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No. of Recommendations: 226
I’m not sure I understand what people are talking about. At today’s close, with Fastly down 16% or 17%, and all the others down 2% to 4%, my portfolio was down all the way to where it was… last Thursday, all of a week ago, at up 131%! (Granted, that’s down from 146% on Monday, but that’s investing). If each of my remaining companies sells off 16% as well, my portfolio will still be up roughly 100% on the year, which is so much better than the indexes that it’s ridiculous.

And people talk about “Covid hitting our companies hard.” And that was in a discussion of Datadog, which was only up 68%. "ONLY" up 68%!! And then we had Fastly (which, granted, had risen too far to fast), and was “ONLY” up 62%, and "ONLY" guided to 50%! In the middle of a once in a century pandemic!!!

If you want to know what “hit hard by Covid" looks like, look at airline companies, or hotel companies, or restaurants, or entertainment companies, or clothing retailers, etc, etc, where revenue isn’t up over 60%, revenue is DOWN 70% or more. Some have almost NO revenue speak of right now.

DataDog and Fastly just put up some of the best results you will see from any company in the world right now. Yes, Shopify beat them, and Zoom will of course, but how many companies are growing at 62% or 68% in the middle of this pandemic? A miniscule number.

Forgive my rant, but I had to get it off my chest.

Best,

Saul
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No. of Recommendations: 4
Thanks Saul!
I was wondering whether other people were not impressed by FSLY and DDOG’s ridiculous performance in the middle of the COVID suffering.
Considering that so many businesses are closing or reducing in sizes today, I was rather shocked by people’s response to >50% growths reported this week.
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Thank you for that perspective. Out of curiosity I went back and looked. My portfolio is down to what it was last Friday. I came into this SAAS investing world in June but still up significantly. I can only imagine what up 100% for the year would be like. In for the long haul!
-R
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No. of Recommendations: 6
DataDog and Fastly just put up some of the best results you will see from any company in the world right now. Yes, Shopify beat them, and Zoom will of course, but how many companies are growing at 62% or 68% in the middle of this pandemic? A miniscule number.

This is the first time in my investment life where a drop like that didn't cause me grief. Like you said, back to last week.

This begs the question: Given that your investment style focuses on growth, has there ever been a time where nothing was growing enough for you to want to be invested? Is there a "minimum" growth rate that below which, cash is your favored place?

Forgive my rant, ...
Nothing coming off your keyboard can be considered a rant. It is words of wisdom in caps.

Thanks
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No. of Recommendations: 7
As I said before, this board has taught me to take a deep breath on days like this. Today my main thought is just "Hmm, that reordered the portfolio weighting a tad."
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No. of Recommendations: 4
This is my first post to Saul's board. I think the last few months and maybe even the 11 year bull has twisted people's thinking in regards to normal returns on investments. Saul said it perfectly. Some of these stocks have gone up to levels in a few months that might have normally taken a few years. The market is a great place to grow wealth but it shouldn't be a money machine that doubles you money every few months. Some folks might need to get a grip.
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No. of Recommendations: 2
It's been a breathless ride since April, but nothing goes up in a straight line forever. I'm kinda licking my chops, this seems like a great opportunity to deploy some reserve cash to add to some of these rocketing stocks on this pullback.
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No. of Recommendations: 8
Saul, first off, I want to congratulate you again on your continued wonderful performance. Not that you need to hear it from me, but massive kudos. You have correctly nailed the market zeitgeist so far, and picked the right stocks.

On Fastly, which is down another 18% today, the fact that their guidance was flat Q over Q seems....concerning for a stock with an incredibly high 40x P/s valuation. On top of which they may lose their largest customer. A 35% drop in 3 days would concern me, personally, you have a higher risk tolerance though.

AYX, which you predicted have Revs up 30-40% after wisely reducing your position came in at only 17%. And is predicting only 7-10% growth, at a 25x P/s that seems pretty bad. The 85% ytd gains are down to 19%. Lucky for me, I took profits at 175 because the growth expectations were simply unreasonable.

DDOG rev growth dropped from 87% to 68%, still very good of course. They guided down to 50% growth however. [I also had been slowly selling out of this one and closed the position today.] Still over 42x P/s.

Given the slowdown [after the perhaps once-in-a-lifetime Covid bump] in sequential growth, how 'slow' does the relative slowdown have to be for you to exit these kinds of positions?
Are you comfortable continuing to predict massive growth for these firms when their own predictions for next Q are for 0% growth or 7%? We see them getting punished severely when their 'beat-and-raise' is no longer good enough due to their high valuations.

You have done an amazing job on CRWD, a name I foolishly sold out of months ago. Big mistake. And Zoom of course, among others, that goes without saying.

I wish I had your gains, believe me, but I'm up 30% ytd so I'm happy with that. If I'd just held on to CRWD, ETSY, PTON, LULU I'd be doing a lot better.

Best,

Naj, recently exited DDOG, AYX, CHWY.
Long COUP, ADBE, ADSK, MSFT, FB, AMZN, ATVI, AVLR, NFLX, GOOG, BKNG, MA.
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No. of Recommendations: 6
On Fastly, which is down another 18% today, the fact that their guidance was flat Q over Q seems....concerning for a stock with an incredibly high 40x P/s valuation. On top of which they may lose their largest customer. A 35% drop in 3 days would concern me, personally, you have a higher risk tolerance though.

I too expressed my concern about Fastly's growth acceleration going into the rest of the year in a separate thread. Despite the Covid 'bump' in usage, Fastly has in fact seemed to be impacted by new Enterprise business wins (likely as companies cut down on budgets).

