This is a helpful exercise, thanks Ethan and Gaucho. Here are my latest thoughts culled from my last Latest in Earnings post on 6/17 (#56976), plus CRWD, which I bought a bit of at IPO. Beyond that, I haven’t bought or sold anything in that time (having too much fun this summer) but likely will make some adjs in late July.
CRWD: Their cloud-based endpoint protection system of 10 modules analyzes 1T real-time events per week! Like ZS, they have huge potential in that they can leverage ML/AI over their entire customer base’s logs. Massive revenue (+110%) and customer growth (+103%) on top of an amazing $NER of 147%. This company debuted expensive (> market cap than ZS), but this SECaaS is clearly doing something right and leaving competitors (Symantec, Cylance, Carbon Black) in the dust. I wrote up a deep dive of their product line in #55994 if interested in more. Will be increasing my 1% position obtained at IPO.
ZM: I don’t own it [yet]. I admit their insane numbers are compelling; extreme revenue growth propelled by high cust growth (especially in the high-spend tier) and the $NER are all enticing. But it seems like such a replaceable service with litle moat - I challenge any ZM fans here to expand on what moat they have or what stickiness applies to their service besides “being better” (Webex and Gotomeeting both set such a low bar!). Ultimately I think OKTA, ZS, MDB, AYX, TWLO, and ESTC are all way more sticky enterprise services. Despite that, I may nibble with a 5% pos just to ride the hypergrowth, but keep it on a short leash. Surprised to see 1/3 of workforce is in R&D - AR and AI are clearly both coming to video-conferencing, so those are something to watch for.
MDB: Knocking it out of the park, and stock reflects that. I did buy more after last earnings as I mentioned I would, and now it has risen into 13% position for me. I know I compare this to Elastic all the time, but geez, MDB organic growth was +68% to ESTC’s +68% CCURR! They both deserve your attention. But relative strength of MDB remains way stronger. Look forward to seeing what gets announced at MongoDB World this week.
ESTC: Fantastic and very relevant move into security space with Endgame acquisition. ESTC continues to expand beyond db hosting and into focused enterprise SaaS space (search-as-a-service, and now security-as-a-service). They made excellent use of Swiftype’s products to extend themselves into being a enterprise search service competing against Google, and are spinning into other exciting new directions like SIEM. Saul and many others have exited but I and few like Dreamer and Darth are moving in more. I know MDB has been winning on relative strength - but that is why it was 3x the position for me. Lockup is finally over, and as market wakes up to ESTC’s potential, I want to be ready. The past several months have gone nowhere - but it is where it is going from here that matters today. [UPDATE: ESTC up strongly last 2 weeks. Finally!] I upped my position to about 1/2 of what MDB is, mostly from SQ sale and TTD trim. Look at how quickly they are moving on their product line releases - this company is not standing still.
SMAR: Smartsheets is a core data management platform (built around a spreadsheet with custom forms and dashboards over it) and having lots of products coming out based on that core. This gives lots of optionality - but I find it a bit confusing when looking at their product line. It remains to be seen if SMAR can keep selling as product line expands but something is working – the numbers show that customers are growing, and keep spending more and more (top tiers growing faster plus $NRR of 134%). I need to get this up 3-4% soon.
ZS: I still vote ZS as stickiest service. They warned of difficult comps next Q so maybe a little rocky ahead. Still wonder why the $NER is so muted, perhaps due to larger initial deals? [UPDATE: Saul confirmed YES this is the case.] Not sure what to think about the new acquisition. LOTS of room internationally to grow - APAC is just beginning. I continue to sit on my 11% and wait.
OKTA: Okta is maturing into its next phase. Growth slowing to 50% yet growth in high quality custs is accelerating and $NRR stays at 120% (customers spending more). Impressed by their recent acquisitions – very excited by the Zero-Trust forays from ScaleFT (expanding Okta to managing access to your on-premise and cloud servers as well as on-premise applications) and the workflow mgmt UI enhancements they get from Azuqua. I hope my deep dive got some folks here into this exciting company - it’s gone up 39% in the 2mo since. If it keeps that up it will overtake TWLO as my #1. [UPDATE: It has.] I am going to trim it a bit but it will stay a top 5 position.
ROKU: Roku is in a crowded space against the big-wigs yet excels at being neutral ground for CTV (unlike Amazon, Google and Apple). Roku is clearly focused on growing the eyeballs. Unit sales continue to grow the base, and active accounts is growing faster while ARPU is rising. They seem somewhat complicated with their ad sharing deals, but the base equation is simple: Accelerating streaming hours = more ads = accelerating revenue. I will increase to 5%, probably from TTD trimming.
TTD: TTD revenue can be choppy based on advertising trends, so the drop in growth is to be watched to see if one time dip or new trend. But growth has dropped to 41% from 56% just last Q. Hulu just opened up a new frontier for CTV ad space, while Spotify and podcasts are making audio ads grow +240%. Walled gardens are getting extra scrutiny. International expansion continues. Trimmed this a little on its exuberance but it remains a 11% position. Likely to trim more from here.
SQ: S&M expense rising more than adj rev growth, but sub rev growth remains exceptional (128%). Larger sellers are driving GPV growth. SQ is moving towards SHOP, while SHOP does the reverse. Market has been pretty sour about everything, as it hasn’t remotely returned to prior highs in Sept’18 (38% more to go…), while SHOP goes up and up. Disappointing. I’ve dropped it from 9% to 4.5%.
AYX: Solid revenue growth, driven by more customers (+35%) that are spending more (rising $NER). Hard to complain about 50% growth, but I still keep a close eye on this non-SaaS company. I’d be very excited to see them start moving towards SaaS products instead of just having Windows desktop apps sold on an annual fee, but doesn’t appear in the immediate cards. I am not sure what the ClearStory acquisition is really gaining them, and they consumed their website so I don’t have any vision into what they did. They are making stronger moves in ML it seems from Inspire conf announcements, with a new beta AutoML feature.
TWLO: Twilio continues to shine. Custs growing (31%) while spending more ($NER 145%!!). International is just beginning so expect more spend as they expand to new carriers. Doubling their roadshow events. The need to directly communicate with your customers is only going to grow. This remains a top pick.
SHOP: SHOP continues to rise while SQ price remains stagnant. Revenue growth now under 50%, while sub revenue has dropped from 55% this year to 40%. Growth is slowing markedly, yet the market doesn’t care. At some point I need to move on but I am glad I have not as of yet.
long all that but ZM