Nate,
I agree with your sentiment about the likelihood that certain forms of virtual behaviors may be with us for the long term. The bigger question is HOW MUCH of this new style of interaction will recede with the mitigation of the Corona Pandemic. Might some activities become routinized -let’s use PTON as an example - to the point where folks won’t return to the gym?
Much of this is uncharted territory in social and culture behavioral patterns.
I Just entered a position in EXPI as well.
I have a couple of real estate clients that have recently switched over to EXPI with others planning on it and they cannot be happier. The company offers them a ton of resources, simplifies the buying and selling process, and provides a super competitive commission rates.
Excellent point, and one that I was considering this morning.
ZM is safe. Here is one example of why. Higher education, and primary education for that matter, has seen the light. Universities are expensive to maintain. Like we see with our SAAS companies, online education boasts much larger profit margins (if it’s appropriate to call it that). Best part, though, is that you broaden your applicant pool to the entire world, potentially, instead of just a narrow geographic region. And not just student applicant either; now you can hire exceptional faculty/instructors that otherwise wouldn’t have been willing to move.
TDOC is safe. I’m not suggesting it is the best place to put investment dollars to work, but I firmly believe that it has a commanding lead in the future of ordinary medicine and the behavioral treatment of chronic conditions. Who wants to take time off work and sit in a waiting room to just to be verbally interviewed.
PTON is an interesting case. Why might customers still flock to PTON when gyms are back in full force? The top reason that people exercise is to lose or maintain weight. Easiest solution is to exercise and eat fewer and better calories. And exercise doesn’t need to be extravagant; the best exercise for weight loss turns out to be walking. Sure you would burn more calories per minute running, but for the average person trying to lose weight they might only be able to run for a few minutes before fatigue. Therefore, walking for a longer time burns more total calories than running (on average). So, why with such easy and inexpensive solutions like diet and exercise is weight loss a trillion dollar industry? People need motivation and they need a plan. They think to themselves, “I don’t feel motivated to get up extra early, drive to the gym, exercise for a bit, shower at the facility, and go to work. But if I had a bike in the house, and a trainer leading me through a workout, and less time wasted driving, and the ability to shower at home, and an online community to support my efforts, I think I might actually stick to a routine this time.”
"That's why I didn't want to buy e.g. Zoom (or any "Corona" stock)."
Zoom is up close to 400% since March, why would a possible reactionary 12% drop stop you from investing in a great company?
Is it because as the investing 101 mantra says, past performance is not an indicator of future results? I mean, we here know it’s not entirely that simple, but the italicized bit above is something of a loaded question. I wouldn’t tie ‘recent ~400% growth’ so closely with ‘stop you from investing in it’. It’s been a great company, but stock performance off the March low is not the reason, it’s a result. I interpreted the first line of this reply to mean that RevTK doesn’t see the current situation the way others here do. To some investors, this might not be so much a “possible reactionary 12% drop” as a signal that there’s a risk of an individual losing money by buying ZM today within their own individual investing context (risk tolerance, diversification, ownership horizon, knowledge base, etc). RevTK’s subsequent reply shed some light on this, but I thought this possible “remember our motleyness” moment was worth pointing out.
-n8 (started ZM position late last month, not concerned right now)
"PTON is an interesting case. Why might customers still flock to PTON when gyms are back in full force? The top reason that people exercise is to lose or maintain weight. Easiest solution is to exercise and eat fewer and better calories. And exercise doesn’t need to be extravagant; the best exercise for weight loss turns out to be walking. Sure you would burn more calories per minute running, but for the average person trying to lose weight they might only be able to run for a few minutes before fatigue. Therefore, walking for a longer time burns more total calories than running (on average). So, why with such easy and inexpensive solutions like diet and exercise is weight loss a trillion dollar industry? People need motivation and they need a plan. They think to themselves, “I don’t feel motivated to get up extra early, drive to the gym, exercise for a bit, shower at the facility, and go to work. But if I had a bike in the house, and a trainer leading me through a workout, and less time wasted driving, and the ability to shower at home, and an online community to support my efforts, I think I might actually stick to a routine this time.”
I fall firmly into that last sentence - my schedule is very full and I prefer to exercise either at home or ride around my area instead of going to a gym. Right now I am lucky to get 30-60 minutes a day for exercise (work is very busy and my family time is very important to me), so I run mainly on our treadmill.
right now I have not subscribed to PTON for my treadmill runs, as i tend to watch Youtube videos on topics I am interested in while I run. I am thinking of trying out their program to see if it resonates with me. Not sure it will, I really like watching videos or movies, but since I am invested in PTON I should check it out.
I am long PTON with only about a 3-4% position. I bought a bit more today. I think this sell off is premature, as others have stated. I do plan on watching this one carefully however.
