than Mongo, and no one questions Mongo’s ability to do so.
To respond to these questions. The market is so large that Splunk and Elastic can and will happily co-exist. Elastic will take over Splunk customers on the fringe, and Splunk probably won’t do the same on their end. Elastic will have more paying customers, but Splunk customers will pay more per customer. There is not likely to be anyone else who can possibly catch up at this point.
Elastic’s business model, TBD. As I linked to a few weeks ago, the ability to recreate the proprietary functions that Elastic offers for money is nearly impossible (absent a Netflix sort of operation). There are open source and commercial solutions that can do each material piece that Elastic sells, but they in the end cost money, don’t work as well, and have to be pieced together with multiple other unrelated software packages to accomplish what Elastic sells in one package.
If you are a serious user, and not Netflix or Apple, your going to pay Elastic for any material production product you put out with Elastic.
The other 100 million users of Elastic don’t matter. These are either developmental usages, trying to develop production products, or usages that would not pay anyways. Mongo has the same circumstances.
Zoom…you know what, I don’t know. I just look at the numbers. The numbers for Zoom speak volumes. Zoom is something special. What exactly Zoom is doing that is singular, I don’t yet know but clearly in a crowded and “mature” market Zoom is profitably growing at lightning speed and disrupting it. Clearly Zoom has something singular they are doing. Zoom is clearly not a commodity. TBD. Tuesday IPO I understand.
Smartsheet…I’m out of time for now.