To label it as a 'once in a lifetime bump' is perhaps wrong though, as the business will still be there after Covid. Let's look at it from a different perspective. Fastly has 304 Enterprise customers, but sees 30,000-100,000 Enterprise customers as its total addressable market. If you believe in Fastly as a proposition (its customer base including the likes of Shopify, Pinterest, Etsy, Amazon, Microsoft perhaps speaks for itself here) then the market is out there, and Fastly will gain a good share of this market. This is without taking Compute Edge into account, which could be a game changer.

Why does the stock price dropping 35% really matter, if you believe the story that you invested in it in the first place is in tact. After all it's back at a price from just over a week ago. If you still believe in your thesis, then you should welcome this pullback.
Personally I am grateful that I had some cash on the sidelines (from selling LVGO 15% of portfolio, because the story HAD changed for me) and now I welcome the pullback to add to names I have highest conviction in. I feel more comfortable adding to these names after a 35% pullback than at all time highs. But I recognise the need to do both and to not try to time the market.

As for TikTok, this equates to ~6% of Fastly's revenue, which for a company growing at 62% YoY becomes less consequential. We still don't know what's going to happen with it, and for me it has little impact on my long term view. I don't see why somebody would sell a stock because the company might lose ~ 6% of its revenue indefinitely, or it might not.

I wish I had your gains, believe me, but I'm up 30% ytd so I'm happy with that. If I'd just held on to CRWD, ETSY, PTON, LULU I'd be doing a lot better.

It just seems to me that to be a successful long term investor, you need to hold or add when people are selling if you still believe in the thesis that you bought it in the first place, and to not base your decisions on the reaction of the market.

I noticed in another post that you also regretted selling Shopify, Okta and TTD too early.
Not meaning to be rude, but do you consider the possibility that come 1, 2 years from now, you will be posting how you wished you also had held on to FSLY and DDOG too.
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To label it as a 'once in a lifetime bump' is perhaps wrong though, as the business will still be there after Covid.


I meant bump in growth rates, as we've seen from this Q reports, many of these SaaS firms growth rates have already decelerated from their Covid-related bump.

I thought that was clear given the conversation, but thanks for helping me clear that up.

As for TikTok, this equates to ~6% of Fastly's revenue,

You are incorrect. 'CEO Bixby said that TikTok is the company’s single largest customer, accounting for 12% of revenue in the year’s first half.'
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Naj

Not wanting to get into a back and forth but to clarify:

I meant bump in growth rates, as we've seen from this Q reports, many of these SaaS firms growth rates have already decelerated from their Covid-related bump

Yes, but you need to understand what is driving these growth rates. The growth rate is fuelled by 1. Existing customers & their additional spend (i.e DNBER) - which has been propelled by usage due to Covid and 2. New customers (new Enterprise customers have slowed in the quarter also due to Covid, but the demand & backlog will still be there)

You are incorrect. 'CEO Bixby said that TikTok is the company’s single largest customer, accounting for 12% of revenue in the year’s first half.'

12% of revenue, but only about 50% of that revenue is in the US which is what would be at immediate 'risk'. Hope that helps.

GaryMF2020 summarises this in the separate FSLY/TikTok thread as per below:

So assuming worst case scenarios, how much impact? Parsing the conference call transcript, TikTok represented 12% of FLSY's revenue in the last 6 months, of which, less than half was US based. Doing the math...
Revenue for the last 6 months (as of 6/30) was $137.6M.
12% of that = $16.5M;
less than half of that is $8.3M.
So we are talking about ~$8M, or at worst (if TikTok got shut down or if MSFT used their own edge CDN services,) ~$16.5M for 6 months, or call it ~$33M for the year, or about 11% of the top range of their 2020 revenue guidance that they'll need to make up. Given FSLY's growth, this would be a relatively easy fill.
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Fastly has 304 Enterprise customers, but sees 30,000-100,000 Enterprise customers as its total addressable market.

Here is what Bixby says:

So you're talking about large, large wallet sizes, I mean, to put our 300 enterprise customers into perspective, some of our largest competitors in the space have 6,000 -- 7,000 of these. So, this is -- we are in the early days of this market from our perspective. And I think that only that universe of 6,000 to 7,000 enterprise customers is very much limited by the lack of programmability and innovation in the traditional sectors. So if you sort of captures wider to some of these other companies that have 30,000 or 100,000 enterprise customers that certainly where we're looking at

Given that they have <1% of the possible # of enterprise customers, it is strange that their enterprise customer growth # is slowing so much. They added 7 this Q, 9 this prev Q, and if I recall only about 30 in the previous 4Qs. Is it possible that the possible advantages of FSLY are essential only for a subset of the enterprise customers?

Tiktok - India banned it last month. After US, more countries may ban it. I know Australia is looking at doing that as well. So, the full 12% rev from Tiktok may be at stake. Also, Bixby says these innovators lead to more rev through their APIs. So, greater traffic may be an issue.
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No. of Recommendations: 30
Remember, we're in one of the toughest "spend" environments in recent history.

Fastly signed more total customers this Q than ever before as a public company. That's great, many of those will eventually grow into enterprise customers who spend $100k a year or more.

Their enterprise customers were up 7 this quarter which is low... but remember, this is not "adds" this is their total enterprise customer count.

So if they have 10 that dropped out of the $100k/yr category and signed 17, it will look like they grew by 7.

I think people are making a HUGE mistake if they are worried about enterprise customer growth and I wouldn't be surprised to see 20+ growth quarters soon.

The metric that matters way more is avg enterprise customer spend. Here's how that looks since Q2'19.

Q2'20: $716,000
Q1'20: $642,000
Q4'19: $607,000
Q3'19: $575,000
Q2'19: $556,000
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