Dave
Another thought that just came up in a conversation with a colleague, relevant as many of our stocks here seem to have a negative correlation with the perceived covid-19 situation:
The trial did not include anyone over 55 or high risk adults, those with diabetes, those who smoke etc. And these results are only for the first 7 days of the trial. While super promising and much higher efficacy than many expected it’s not beyond the realm of possibility that the final results (1) may not generalize to the humoral immunity of these population groups (2) we could see an adverse event before the trial is completed.
More likely, I suspect that the final efficacy will be lower than 90% when we see final results as these things are range bound… but it’s great news and I’d rather have a few down days and have a strong vaccine candidate that will save lives than the opposite. Another not talked much about insight is that the trial will probably get a quicker read out than expected because we are in the middle of a rapidly rising epidemic curve so the outcomes will occur more quickly.
Almost immediately prices started declining, and as I write (~7:30am) ZM is -12%, DOCU -8% and TDOC -5%. Other SaaS stocks show collateral damage. This is a premature reaction on very preliminary data, and likely a buying opportunity.
It’s certainly an interesting reaction, hardly rational though. It’s still going to be ages before the vaccine is fully tested and production ramped up to make it available for enough of the population to get inoculated to even consider a return to normalcy, enough time for the WFH infrastructure to become that much more entrenched.
Excellent point, and one that I was considering this morning.
ZM is safe. Here is one example of why. Higher education, and primary education for that matter, has seen the light. Universities are expensive to maintain. Like we see with our SAAS companies, online education boasts much larger profit margins (if it’s appropriate to call it that). Best part, though, is that you broaden your applicant pool to the entire world, potentially, instead of just a narrow geographic region. And not just student applicant either; now you can hire exceptional faculty/instructors that otherwise wouldn’t have been willing to move.
TDOC is safe. I’m not suggesting it is the best place to put investment dollars to work, but I firmly believe that it has a commanding lead in the future of ordinary medicine and the behavioral treatment of chronic conditions. Who wants to take time off work and sit in a waiting room to just to be verbally interviewed.
PTON is an interesting case. Why might customers still flock to PTON when gyms are back in full force? The top reason that people exercise is to lose or maintain weight. Easiest solution is to exercise and eat fewer and better calories. And exercise doesn’t need to be extravagant; the best exercise for weight loss turns out to be walking. Sure you would burn more calories per minute running, but for the average person trying to lose weight they might only be able to run for a few minutes before fatigue. Therefore, walking for a longer time burns more total calories than running (on average). So, why with such easy and inexpensive solutions like diet and exercise is weight loss a trillion dollar industry? People need motivation and they need a plan. They think to themselves, “I don’t feel motivated to get up extra early, drive to the gym, exercise for a bit, shower at the facility, and go to work. But if I had a bike in the house, and a trainer leading me through a workout, and less time wasted driving, and the ability to shower at home, and an online community to support my efforts, I think I might actually stick to a routine this time.”
Interestingly, all three of these were excelling before the pandemic. Last year’s revenue growth for the three was 88% for ZM, 32% for TDOC (128% for the LVGO component, I believe) and 99.6% for PTON.
Multiples and growth may be temporarily distorted by the pandemic. But these three were pre-pandemic winners so they might be expected to continue their winning ways post-pandemic.
I had only recently sold out of FSLY, so had a sizable chunk of change to buy today…
Did so by adding most of it to ZM and PTON, but also added to CRWD, DOCU, and TDOC.
I consider today to be a premature overreaction to the vaccine news for the same reasons so many here have already pointed out.
GoSubject: Re: ZM, DOCU, TDOC down on vaccine new
FWIW–Took the opportunity to add a bit today to DOCU,TDOC,ZM and SE. I believe the drop is an unjustified reaction to the news about the vaccine. I thought about PTON but decided I didn’t want any more–currently with a 3% position. Similarly for CRWD and FVRR which are also down .
I selected those 4 companies because I anticipate very strong continued growth…they dominate each in their own growing universe. I would have added more than I did but the thought of still more cap gains taxes this year stayed my hand.
cheers
arnie
I added ZM/DOCU/SNOW/ETSY/PINS/EXPI
I had sold and had cash available. Used opportunity to fully deploy today. The first five were on my target list and even though SNOW did not go down like the others finally bit the bullet today. If on such a large down day it did not go down as much reasoned it is currently range bound. I believe there will still be substantial time needed to distribute vaccine and still looking at a couple of quarters before we go back to normal. Also, the new normal will not mean as much of going into the office as it used to be earlier and a lot more office staff will work from home.
It’s still going to be ages before the vaccine is fully tested and production ramped up to make it available for enough of the population to get inoculated to even consider a return to normalcy, enough time for the WFH infrastructure to become that much more entrenched.
