Ranking the post-Tuesday earnings reports

I’m in a situation like probably many of you on this board, very much looking forward to ZM and CRWD reporting on Tuesday. For me, ZM has grown into an oversized position (>20%), and I will be likely trimming after earnings. I regret not building up CRWD enough this past month, and it’s at 13%. But if they blow-out earnings and pop like FSLY or TWLO, I may trim that as well. I might even trim my ROKU, which is a 4% position, which I’m losing patience with. In any case, I’ll probably be shopping around for things to buy after trimming this week, and my plan is to buy things that will be reporting earnings in the next week. We have Wed (ESTC, SMAR), Thurs (DOCU, MDB, WORK, PD), and Monday (COUP). I used to own ESTC, SMAR, MDB. Currently have a 3.2% position in WORK, and and 2.1% in COUP. Never owned DOCU or PD.

Why buy only these? To be brutally honest, I’m having a bit of FOMO watching so many stocks on my watch-list, or former holdings, either run up before earnings (MDB, SHOP), or pop double-digits (NVDA, BILL), or 30% (ZS), or even 40% (FSLY, TWLO) after earnings. Even the “non-superstar” stocks such as PANW, NEWR, have shot up after earnings. And there’s not much of the opposite. Our SaaS/cloud companies aren’t really going down after earnings. The closest was AYX, which was down a little, but quickly recovered. OTKA didn’t shoot up much, but they’re up since, and ran up quite a bit before earnings.

Yes, I know that FOMO is a terrible thing to act upon. And normally, I wouldn’t even think of doing something like this, as in normal times, it’s basically gambling. Earnings are too unpredictable. It happens all the time that a company has a stellar report, fires on all cylinders, but the stock inexplicably drops 15% after-hours. HOWEVER, it seems like in the last month, the strong cloud stocks have at worst stayed flat, or at best shot up when they reported earnings. Sure, there’s risk. Maybe you still think it’s gambling. But for me, being in my 30s, the reward outweighs it. Also, I’m not picking random stocks. All of these are discussed on this board, and I would feel comfortable owning anyways, as single-digit positions.

So, assuming that I do trim Wednesday morning, I’ve got decisions to make about what to buy. I’m well aware that “what should I buy?” posts aren’t appropriate for this board. Also forbidden is “turn-around investing”. Though one may interpret this post as having elements of either or both of these, that’s not my intention. Instead, I’m envisioning this thread to be like two fantastic threads from last summer, which were crowdsourcing efforts to pick the best of the best. Remember Bear’s “Focusing on what we’re good at” (https://discussion.fool.com/focusing-on-what-we39re-good-at-3424…), and Ethan’s “High/Low” (https://discussion.fool.com/highlow-34251485.aspx?sort=whole#342…), which was also going into earnings season. Same thing here, but there’s a really good chance that several of these stocks will shoot up double-digits, and +20% wouldn’t surprise me either. Let’s put our heads together and figure out what’s gonna do the best. Not necessarily within 24 hours of reporting, but at least over the next few months. Once again, in “normal times”, just the idea of certain elements of this post would be absurd. But as a very wise man once said, “Yes, this time IS different!”. And I’m certain that other people on this board are thinking some of the same thoughts that I just expressed.

Below is a list of the stocks I mentioned above, ordered by reporting date. I’ve included the P/S ratios from Ycharts, and the link, for easy click-access so you can see the trends over time. With each company, I’ve tried to include some Pros and Cons. Much like Ethan’s “High/Low” post last July. However, I don’t follow most of these stocks as closely as many of you do, because I only own two of them, both small positions. So my knowledge is basically from reading everything on this board. So please feel free to add your own thoughts, and tell me where I’ve gone wrong, or what I’m missing.

