If a stock has the following trend in revenue growth rates from oldest to most recent, would you buy or sell it?:
56% 41% 42% 38% 34%
Certainly not sell it if you have a cheerleader CEO that has built the “catchers mitt” of digital advertising. Especially when it’s guided for reacceleration.
8 Likes
What if the guide for next quarter was back to 40% growth?
Not a very valid question as there is more to investing than just the numbers.
AJ
3 Likes
If a stock has the following trend in revenue growth rates from oldest to most recent, would you buy or sell it?:
56% 41% 42% 38% 34%
or how about this one:
65% 61% 53% 48% 36%
In both cases, the YoY revenue growth rate has fallen substantially quarter after quarter.
You would buy both or sell both??
What if the guide for next quarter was back to 40% growth?
Exactly!
if you expect that same company to re-accelerate revenue growth to 40%+ next quarter, and have two major events that only happen once every four years happening in the next 12 months which are expected to significantly drive their business…
and you expect that the company is in in the driver’s seat of one of the biggest industries in the world that is going through a once in a generation change toward where this company focuses…
and they have been profitable for each of the past seven years, while most of the companies I own have not yet reached profitability…
well then, I would be making that company my #1 biggest holding
-mekong
15 Likes
What if the guide for next quarter was back to 40% growth?
Hey AJ:
Let’s look a little closer at that guide. This is the last 5 quarters of revenue:
$160
$121
$159
$164
$216
So what happened between the Dec $160 and the March $121??..…seems a pretty massive drop off last year. Was there something unusual about that quarter that came in so low? Or is this just a seasonal event?
The 40% guide was against the $121…but had it been the second quarter or the last quarter of year before…ouch…pretty flat guidance. So was the 1st quarter of 2019 an anomaly or typical seasonal drop ($40 million lower than either side of that quarter).
Seems the comps may get more challenging to beat as the quarters progress.
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and you expect that the company is in in the driver’s seat of one of the biggest industries in the world that is going through a once in a generation change toward where this company focuses…
And in the driver’s seat as the dominant player, it has a massive TAM and incredibly long runway for growth…
Sometimes, the longer term picture with sustainability of growth is most important and the market reacts accordingly.
Dave
1 Like
So what happened between the Dec $160 and the March $121??..…seems a pretty massive drop off last year. Was there something unusual about that quarter that came in so low? Or is this just a seasonal event?
Yes, seasonality explains it. Q1 always shows a significant drop from Q4, their biggest quarter every year. Last year, the sequential drop was 24.6%. The year before that it was 16.5% and the year before that it was 26.2% and the year before that it was 23.2%. Okay, so we have established Q1 is always lower.
This year the guidance calls for 21% sequential drop.
I don’t see anything here that is worrisome.
A.J.
7 Likes
What if this company has YoY revenue growth of 39% and a GAAP profit margin of 24%? Have many profitable companies have a Rule of 40 score of 63%? What if it is also guiding for re-acelerating revenue of +40%?
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It certainly doesn’t share the attributes of a growth stock… and that’s what we’re about here… #flush
🆁🅶🅱
For not in my bow do I trust, nor can my sword save me.
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There is a company out there that instead of hypothesizing about Programmatic Television, and saying if XY and Z happen, they’ll be in the drivers seat, they are actually breaking out the portion of their revenues are a result of streaming TV. And those numbers are a big portion of their revenue, and they are growing fast. And they certainly aren’t 40%.
With TTD, that $121 million last year was the first quarter they significantly slowed down.
They went from 53% growth in the December quarter to 41% in the March quarter when they had that $121 million in revenue. They reaccelerated the June quarter again to 43%.
Green mentioned that the March quarter is always the hardest to predict because that is the quarter that advertising budgets get readjusted.
The other company I mentioned, Roku, also stands to benefit from elections this year. And after the election is over then what? Y2K stocks never traded at a high premium toward the end because everyone knew what happened after they fixed the Y2K glitch.
On top of this we have companies like Netflix that continue to say they will not switch to ads because they stand to lose billions in revenue during the transitional period. At this time I will take Reed Hasting’s word over Jeff Green’s.
For these reasons I have my bet with the CTV trend with Roku. Plus I don’t have to listen to Jeff Green that way.
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It certainly doesn’t share the attributes of a growth stock… and that’s what we’re about here… #flush
This statement is puzzling. If TTD isn’t a growth stock worthy of discussion here, we are limiting ourselves too much I believe.
TTD has plenty of “growthy” metrics perhaps with the exception of their profitability.
AJ
7 Likes
…trend in revenue growth rates from oldest to most recent…
56% 41% 42% 38% 34%
It certainly doesn’t share the attributes of a growth stock…
A growth rate of 34% isn’t sufficient to make it a growth stock? Growth is decelerating, but it is still growth.
I find the whole question to be absurd. If all I know is that string of numbers I would not buy it, I would not know enough about the company and its business. And I could not sell it because I never would have bought it in the first place. I’m actually surprised this whole thread has not been called out as off topic. That’s not an individual growth stock, just a bunch of numbers.
