Hi all - I also posted this to NPI, but then they started talking immigration and I threw up in my mouth a bit. Figured I might as well post it here, too.
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My opinion only: TTD, AYX, MDB, and ZS for the win.
Basically these are the 4 I think offer most likely high-growth high-upside.
I think AMZN, GOOGL, NOC, DIS, ILMN, SQ are great companies and expect them to grow, but these are not little small caps that I expect can provide 3-5x returns the next 5 years (I hope they do - but doubt it). Same with TSLA and NVDA, although I am not currently invested in them.
Stocks somewhere in between, meaning I like them but they are not quite my top-4: PFPT, VRNS, PAYC, ANET, BIDU, CGNX. Except for Varonis, these are all a bit more mature than my 4 selected small caps. Varonis isn’t growing quite as fast and forecast was modest. Will watch their ER’s next couple of Q’s to see how much they are sand-bagging and reevaluate whether they make sense for long-term. They don’t seem overpriced (since growth rate is lower) so hanging on for now.
My big 4 are based on current market cap + P/S, TAM, and current and forecasted growth rates:
TTD - The Trade desk. $308m in revenues was 50% growth y/y. Forecasting 31% growth of $403m with expectation based on history that they are sandbagging. 2.5b market cap. TAM is harder to gauge, but essentially they are targeting their piece of the $700b global ad market, which is expected to grow to $1T. Currently programmatic is low-single-digits as a percent of this market and expected to grow to be majority (per CEO and in general that is sense of articles online not penned by TTD CEO too). Love this company. Google/Facebook not a threat and only provide upside if they dropped their “walled gardens” and play ball in the future. The reason is TTD is targeting Connected TV (CTV), International/China (no walled gardens), and Mobile. They have half of top 200 advertisers using their platform and client retention is 95% for multiple Q’s running. Of the 4 companies listed here, they have the most revenue, and are already profitable, with the lowest P/S of the bunch at approx 8.
AYX - Alteryx. $132m in revenues was 53% growth y/y. Forecasting $179m or 35% growth. Market cap of 2.2b, P/S is the highest of this group at 16. I like Alteryx better than Hortonworks or Talend, because the more I read on Hadoop, the more it appears that the real need in the marketplace is to make sense of the data and make it “actionable”. A few articles note the slowing, or potentially slowing, growth of Hadoop…or the unrecognized hype it brought with it. For that reason I like the noSQL space and MongoDB (MDB). This article kind of summarizes some of these thoughts: https://www.datamation.com/big-data/wheres-the-big-money-in-……
Hard to put a TAM on benefits of utilizing big data and making sense of your data. Pretty much every company producing sales/traffic/store/customer/b2b/financial data would benefit. Just a matter of whether Alteryx continues to be the sought-after solution or gets displaced by the next new thing. One can imagine AI-infused programs taking huge amounts of data and coming up with solutions across biotech, finance, tech, forensic science, etc etc… I think the players in this space will evolve incredibly fast, but willing to watch AYX on an ER-to-ER basis for now.
MDB - MongoDB. $154m in revenues for 52% growth y/y. Forecasting $215m on 39% growth at high end. Market cap at 2b, with P/S of 13. Mile long threads here and at Sauls board, so I won’t repeat it here, but relational and nonrelational db TAM seems significant.
ZS - Zscaler*. $125m revenue fro 56% y/y growth. Not public yet so no forecast, but there is data on 2 more Q’s of revenue since then, and the pace is 50% above the 6-month period in the previous year. So if I use 50% growth, my forecast for them will be $188m. Market cap is unknown, but IP expected to have them start at somewhere between $1.2 and $1.5b. Assuming $1.5b, it would have a P/S of approx 10.
*Brought to you by the only poster on TMF who seems to give a crap about this company. If it has doubled in a year, I will come back and gloat. If it implodes and they are sued into oblivion by Symantec I will do the walk (post?) of shame. Security is huge, of course, and it is hard to find cloud-native security providers at this valuation and with this growth. A lot of competitors are legacy security vendors that are attempting to transition to cloud (some more successfully than others). Going to be a few winners in this space, but I posted a link to Cisco-OpenDNS founder giving props to Zscaler and calling it a 2-1/2 horse race between Cisco, Zscaler, and Symantec (who bought competitor Blue Coat for $4.5b).
I have a spidey sense telling me the market could really crap on us any minute, from a combo of strong run up recently, to Trump being so unpredictable, to potentially rising interest rates, etc… I am invested, but in 2 ports I am about 20-30% in cash just in case. I also temporarily gave up on OKTA, TLND, and HDP. All good companies, but wanted more cash handy and for investment in MDB, potentially ZS, and just adding more to positions I was more comfortable with. For what it’s worth, my spidey sense has been worthless since 1999. I thought things were a bit crazy in early 2000, but I didn’t do enough about it. (taking fast gains vs catching falling knife later)
Can you beat my 4 picks for growth?
-Dreamer