Okay, let’s get started:

ESTC: (Wed 6/3). P/S ratio is 17.6. (https://ycharts.com/companies/ESTC/ps_ratio)
Pros: Still below ATH of $104, good valuation. Easily the cheapest here other than PD. Only a 7B market cap. P/S ratio is much below it’s high of 25 last year.
Cons: Already up 43% in the past month. Could this be more of an “OKTA” (run-up before earnings) than a FSLY/TWLO (earnings kick-started the run-up).

SMAR (Wed 6/3). P/S ratio is 24.5. (https://ycharts.com/companies/SMAR/ps_ratio)
Pros: Still only a 7B market cap. Is only up 15% in the past month, which is less than most on this list. Could this be “lying low”, like FSLY or TWLO, and poised for a jump?
Cons: Not our highest conviction stock. Should have WFH tailwinds, but might be more delayed [I love BobbyBe’s analogy of how ZM and DDOG are like ropes & boards during a hurricane, but AYX is like the brooms and shovels: [https://discussion.fool.com/there-were-doubts-on-alteryx39s-shor…](https://discussion.fool.com/there-were-doubts-on-alteryx39s-short-term-34497200.aspx) ]. Seems like the P/S is on the high side, but it’s still lower than the 29 that it was last year.

DOCU (Thurs 6/4). P/S ratio is 27.3 (https://ycharts.com/companies/DOCU/ps_ratio)
Pros: Aside from ZM, this might have the strongest WFH tailwinds, in terms of a change in how things are done. And of the ropes & boards flavor. Seems like (to me) this should have a higher P/S than SMAR.
Cons: Already a 27B company, and up 166% in the last year. How much more room does it have to grow? Last summer, the P/S ratio was under 10.

MDB (Thurs 6/4). P/S ratio is 31.2. (https://ycharts.com/companies/MDB/ps_ratio)
Pros: Strong company. Many of its SaaS peers have shot up after earnings.
Cons: Already up 50% in the past month. Seems more like an OKTA-style run-up before earnings than a TWLO or FSLY, where earnings kick-started the gains. But perhaps that’s just based on timing of when they reported. The P/S ratio is at an ATH, even above what it was last year when it out of nowhere, shot up to $184 before languishing in the low $100s for a while.

WORK (Thurs 6/4). P/S ratio is 28.9. (https://ycharts.com/companies/WORK/ps_ratio)
Pros: Still below its ATH of $42 last year, and much lower than its peak P/S ratio of 44.6.
Cons: Already a 20B company. Not clear how many non-tech people are using it, or how it’s usage has increased due to WFH, so the COVID tailwind might not be as strong as other, or at least will be delayed a few quarters.

PD (Thurs 6/4). P/S ratio is 11.1. (https://ycharts.com/companies/PD/ps_ratio)
Pros: Less than half of its ATH of $59.82. Still only a 2.23B market cap. Seems like something that could get a strong WFH tailwind, like DDOG. Much below its P/S ratio of 29 last year. Seems like the riskiest, but also might have the largest potential upside.
Cons: Not as high of a conviction as most of our companies, slower growth. Already +40% over the past month. It’s not one that I would be considering if it wasn’t reporting for earnings this week, in this unique environment. I don’t really understand enough of how this works, especially compared to DDOG, to speculate about tailwind. Being half if its ATH is also a big red flag. This is the least discussed on this board, but here’s a recent thread: https://discussion.fool.com/why-i39m-passing-on-pager-duty-pd-34…

COUP (Mon 6/8). P/S ratio is 37.84. (https://ycharts.com/companies/COUP/ps_ratio)
Pros: Strong company, high growth, and many of its peers have shot up after earnings.
Cons: Already up 36% in the last month. Its tailwinds might be more delayed (brooms & shovels), like AYX rather than immediate (TWLO, OKTA, FSLY). The P/S ratio is much higher than the 30 that it peaked at pre-COVID.

