During this intense drawdown in SaaS stocks, we examine whether lower multiple names are safe havens.
appealie.com/high-versus-lo…
TL,DR: Higher multiples better in 2020...
...but lower multiples were better in last 4 drawdowns 2014-2019
appealie.com/high-versus-lo…
TL,DR: Higher multiples better in 2020...
...but lower multiples were better in last 4 drawdowns 2014-2019
We approached this at the direct comparable level (instead of quant baskets like revenue growth >20%) to see if a high versus low pair trade would have worked.
Ex #1 - $DDOG vs $NEWR: Datadog vs New Relic: High Multiple Outperforms (1 Month Delta: 370 bps)
Ex #1 - $DDOG vs $NEWR: Datadog vs New Relic: High Multiple Outperforms (1 Month Delta: 370 bps)
Ex #2 - $BL vs $WK - Blackline vs Workiva: High Multiple Outperforms (1 Month Delta: 930 bps)
Ex # 3 - $HUBS vs $SHSP - Hubspot vs Sharpspring: High Multiple Outperforms (1 Month Delta: 1,490 bps)
Ex #4 - $TWLO vs $BAND - Twilio vs Bandwith: Low Multiple Outperforms (1 Month Delta: 830 bps)
Ex #5 - $ZEN vs $MDLA - Zendesk vs Medallia: Low Multiple Outperforms (1 Month Delta: 520 bps)
Ex #6 - $RNG vs $EGHT - RingCentral vs 8x8: High Multiple Outperforms (1 Month Delta: 1,290 bps)
Summary: higher multiple names have:
- outperformed 4 of 6 cases
- with an average 1-month stock price outperformance of 4.5%.
On average:
- the higher multiple names saw their multiples contract by 18% - 20%
- lower multiple comps saw their multiples compress by 33% - 35%
- outperformed 4 of 6 cases
- with an average 1-month stock price outperformance of 4.5%.
On average:
- the higher multiple names saw their multiples contract by 18% - 20%
- lower multiple comps saw their multiples compress by 33% - 35%
2020 is a unique market, with COVID19 driving insane demand for remote apps:
appealie.com/covid19-saas-i…
appealie.com/covid19-saas-i…
No recommendation on high vs low strategy.
But worth including @BatteryVentures (@NeerajVC + @loganbartlett) on role of PE, a rising floor multiple(?), & diff risk-reward calculus(?).
The "Vista/Thoma Bravo put" *might* exist for 5x revenue names, not 14x revenue names.
But worth including @BatteryVentures (@NeerajVC + @loganbartlett) on role of PE, a rising floor multiple(?), & diff risk-reward calculus(?).
The "Vista/Thoma Bravo put" *might* exist for 5x revenue names, not 14x revenue names.
