Every once in a while I see a valuation that gets detached from reality. When Square was at $100 and a PS over 30, it was hard to understand what was happening. Well, it’s not that complicated. It was overvalued. The hype train had left the station.
I called out ZS on August 27th when it was at a PS of 33 ($47/share). https://discussion.fool.com/zscaler-33159259.aspx It has taken 5 months (and a couple earnings reports) just to get back to that level (PS is actually lower today since the revenue is up).
Today I believe it’s Elastic whose share price is indefensible. The PS (if you use 87.5 million fully diluted shares, as I do) is 37.7. That makes it an 8 billion dollar company with $212 million in TTM revenue. Let that sink in a minute.
I have no short position in Elastic, but I thought I would at least make my concerns known. I don’t think anyone here is rocking a 10% or higher ESTC allocation, but just please use caution. Seems like a wonderful time to sell a covered call maybe.
Just an APB. Take it for what it’s worth.