Before starting this message, I wasn’t sure how I’d rank these. The act of writing it actually helped clarify things for me. I’m thinking about the following rankings, for what I’d rather own over the next few months, and maybe longer, buying before earnings:


Again, I don’t follow most of these companies that closely, but I know that some of you do, so please take this ranking with a grain of salt, and don’t let it bias yours. I’d love to hear any thoughts.

Long, in order of size: ZM, AYX, CRWD, DDOG, LVGO, TTD, TDOC, OKTA, ROKU, WORK, SE, COUP, FSLY.


For me, ZM has grown into an oversized position (>20%), and I will be likely trimming after earnings. I regret not building up CRWD enough this past month, and it’s at 13%. But if they blow-out earnings and pop like FSLY or TWLO, I may trim that as well.


I understand your thinking about Zoom. If over 20% is too much for you, then trim it back down to 20%.

However I don’t understand your thinking at all about Crowdstrike! Obviously 13% isn’t too much for you. You have over 20% in ZM. If Crowdstrike “blows-out” earnings (which they will probably do) how is that any kind of signal to trim your position, basically to trim the best-of-the-best to put the money into a second tier company??? If you sell part because you think it’s too high, you’ll likely never buy back because Crowd will probably keep going up (with drops mixed in, of course), and it will always seem too high to you.




Hey Matt,

Matt here. I’m new to this board (big thanks to Saul and all of the others for the fantastic discussion that takes place here).

I will throw my 2 cents in on WORK.

The stock has been plagued since it’s IPO, and overall a disappointment. It’s felt like many investors viewed it’s poor performance as an indictment on the product – “basically a chat room”. Also, it seems that many view Microsoft Teams as an existential threat to Slack, which in my mind is absurd. There’s no reason they can’t both be industry leaders, and though I haven’t used Teams, from what I’ve heard about it, Slack still seems like a far superior product.

CEO Stewart Butterfield revealed on March 26 that Slack had seen 9000 new paying customers already in Q1 2020 (Feb-April), compared to 5000 in previous quarters. At the time of this revelation there was still a month to go in their financial quarter, with many areas just beginning SIP (California wide SIP began on March 19). Since the peak of the run up that came after Butterfield gave that interview, the stock is up 30%. While this is monstrous during normal times, it is somewhat pedestrian when compared to some of its SaaS counterparts during that period.

If earnings are as outstanding as I expect them to be, investors will jump in not only for Q1 earnings, but because Slack’s Q2 started May 1st, and will include a month when most of the country was SIP, as well as all of the business driven by companies going fully remote. Additionally, Slack is a sticky platform. Being preferred by most developers (no data on this but it was my personal experience working in the SF tech scene), and with all of the integrations that come with it, churn is very low (in June of 2019, net dollar retention rate was 140%).

To sum up: I think investors have been scared off from Slack due to the poor performance since IPO and the well publicized challenge of Microsoft Teams. I think that is about to change in a big way.



Hi Matt,

I’ve been thinking along these lines for the past couple weeks.
ZM’s grown to a 34% position for my portfolio. While not super comfortable with this much in one stock, I’ve been so bullish on their prospects, trimming hasn’t made sense to me.

In my opinion, WORK is a decent candidate to beat estimates and see a spike after earnings.
From the article, Slack saw a surge in platform adoption in their fourth quarter. CEO Stewart Butterfield noted “exceptional growth at the high end” (of customers) in the last conference call. This should have accelerated with WFH.

The current estimate of 39.2% revenue growth would be 10% less than last quarter’s 49.1% and based on the drop off from previous quarters 59.8%, 57.6%, and 66.6%.

Revenue estimates of $187.65M is only an increase of $5.75M sequentially.
Previous quarters grew by $13.2M, $23.7M, $10.2M, $12.8M, $16.4M. I can’t see how they don’t blow this away.

While Zoom and MicroSoft TEAMS are growing dramatically, enabling communications between employees has been such an imperative for business that Slack should benefit as well and significantly outperform estimates.