22 Likes
If a stock has the following trend in revenue growth rates from oldest to most recent, would you buy or sell it?:
56% 41% 42% 38% 34%
or how about this one:
65% 61% 53% 48% 36%
These decaying revenue growth numbers between theses two stocks look rather similar though correct? The EXACT same concern led many here to abandon SHOP a while back. More recently, MDB was abandoned over similar growth deceleration concerns.
So I don’t find this discussion “absurd” at all. But no problem, will continue it on the slack board.
BTW, for those who didn’t already guess, the second stock mentioned above with those similar decelerating revenue growth rates was:
http://www.stockta.com/cgi-bin/analysis.pl?symb=ZS&cobra…
Many of you, perhaps most of you, divested of ZS recently…similar revenue decelerations…dissimilar stock outcomes.
Sorry to bother everyone here, won’t respond further on this thread.
Best:
Duma
1 Like
Duma,
To me, the discussion wasn’t absurd (now that I know a little more about what you were talking about), I think it would have been fruitful, it was just the “guessing game” way that you framed it that kept me from contributing. Just listing the string of revenue growth numbers without mentioning even what stock you were talking about is not giving us anything to discuss, as there’s more to buy/sell decisions than just the one metric, and without knowing the stock, we couldn’t take the other metrics into account. So someone would have to answer “yes” or “no” to your post, then maybe you would have told what stock you were listing the numbers from, and further discussion could have started, but I don’t have growth percentages of all my stocks memorized, or the time to try to figure it out by looking them up one by one.
And for what it’s worth, from some previous replies, I think the first string was TTD, and you stated the second is ZS. Had I known that I may have replied, that yes, the last 5 quarters of growth rates do look similar, but I believe that TTD will improve that trend this year because of the upcoming election spending sure to take place, whereas I feel that ZS looks like the numbers may not improve for a year or more as to why I sold completely out of ZS, but still hold all my TTD stock.
My holdings are similar, but definitely not the same as many others here (Saul included), but regarding the rest of the stocks you mentioned, I still hold some SHOP (although I’ve lightened my holding as it went over $400, then over $500, still hold all my MDB, and as I mentioned, have all my TTD, and sold completely out of ZS.
With the question framed differently, I think this could have been a very on topic, valuable discussion.
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I don’t hold either TTD or ZS, but I did find the comparisons pretty profound. And I think that was the whole point of the exercise without knowing the company’s name. What really is the difference between the two companies? I think Green is a better salesperson than Chaudhry is. And TTD has the election year. I suppose that being a little more “concrete” than Chaudhry’s CRO turning things around is the other difference.
At the end of the day, one company is getting a free pass for it’s slowing growth rates, the other is not, even though the declining growth rates are very similar.
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At the end of the day, one company is getting a free pass for it’s slowing growth rates…
Disagree, its not getting a free pass for it’s slowing growth rates, it’s getting a pass because of it’s expected future growth rates which the other company does not have!
Big difference.
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Hi Duma,
The EXACT same concern led many here to abandon SHOP a while back.
Assuming you abandoned it too, how did that turn out for ya? If not, is your point that you still hold TTD and think it’s a good call?
Make your case, man. We might disagree in the end, or you might even change some minds. But either (or any) outcome would be better if it followed an intelligent conversation, don’t you think? Investing is hard enough as it is without everyone having to agree on every issue or every candidate, or getting upset when someone disagrees with us.
Hope so, I’m here for (friendly) disagreement, because (whoa!) I don’t know everything. But I’m not too old to learn. Close, maybe, but I’m not ready to give up yet.
BTW, I have limit orders in for SHOP, trying to rectify an earlier mistake. Or, maybe these BUY orders are just another mistake. Feel free to chime in, but please; make your case.
Dan
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Assuming you abandoned it too, how did that turn out for ya? If not, is your point that you still hold TTD and think it’s a good call?
Make your case, man.
Hey Raptor:
I first bought TTD in May 2017 for $38.83. You were probably invested in TTD well before that I presume?
I sold all shares in August 2019 for $252…that would be a 6 multiple.
That is how it turned out.
Since most of my assets are in taxable accounts, I will have paid the capital gains for 2019 sale come April.
I did reallocate all that money to ROKU at $274…now trades for $327…a gain of 20%.
But as to the original post…few, other than 12X, seem to get the prevailing issue when comparing the 2 stocks revenue decelerating growth rates. Another example might be, why did Saul trade out of SHOP because of what he viewed as massive revenue slowdown…that stock took off since then. TTD hasn’t been pummeled by its slowdown but ZS has.
Point is…without using the retrospectascope….could you tell the difference between a SHOP with massive revenue growth slowdown and a ZS with the same???
Rather than clutter this board with this thread, I will just leave it at that and suggest this thread end and won’t respond here further.
Best:
Duma
1 Like