At this point they are simply repeating by rote his unsubstantiated claims that the price declines “of our great companies” are overdone simply because they have declined so far already. There is no attempt to wrestle with questions of value, or to estimate relatively safe entry prices, because the conversation is forbidden. Instead newbies are left to cross themselves, grab the prayer beads, and hope the guru leads them to the promised land.
I wonder if the decline might be mostly over?
After the peak in the NASDAQ in March 2000, that index dropped about 2/3, from about 5100 to 1700.
Look at some of these that are widely held on Saul’s board:
Croudstrike (CRWD) down 28%
Datadog (DDOG) down 34%
Zscaler (ZS) down 45%
Snowflake (SNOW) down 58%
Upstart (UPST) down 60%
Cloudflare (NET) down 60%
Zoom (ZM) down 63%
Monday (MNDY) down 68%
Datadog (DDOG) down 70%.
Of course, if these stocks were even more highly priced than the tech stocks in 2000, then how far they have come down doesn’t tell us how much farther they might have to go. But to me, the prices for some of these high-growth companies don’t seem too crazy any more.
To take one example, Upstart now has a market cap of under $9b, 10x revenues and about 50x last year’s GAAP earnings, for a company that had revenue growth of over 200% last year. For the sake of comparison, Costco (COST) is at 44x last year’s earnings, and is growing at about 15%. Snowflake is at 50x revenues, no profits yet, but they too are growing at over 70% a year, and it won’t take a lot of growth for their price to be at 30-40x earnings as well.
It’s not our cup of tea, since the valuation depends on that blistering pace of growth to be maintained for a few years, and we here on this board like our one bird in hand rather than all those birds in the bush that we are not sure we are going to catch. But the price is at least in the right general ballpark now, so any new investor listening to Saul and buying these stocks at today’s prices might do fine. The people that we should feel sorry for are the ones who just heard of Saul late last year…