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Subject:  Re: Let's Refine the P/S Discussion Date:  12/9/2018  6:25 AM
Author:  BenDubya Number:  106457 of 115974

Facebook is a really interesting case study.
If you had bought FB after the initial P/S expansion, you still had a roughly 20% CAGR for the next 5 years despite the recent drop. But Facebook demonstrated excellent growth in that time even after the P/S expansion. So you really really need to believe your chosen company is firmly in that S-curve ready to dominate the market.

Clearly a lot of stocks discussed here that have had massive gains ytd were precisely due to the derisking of the company and their growth.
MDB - acid and 4.0 being released and move evidence of enterprise companies using it for mission critical systems
TWLO - hidden growth revealed after uber left. Market woke up to this and recognised hyper-growth
TTD - just continued, steady, amazing growth QoQ.

Most companies have some sort of sales or support team. They can't grow these teams instantly. Therefore they're generally capped in terms of sales growth. NTNX as an example, growing billings ~50%, if the whole world decided tomorrow to go HCI, would they be able to jump to 100% growth, or 200%? Or will they be limited by their sales team. They'll be limited. So growth rates into the future will accelerate or decelerate moderately. Being in the S-curve just allows them to maintain a high rate.
Of the above three, perhaps TTD is not limited. They provide a platform for companies to use, if google were to shutdown overnight or some other black swan event or market realisation, they probably could benefit instantly in one quarter.

Derisked Hyper-growth tech stocks, P/S of 20+ looks to be the new norm at this point in time. If we're looking for the next play, as duma suggests, we should be looking for those with P/S 8-12 that has some FUD about it. Or maybe not even FUD, just not quite proven. Either some hidden growth the market hasn't realised yet, or multiple competitors and can't be sure who's going to be the winner. Identify why the market has given their P/S is ~10 and not ~20, and determine whether it's warranted or not.
TWLO - the hidden growth was quite clear
MDB - tinker teased out the dominant mindshare all those months ago.

What about NVDA? If you disagree with the -7% guidance for gaming and think the channel will clear faster than expected, with NVDA gaming growth returning to 50%+, database and autonomous accelerating further, then that's a good shout. But I don't know if we'll be able to infer if that's the case or not.
NTNX? Well, I'm heavily into that. Much discussed already. But it clearly does not have the CAP that say MDB is developing. Yet....:) So there's a higher risk here.

TTD - of duma's table, this strikes my eye as the most appealing. Significantly lower P/S than MDB or ZS, a wonderful company ready to grow and grow and grow. And this despite the incredible run-up.

A shame how ESTC and ZS opened up so high on their IPOs, but such is the age of technology and free information.
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