==================================
Apparently not that long if this is to be trusted, although I retain confidence in all of these stocks
https://www.theguardian.com/world/2020/nov/09/uk-rollout-of-…
Long ZM, TDOC, SE, DOCU
And longish PTON
Hi Guys,
good replies to affirm each other’s convictions.
May I add that alot of trading volume these days are driven by machines that use natural language processing to interpret headlines.
Thus we see huge volatility on big unexpected news when it triggers their rotation trades. (Eg. fastest crash and recovery earlier this year)
So don’t be too obsessed with this swings and instead go back to your investment thesis because it can swing upwards very quickly and you want to be there when it happens.
Apparently not that long if this is to be trusted, although I retain confidence in all of these stocks
Beginning a rollout and innoculating a large fraction of the population are far from simultaneous events. We have one week of testing on this vaccine on a limited population, so even beginning a rollout that soon sound wildly … perhaps irrationally … optimistic.
Beginning a rollout and innoculating a large fraction of the population are far from simultaneous events. We have one week of testing on this vaccine on a limited population, so even beginning a rollout that soon sound wildly … perhaps irrationally … optimistic.
tamhas,
I vote for irrationally. IMHO the market is overreacting, as it usually does to news which amplifies in my opinion the normal ups and downs in market prices. It appears further that the news is being misinterpreted and misused (also a normal event) .
In fact progress in dealing with Covid does not negate any part of the investmment thesis for ZM,DOCU or TDOC. Their position of leadership and probable growth trajectory are defined independently of progress with the vaccine. Or to put it differently eradicating Covid doesn’t affect the demand for better business communication systems ,nor for efficient document and contract management, nor for the demand for ease of access to medical advice and monitoring of selected chronic conditions.
cheers
arnie
In fact progress in dealing with Covid does not negate any part of the investment thesis for ZM,DOCU or TDOC. Their position of leadership and probable growth trajectory are defined independently of progress with the vaccine.
Agreed. And we still have lots of uncertainty with the vaccine. It’s not a done deal yet.
the Pfizer vaccine uses a brand new technology called messenger-RNA, or mRNA. It has never been approved for human vaccination before.
It is also important to get a sharper picture of Pfizer’s claim of about 90 percent effectiveness. This first analysis only included data on 94 confirmed Covid-19 cases, meaning there is no proof yet that the vaccine prevented infection.
https://www.nbcnews.com/health/health-news/pfizer-s-covid-19…
It is highly probable that other vaccines will show very good results too. The elderly particularly those in some sort of nursing home are the ones impacted the most because they are the ones likely to get severe Covid,or even die. They will be high on the list for vaccines. So as more of that population gets vaccinated the severity of Covid in the remaining unvaccinated population will fall. Until it is like flu and eventually maybe the common cold. More of an annoyance than a severe public health threat
Did anybody think that Covid was going to last forever??
"ages " is. a fluid word, but in fact vaccines will be going to the most at risk people “soon”
BTW the government has medical personnel not regularly exposed to Covid higher on the list than elderly, IMHO a mistake.
Business will not go back to almost all work in office. Though pressure to do so will be high from many bosses whose main joy in life is being a boss. So WFH will have to be pushed from high up in the company.
This is great news for the world, and there are more important things than our portfolios (really!)
But if Zoom is by far your top holding, like it is for me, and you see it down 20% premarket and down still further the next day, the news feels somewhat bittersweet (sorry to admit).
We all knew the news was coming, it was just a question of when.
I’d said in a post just a couple of weeks ago:
“There are reasons why the stock price COULD plummet in the coming months, the most obvious being vaccine news and a sector rotation.”
So now the news has happened. I’m not actually in the camp that the sell-off is all reactionary or completely unwarranted, as it’s to be expected. The growth prospects of Zoom ARE somewhat entwined with Covid, so vaccine news understandably causes a re-rating of its share price and of those growth assumptions.
The question is now, where will that re-rating settle, how long will it be until the vaccine is rolled out, and how will this impact Zoom’s growth.
Here’s what we know about the vaccine:
I probably didn’t expect any vaccine news for another few months, but perhaps that’s just psychology - you spend so long in lockdown you can’t see a way out. I was really eyeing mid-late 2021 for a vaccine to be rolled out. This maybe brings the timeline forward 6 months, the same time as Zoom had to scale up in their Q1&2. So when will the new vaccine reality settle in?
And what does this really mean for Zoom?
Eric Yuan, in his Q2 earnings call back in September had said:
“Good news, we do have time for next 10, maybe 12 months, we can optimize what’s the future workplace look like.”
If the vaccine is rolled out successfully in the next 6 months, as many seem to expect, this may cut down Yuan’s cited timeframe of the ‘Covid environment’, and perhaps impact his vision of Zoom capitalising in that setting.
