Thread by @Crussian17

Valuation thread with heavy credit to @akramsrazor whose podcast highly recommend for insights. Lets take $zm. Everyone was in love with their earnings beat and higher guide and congratulating themselves for being long after the last q and then thr stock dropped 30% quickly..why?

$zm reported revs of 883M & guided to 902M revs for next q. The runrate of 902M per q1 guide if taken flat for rest of yr is 3.6B. They guided to 3.77B. Thats just a 5% increase for the yr from q1 run rate. That is a massive decline & implies negative billings growth 2H of 21..

A stock that at the time was trading 35x revs (now 28x) for negative growth second half of this yr is too much. $zm ended this yr at 2.65B revs so u could say well hey thats still 42% growth next yr which is great! Well not really because q1 and q2 are easy compares.

Again just by $zm’s run rate this past q4 at 882M if they just keep that & dont grow at all their rev next yr would be 3.528B which is 33% automatic growth. So they really only guided to 9% growth on top of that for the whole yr next yr. why pay 35 or 30 or 25x revs for that?

I think $zm likely ends this coming yr at 4B but even then multiple will come crashing down unless the following yr things reaccelerate meaningfully and that could be tough as many go back to the office. Now why are people buying hotels and airlines and cruise lines and retail?

All cyclicals had revs cut huge. For example lets say im a hotel chain and my revs fell from 5B to 1B (just to make it easy). So now economy reopns and i have 3B in revs. Thats 300% growth at a 20PE multiple vs a 25x revs for minimal growth for $zm. This is why ppl are rotating

This value outperformance could last all this yr and little next yr due to easy compares however after numbers are rightsized then likely goes away. Growth outperformance was always because growth was scarce and ppl had to pay a premium. Well now its not scarce in reopening names

Reopening names will look like they have faster growth than tech def this yr & prolly next at much lower valuations so if ur a portfolio manager which do u buy?Its all bs numbers games but thats why tech took off so much in 2020. Had huge growth while Everything else was cut down