That said, I’m not certain of Slack’s long term prospects and haven’t yet decided to trim and take a position.


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My vote is in ESTC. The company like DDOG makes its revenue on resource use not per seat like AYX. So, you would think it should be less immune to Covid. It also plays in many of the same areas as DDOG but with a more developer focus. Yes, the operating and cash flow margins are not great but still comparable or better than FSLY, NET, SMAR, MDB which are all at a much higher valuation and growing slower. This is the 4thQ for ESTC. Would be interesting if they guide well for the next year.


The writeup is thoughtful and well-intentioned. If you’ll allow me what’s intended to be helpful coaching? What you’re looking at and analyzing is pure momentum, sentiment and valuation. Because it doesn’t get into any fundamentals compared to the valuations relatively, this list / approach tries to make judgement calls about risk/what to hold based purely on how they’ve done recently.

Investors like you will torture yourselves crazy with constant performance monitoring and comparing AND trying to guess at whether you should buy, sell, or “trim” based on the most recent price performance, especially in these hot SaaS stocks.

It is great that they are the hottest thing on the planet right now, and that Saul has exposed this wide vein of gold to mine. But I would diplomatically suggest not wasting your time obsessing about the size of the nugget each pick of the axe pulls off.

I know, because I learned this painfully myself 22 years ago and watched others do it at the advent of the 98-99 internet bubble.

Which is why the Mechanical Investing approach rose back then. At its root the only fundamental focus was screening for the highest growth stocks with the highest earnings growth. It was and is not as mindful as Saul’s specific vertical focus on a sector/sub-sector. That out of the way, it removes the element of judgement or guessing on the horse race; you just pick a list of stocks meeting criteria (the “Saul screen”), buy equal amounts of the top 3,5 or 10, and then at a constant time interval you are comfortable with (3 weeks, 4 weeks, 3 months, whatever) you rerun the screen; whatever’s fallen off that you still held, you sell, and whatever’s new replaces those items. Hands off. No mid-interval guessing about what to trim and why (except for the advanced curriculum in blowoff top overpricing ;-). No fundamental analysis - it’s just a list of symbols - nothing to get emotional about unless you want to learn something about it. If the approach works, the proof will be in the pudding as that section of your portfolio advances as a group.

I’m not suggesting that you switch to an MI screen. I’m merely suggesting a mechanical approach can be taken to this specific sub-sector, like any other specific group of companies that very few people have actual publishable insight into. What’s better about this than general MI is, there’s a very supportable fundamental rationale for The Screen to be picking stocks that will increase in price.

We are BLESSED on this board - generous people with deep fundamental insight into ANY given subsector’s companies are RARE, and there are several here that understand WHY these truly awesome next wave software companies continue to grow at the rates they are. Rely on them to communicate that, to select the (small) universe of candidate stocks for the “screen”.

re-entered last month with a screen of similar criteria and an intended 3 month hold which has - with intent, but very lucky timing - picked up ZM,ZS,COUP,DOCU and a few names outside this group’s focus.


Thank you everyone who responded. I’ll respond to each in one message, so as not to clutter the board further:

Saul: “However I don’t understand your thinking at all about Crowdstrike!..

Great point. Definitely made me stop and think. Though one detail I didn’t include is that I decided this weekend to use my remaining 4.6% cash to buy more CRWD before earnings. When it shot out of the gate Monday at +8%, I didn’t pull the trigger. Might be a mistake (probably was), so I’ll get stuck with Tuesday’s prices. So it’s very possible that it will be a >20% position by Wednesday morning. And at that point, I’ll have a decision. DDOG (my #4 holding) is a good example of getting a large post-earnings bump and then staying flat for 3 weeks, while a number of my other holdings gained 10-20%. So that’s my thinking.

alkaline119 and JTMatrix9: Thank you for your comments on WORK, you’ve convinced me. I know it’s been discussed on here recently, but what both of you said gave me more confidence about increasing my position.