Kelly Steckelberg, CFO:
While better-than-expected churn was one of the drivers to our Q2 outperformance, we did experience a significantly higher level of overall churn in Q2 as compared to historical rates. As customers with 10 or fewer employees have increased to 36% of our revenue, we are assuming a higher rate of churn due to this mix shift.
The most likely impact of a ‘post Covid’ world in the near term will be churn of Zoom’s customers, particularly those with 10 or fewer employees. One of the things I was really excited about in Zoomtopia was ‘OnZoom’, which might create some stickiness on the platform and an altogether new segment of customers. How long they will have to cement that stickiness now, remains to be seen.
With a continuation of the pandemic for the entirety of Q3 (up to 30th October), I remain convinced that Zoom will smash Q3 earnings out of the park. And I think it’s safe to say Q4 through these winter months will be a similar story. We may also have first sight of Zoom Phone revenue contribution in the beginning of the year. Q1 2021 will be up against a softer YoY comparative, and it’s unlikely Zoom’s growth rate will tail off then either.
However, with a torrent of vaccine related news likely to come over the coming weeks and the likely imminent approval of the vaccine, my concern now is that this upside potential won’t be realised, but more than offset by this sentiment shift. Even if Zoom reports YoY revenue growth of 400%, 450%, or 500% at the end of the month, how will the market react to that, with a vaccine around the corner. The risk/reward seems to have shifted.
I don’t personally see a full return to ‘normal’ post Covid, companies will always need a remote work option and there are practices which will undoubtedly stick. However, it’s undeniable that Zoom benefited from the Covid environment, and now that the light can be seen at the end of the tunnel some near term headwinds could materialise, first in terms of market sentiment and then reaching an inflection point on its growth rate. The prolonged continuation of the Covid environment did have some near-term bearing on my conviction. And I’ve had to ask myself if I still felt comfortable holding such an outsized position going into that.
Zoom rose to the challenge and scaled up extraordinarily in the first place to meet the demands of the pandemic. Now will it be able to execute on its advantage in the looming post Covid world? That is the $m question. So far, they have not put a foot wrong, but circumstances have been favourable.
Has the story changed? Maybe. This a part of the story which we knew was coming all along. We just don’t know how the chapter ends yet. I am cautiously optimistic, but a little less certain.
Taking a step back, perhaps the 30% or so drop we’ve already taken is a small price to pay for what is undoubtedly great news for the world. And this helps to roll with the hit I (and many of us) have just taken to our portfolios 
Not sure if this has already been addressed, if so then my apologies. However ZM may be moving a bit not only due to vaccine news but this attack article by Arstechnica as well:
https://arstechnica.com/tech-policy/2020/11/zoom-lied-to-use…
On the flip side; Beth Kindig tweeted a supportive response as follows:
"I expect more from Arstechnica as they are fully aware that enterprise apps do not typically offer end-to-end encryption. Microsoft Teams offers encryption in transit and at rest. What Zoom did here is being blown out of proportion. If the government wants to get involved with free markets then they need to be consistent and go after $MSFT too. With encryption in transit and at rest, the service in the middle can de-crypt.
To offer ECE, which $ZM is rolling out, is totally unheard of for enterprise. Slack is encryption in transit and at rest, as well and does not do end-to-end encryption. The FTC is clearly discouraging free trade by not examining the other competitors to understand the industry standard. Arstechnica should know better and should detail these important facts. The government clearly favors Microsoft but consumers do not."
I have been following FLGT due to the Fool’s positive outlook, their take on the vaccine news can be found in their conference call. The emphasize the virus and virus testing is not going away anytime soon. few snippets:
START
I think in terms of vaccine development, we welcome the news of the vaccine development because we do see the demand for the Fulgent Genetics to provide faster, quicker, and cheaper tests in terms of the COVID-19 test. In addition, as the vaccine developments will come in, adding additional requirement for the test, faster and cheaper and quicker and more accurate test for the antibody test, neutralizes those antigen test. So I think this creates a new opportunity for Fulgent Genetics in this space. I do not believe that COVID-19 will go away easily.
So we think we can play a dominant role in the testing. We think it’s quite durable. And I think the platforms we’ve built, the turnaround time, the systems, I think we’re going to be a player for deep into 2021.
So if you take a look at the amount that we’re spending for COVID versus what COVID has brought us just for this year, we’re going to be generating approximately $200 million of COVID business on top of massive profits. We’ve already gotten massive returns on those investments. So COVID is not going to go away at the end of 2020.
We see these contracts going deep into 2021. We believe we’ll have a material level of COVID business. END.
One thing they mentioned is the welcome back to normal business which was affected by COVID which has been an issue for our companies as well, it can provide a boost to WFH as well due to being able to go back to business and selling as normal.