RBLX is doing a direct listing in February. This won’t be a detailed analysis, but there has been a discussion about EV/S not being the correct metric for evaluating our companies, and that one needs to look beyond revenues and pay more attention to cash flow growth.
There is a chart in this article that outlines some of their metrics.
2019 cashflow: $6 million
2020 cashflow: $296.2 million
They don’t have a lot of the other key features of our companies such as recurring revenue that becomes engrained into an enterprise’s operations. They also are benefitting from significant pandemic trailwinds.
But that cash flow growth is staggering. I just wanted to bring it to the board’s attention. Maybe RBLX will be worth a look.
I am not against it, however I invested in Nvidia while the BitCoin craze was going on. Saul invested too, but was reluctant. The debate raged back and forth about how much bit coin impacted the stock price.
It turned out it had a huge impact. For this reason Saul’s selling out of Zoom and his fears about Docusign carry a lot of weight with me.
As such Robolex just doesn’t peak my interest yet.
Personally, I believe that the major economic impacts of the pandemic will end rather abruptly and for many quite unexpectedly.
If you are invested in any of the companies that are experiencing a pandemic tail wind, listen to conference calls and read the filing with an eye toward an exit.
Saul does not like metrics like EV/S and such, but this does not mean that he ignores valuation, on the
contrary, When a company with a rich (by old metrics) valuation has slowing growth or modest but flat growth rate a simple math calculation determine if the company can grow into its valuation. As such, the stock price of a company
with a slowing growth can and probably will rapidly fall to reflect the new valuation based on the new growth rate.
RAPIDLY!
Like in a day or two. So, these companies that have the Covid wind in their sails should be watched very closely.