FlyingCircus: Part of me wishes I had time to learn more about MI, but the other part of me wants to keep treating it the same as options (blissfully ignoring they exist; I don’t even know exactly how they work and I don’t plan to learn). I fully agree with your sentiment about timing.“Investors like you…”, doesn’t describe me at all…except this week. Normally, I see it like flipping a coin, or filling out a March Madness bracket. Gambling. BUT, this time, and this time only, with ESTC, DOCU, and WORK reporting, all with heavy WFH tailwinds and reasonable valuations, it feels like I’m walking into a casino and getting the opportunity to place an even money bet on the Patriots hosting the Browns, in December. Not a sure thing, but also not something I’m gonna pass up!

Summary: My current plan is to start positions in ESTC and DOCU before earnings, increase WORK, and maybe PD (need to look more into it). If things don’t go as well with ZM and/or CRWD, I might look to trim AYX (17.5%), ROKU (4%), or TDOC (5%).


Today I added significantly to ZM, CRWD, DDOG and FSLY, and started a larger-than-normal-starting-position in DOCU.

Zoom is now my largest holding (I’ll skip the details as it isn’t relevant). It has been exceptionally rare for me to do anything around earnings reports in the past. This time is different for Zoom. I don’t believe Zoom has reported earnings that include peak pandemic growth numbers (now there is a phrase I never expected to be typing!). We are talking about AT LEAST a 3000% increase in daily active meeting participants. 10M to 300M is 30x or 3000%, right? This is the number we heard a month ago! I have to assume that the numbers kept growing (will we see 400M? More?). I have a very hard time believing “the market” has priced in numbers this wild. My guess is we haven’t heard new numbers because they have been security and quality focused and bragging about quantity would be a weird message to broadcast. This is just not something that happens very often! While this is highly anecdotal, I posted my thoughts on how meaningful consumer numbers are (I’m not convinced they matter nearly as much as corporate wins from here on out), and some more specific things I am looking forward to hearing on the call: https://discussion.fool.com/re-zoom-gt-quotwhat-if-only-110-of-t…

CRWD, DDOG, FSLY - I can’t add anything to the conversation that hasn’t already been said recently in other posts. I can only thank you all for helping me build my understanding and conviction in these quality names.

DocuSign (DOCU) is one I’ve been watching for a while. While their core business is undoubtedly valuable in these times (essential really), there is one key point that made me finally jump in. DocuSign was named a leader in Contract Lifecycle Management (CLM). The DocuSign CLM is a platform where they offer end-to-end solutions for things like buying a home and getting a mortgage where all parties can collaborate transparently as they go through the entire complex process. This is pretty new, starting with their acquisition of SpringCM in 2018 which was already heavily integrated with the DocuSign platform and added $17M to revenue at that time. Today this is still a very small portion of their business (I don’t have the number, maybe around 3-5%?) but while signing a document, their core business, is a short touch-point, this engages multiple parties through a longer process. Almost like the TurboTax of contracts…but with multiple parties involved. This is a real differentiator to me and I hope to see it grow. In the meantime DocuSign quick points (all numbers YoY). Please keep in mind these are just my initial notes, not a deep-dive. Please confirm before acting!:

  • Has been giving it away for 90 days to new customers during the pandemic
  • Grew revenue 40% with 94% of it coming from subscriptions
  • Grew customer base at 24% YoY
  • GM at 75%
  • Expected to be profitable later this year

Some potential risks

  • Only +12% in cash flow from operations last year
  • PS 24
  • Only 13% of customers have >10 employees and generate 88% of revenue
  • Costs causing a net loss right now: 20% R&D + 60% sales. Lost $208M last year, but again expected to go positive later this year so maybe a pass is earned. Note they have >$650 cash on hand

I’m not sure if DOCU will compete with some of the other around here so I’m starting with around 2.5% as I continue to watch and learn.