https://investors.pivotal.io/news/financial-news/press-relea…
“We have taken steps to improve our execution, and remain confident in our strategy and market opportunity for the long term. Pivotal continues to be the best partner for organizations that want to modernize their most important applications.”
Down about 18% as I type this. I don’t own any, this is one I sold long ago. Hopefully they can turn the ship around.
best,
Ethan
Subscription Revenue growth of 43%
Net expansion rate of 143%
Customers increased 13%
Doesn’t add up. With a net expansion rate of 143%, subscription revenue should grow 43% without any new customers.
Looks like they could be cherry picking customers for the net expansion rate.
Their definition from the earnings release :
“Dollar-Based Net Expansion Rate: Pivotal’s dollar-based net expansion rate compares its subscription revenue from a common group of customers across comparable periods. Pivotal calculates its dollar-based net expansion rate for all periods on a trailing four-quarter basis.”
Also, my issue with Pivotal has always been, there is a large service revenue that is required to get the customers for the subscription revenue. So you have to look at the total growth rate, which is 19%.
ZUO is the same.
Jim
I feel bad for Pivotal shareholders. A stock getting taken out and shot (down 41% as I type this) is always awful and pretty extreme. Is it really “worth” 41% less than it was 24 hours ago because revenue growth slowed somewhat? In the real world, of course not, but this is the stock market and these are uber growth stocks.
Food for thought about putting in place mechanical defenses against these. “Fall in love with the company, not the stock.”
I think Saul and others here were pretty much on the mark, to explain why valuations seem extreme for elite growth companies and then you have other companies getting punished dramatically.
"Next year our company growing at 50% with high margins will have $150 of revenue instead of $100, and with its 92% gross profit margin, it will keep $138 toward covering operating expenses.
Let’s say our conventional company is growing at a nice steady respectable 10% per year. Next year, it will have just $110 of revenue, and with its 23% margins it will keep just $25 towards operating expenses. So now we have $138 versus $25… one year later! The difference in compounding is enormous and grows each year… " - Saul
I think what you see with NVDA, NTNX, PVTL, ZUO, and others getting crushed is that their predictable growth trends have been disrupted, and with that loss in faith comes a great reduction in forward revenues/earnings estimates.
But PAYC and VEEV have shown you can command great valuations with sub-40% or even sub-30% revenue growth, if your business model is proving to have leverage and you are growing FCF or earnings faster than revenue.
It was also pointed out that PVTL is very services-heavy…clients can’t just mass adopt Pivotal solutions without expert help. Another company that has done poorly with heavy services models are CLDR and APPN, both down or flat over past year.
Dreamer
I still do not get it. Put it together. Cloudera, Pivotal, Nutanix, Appian, Zuo, Nvidia (after it got cheap, not before), Talent, etc. There is no such thing as bargain Growth At Reasonable Value that is the buzz word or at least mind set of so many articles on Seeking Alpha. Near 100% correlation.
Two easy lessons, one you all know: Cheap is cheap for a reason. Even after a real FUD event, a truly great company will still be “overvalued” and never get conventionally cheap. But the only reason to buy on the “cheap” is either responding to an unrelated to the company market crash or a FUD event (e.g Tableau entering Alteryx’s market, or Amazon taking on Mongo, etc.)
Two: Most of the gains in the stock market only happen a few days a year. You are either in when they happen or you miss out. I do not know the same stat for losses. But if your not in you won’t be in for those few days.
The last 3 days we had a market crash…“end of the world” followed by two up days. So you sell at a loss, and then you buy back in at the top. So you lose money and make no profit on either transaction. Or you do nothing…
Yes, at some point a true falling out may happen. They’ve happened before, they will happen again, but yet we are still hear investing. Those who persevered and stuck with quality and recognize true bubbles.
Must say that Zoom does stretch that term “bubble” if a bubble it ain’t. But I’m not going to use an outlier to paint the entire market and let others work on that topic. I love the product, the company, and management. I have had no need to go there with a personal investment at this time.
But end of that latter narrative, which should be for a separate thread with people who have dug into the issue more than I have in regard to Zoom.
Tinker
Another lesson from PVTL is that an investor should not get too wrapped up in the technology and rather should focus on numbers and direction. I read all of the very insightful technology post on PVTL’s technology when it first came to this board. Since I had invested in the company I decided I was going to make this the company I really understood. I read for days on their products and technology. To be honest I think this caused me to take my “eye off the ball” on PVTK the stock.
When I finally realized that this is a difficult concept for users to implement and maintain with out a lot of professional services I decided it was time to leave.
I saw a post, I think it was this board, recently where the poster talked about the superiority of the technology of ESTC over MDB. Perhaps we should continue to follow the numbers not the technology.