What Are These IPOs Telling Us?

Investment Analysis Clubs Saul’s Investing Discussions
1

Could be a lot of things.

Maybe there is starting to be too much excitement in the market. That’s something to be aware of

But looking at how little-known many of our companies are, maybe these IPOs are going to bring more attention to SaaS and our stocks.

So far, we are seeing Zoom sustain its absurd P/S. Slack is coming public too.

So maybe… our high P/S stocks really aren’t so high and the market will begin to accept an even higher P/S (which would still be well below ZM).

Of course, this can’t happen forever and if ZM continued to trade much higher, I’d be worried we are in bubble territory, but our stocks have a ways to go before we are there IMO.

Thoughts?

4 Likes
2

Beyond meat, levis, pinterest, lyft, uber, and airbnb arent SaaS like most of ours.

When these crash, i think money flows right back to consistently-executed growth stocks like those discussed here.

Zoom was overkill but does shine a spotlight on “built for cloud” SaaS, i think in an overall good way. Slack, zen, now, okta, twlo…anyone looking to become a platform or easily work with this new wave of platforms is a trend not a fad.

Chief Data Officers are becoming a thing…making data actionable to provide a competitive advantage isnt going to go away…thus mdb estc ayx and others.

Titans like FB and Google were created off ad spend…TTD is in right market.

Facebook bought WhatsApp in 2014 or so for something like 17b, yet they did less revenue at the time than Zoom does today. Sometimes value is how much someone will pay to own it.

If you were CEO of ZS or MDB or OKTA…what offer would you sell at? The answer may be a lot different than for evbg or PD, given their smaller mkt cap, revenues, and perceived SAM.

I hope all these new IPOs crash hard, especially Zoom and Slack, so that I can buy them cheaper in the Fall or Winter. :slight_smile:

I will keep an eye out for Snowflake IPO too.

I am paring down some of the most expensive stocks, but unlike mistakes i made last year, i am not selling out completely while the growth stories are intact. Going to carry a bit of cash to be opportunistic if i can.

Dreamer

22 Likes
3

In my opinion, the story of Zoom, Slack, et al. going public, is that right now, the market is offering very high prices for a slice these companies (why would these successful businesses public - they don’t need the capital), and I think it is a sign that the market has gotten ahead of itself.

There are a few FUD opportunities unfolding (STNE, SQ), but I think buyer patience is a valuable trait right now.

2 Likes
4

OK, I’m probably getting off target, but to me, these IPOs are telling me that there’s still a lot of innovation and creativity in the market, and it’s exciting. I love how David Gardner thinks about what the future is going to be like. I did not pay much attention to Beyond Meat when it was first put on my radar by a colleague at the Fool, and honestly, I’m not that excited about it personally. But when you look at the market, there is a market for this and from an ecological and humane point of view, there are many people who might want and benefit from this company’s products. That’s interesting and exciting. Will this company change the world? (And how long might that take?) I think that’s exciting. The whole idea of that electric car company (I won’t mention the name) is exciting too. I think the market can see Beyond Meat as a game-changer, and it’s got a relatable story.

ZOOM is also interesting. I wondered recently on one of the premium boards whether ZOOM can take a bite out of business travel. The short answer is probably not right away, but I just wonder if the possibility is there.

Didn’t we have a slow year for IPOs last year? Or the last couple of years? Maybe some of this is pent-up demand?

Karen
(is this too rambly for Saul’s?)

4 Likes
5

ZOOM has a lot of potential markets. Maybe they can start a partnership with TDOC? Imagine getting the expertise of the best specialists in any field available for advise/consultancy to anywhere in the world using ZOOM tech. That’s a large TAM.

Eddie

6

The best specialists are not interested in doing a video chat directly with patients all over the world. They have interesting cases brought to them by other doctors who provide all the workup to date, physical findings, etc. There’s very little that could be conveyed over video/audio chat that can’t be already conveyed via phone, email, etc.

Perhaps it could be used for a multidisciplinary conference, but that market for that is not big.

1 Like