nzealand's recent activity
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Comment on Beyond Meat has hit the ‘short-squeeze trifecta’ as borrow fees keep soaring in ~finance
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Comment on Microsoft Teams is now officially bigger than Slack in ~tech
nzealand LinkSlack has huge downside. The company is overvalued. The product is great from an end users perspective, but that is not enough in the B2B space. Slack has a market cap of $17B with a yearly...Slack has huge downside. The company is overvalued. The product is great from an end users perspective, but that is not enough in the B2B space.
Slack has a market cap of $17B with a yearly revenue of $454.45 which gives it a price/sales ratio of 37.
It is growing revenue 67% year over year while keeping it's net loss at around $149m.
Workday looked the same during calendar 2013, grew revenues 74% to $409m with a loss of $147m and its market capitalization grew 61% to about $14.5 billion. This resulted in a price/sales ratio of 35. For the next four years, the stock languished while revenue grew like gangbusters, until the price sales ratio reduced to about 8 by 2016. The stock only recently started to outperform the overall market when the price sales ratio expanded to 15. Workday revenues are still growing at 32% and the losses are growing at 17%.
Workday however owned the key decision maker. The head of HR. The only way to beat Workday was to go in at the CEO level, or maybe get in via a strong IT department. And their market space was huge and proven. No one was going open source on HR.
Whoever pays for Slack also has to pay for Zoom and Confluence plus maybe MS Office, and now the Microsoft sales rep is friends with the key decision maker, telling him "what you really need is MS Teams, everyone will be more productive because they can more effectively collaborate on shared documents, imagine what your teams can do with increased planning velocity...." Alternatively, someone in IT is saying, "dude, we pay slack all this money, Telegram is just as good, and it is free." And Slack is not sticky, except among the IT crowd. There is no cost in switching. They know that. Even if Slack gets the sale or keeps the renewal, they have to discount.
It's hard making money on the short side of a stock, but I could not resist buying a few deep OOTM puts on Slack.
as @nic mentioned
I looked for companies in the last twenty years that doubled revenue to above $100m and had a p/s over 30 for which we have more than three years of history.
Sirius Satellite (SIRI) grew revenue 3x during 2005 to about $187.40m, had a market cap of $8982.70m with a p/s of 48. Revenues grew 30 fold through to today, but that was not enough, and the stock price never went past the 2005 peak of 7.48.
Brocade Communications Systems (BRCD) grew revenues 4x during 2000 to $329.05m with a market cap of $25,302.85m which is a p/s of 77. It was selling backend during the tech boom, didn't do so well during the dot com crash, and never recovered.