In brief, February has been a great earnings season for our companies so far, but not a great month for our companies’ (emphasis on companies’) stock price.
I highly encourage all of us to review post 83317 by LifeofADreamer. One sentence in that post stuck out to me and figured I would give some context to help us see our companies better.
“The idea that companies had consistently grow their GROWTH rate in perfect linear fashion and in constant fashion is something I have seen this board get fixated with. DDOG didn’t do that in the past.”
I figured I would look over times when DDOG had a significant deceleration in revenue growth and use that as a comparison to what we are seeing now. In 2Q20, DDOG’s YoY revenue growth came in at 68% compared to YoY revenue growth for 1Q20 coming in at 87%. That is a 19% deceleration in revenue growth! Even worse, QoQ revenue went from 15% to 7%! By all metrics, it’s clear that DDOG is on the path to slowing revenue growth. It is not out of the realm of possibility that we would be seeing posts on our board screaming SELL, SELL, SELL! Moreover, a justification to sell DDOG would have come from the market’s reaction to the results – DDOG’s stock price fell by more than 20% from a day before earnings (Aug. 5, 2020) to the day after earnings (Aug. 7, 2020). If you look at what occurred the next three quarters, DDOG continued to decline in YoY revenue growth. For some, it may have been justifiable to sell your stock because of the opportunity cost associated with keeping your money in a company whose revenue growth is slowing. But for others, DDOG was still a company who continued to grow and other metrics that we track continued to do well, i.e. NG Operating Income, NG Net Income, NG Operating Expenses, FCF, etc.
Now let’s look at AMPL. In 4Q21, AMPL’s YoY revenue growth came in at 64% compared to the previous quarters YoY revenue growth of 72%. That is an 8% deceleration in revenue growth. Additionally, QoQ revenue went from 16% to 9%. These YoY revenue growth metrics are not too different than DDOG’s in August of 2020. Moreover, even with this slowing growth, AMPL recorded an ATH DBNRR this quarter at 123% and its second highest NG Gross Profit Margin at 72.0%.
How about MNDY? It missed all my expectations except for NDRR for enterprise customers. The stock is selling off at about +/-20%. YoY revenue growth this quarter was 91% compared to last quarters of 95%. A 4% deceleration. QoQ revenue growth this quarter was 15% compared to last quarters of 18%. YET, MNDY did the following:
- New ATH for NDRR for Enterprise Customers (135%)
- New ATH Operating Cash Flow
- New ATH Adjusted FCF
- Lowest NG Operating Expenses margin to date (100%)
- Second highest NG Gross Profit Margins to date (90.0% vs. 90.2% last Q)
Does a 20% sell off make sense?
Now, I am new to this type of investing like many others on here. But I feel as though we are getting a little too worked up on what the stock price does and not what OUR COMPANIES are doing. I too have succumb to the herd mentality of panic selling. I nearly did with AMPL. But I reevaluated my position and figured AMPL still is new and has room to continue growing. Sure its other metrics are not as great as our other companies, but it too takes time like our more establish companies.
This is just my two cents. Also, please feel free to look over DDOG’s past in my G-Sheet and see what I mean.