$S Sentinel One

Security g co but they’re still burning lots of cash
- need to reduce S&M spend & head toward cash break even

Let’s look at fundamentals

EBITDA getting more negative (-$352M)
FCF too (-$212M), but at least last q was less neg (-$25M)

SBC still marching up $S

They need to turn the corner, they don’t have as much cash as they did before

At least they have no debt

But their cash pile has more than halved to $623M
And they burned $212M (FCF) LTM
Good that it ticked up last quarter

They need some cash for acquisitions presumably

$SNOW - Snowflake

If they achieve FY29 targets ($10B rev, 25% FCF mgn)
& assuming 4% dilution

To get a 20% inv return over next 6y, they'd need a P/FCF of 69x at that point

For a 15% return, they'd need a 54x multiple

10% would need a 41x multiple (more reasonable imo) $SNOW

Trying to figure out what the P/FCF multiple would be in FY29 is not easy.

Depends on the future growth expectations at the time

Their target is they'd be growing rev at ~30% then

@KoyfinCharts vs @ycharts

Been using these two platforms for 1-2yrs

They’re both good & have helped me to speed up my process

But there are differences

Am going to highlight the pros & cons from my perspective as a technology sector fundamental analyst / investor @KoyfinCharts vs @ycharts

1. Speed to update quarterly earnings

Koyfin wins

$SNOW reported Q123 on May 25th (day before yesterday)

Koyfin is updated - see the chart and financials ($422M rev)
YCharts still has the old info from Q422 ($383M rev)

$SNOW Q1 23

Been through results & listened to earnings call

Rev g decelerating as expected (+85% from +101% last q)
~ 66% expected for FY23 full year

Very impressive for their scale (this q rev was $422M)

Operating leverage continuing ✅ $SNOW

FCF positive

Appear to be doing all the right things to build out their data ecosystem

$5B cash & no debt - so opportunities for smaller M&A to secure good ppl & technologies

Mgmnt seem confident & see big opportunities ahead

Overall, numbers look good to me 👍

Tech companies -
Free Cash Flow margin after DEDUCTING Stock Based Compensation

SBC is a feature of many tech co’s. Several boast healthy FCF mgns but when you deduct SBC the picture changes

Some popular names sorted by (FCF-SBC)/Rev

Once again @KoyfinCharts makes this easy

https://twitter.com/IrnestKaplan/status/1519050704291250176

I’ve split them into three parts based on (FCF-SBC)/Rev
- Negative (red box)
- Up to 15% (blue)
- Above 15% (green)

Note that several high growth co’s have positive FCF mgns but when you deduct SBC they go negative. (Some very negative)
$SNOW
$OKTA
$PLTR
$ZS
$SHOP
$ROKU

$ROKU

Since Dec 19 (pre COVID)

✅ It’s gone up 2.2X ($136 -> $302)
✅ Yet the P/S multiple is unchanged (16.5x)

Illustrates the power of growth

Current pullback looks like it might present some opportunities... What I like about $ROKU is the main metrics are going in the right direction

Revenue going up (blue line)
Gross Profit going up (orange)
Free cash flow going positive albeit small (red)

And P/S ratio back to pre-pandemic levels 😀

Wish @ycharts could plot EV/GP for me ;-)

Several high g tech co's are at eye-watering multiples

What IRR can you get over 3,5,7 yrs if their P/S multiple halves or gets cut to a third?

Here's my basic IRR calculator for this situation

Bottom line - if multiples get tanked, it's going to be hard to get a decent IRR The calculator is simple & self explanatory
(link at end of thread)

We consider 3, 5 & 7 yr timeframes
Assume compound forw rev growth
Assume 2 scenarios on P/S multiple (halving & "thirding")
Assume dilution
Work out the final IRR

Green blocks means >15% IRR over that period

Tobi Lutke CEO of @Shopify on fighting off regression to the mean

Thank you @tobi, keep on doing the hardest thing on earth 😀

Fellow shareholder is very proud of what you and your team have done !

$SHOP 💎

https://twitter.com/tobi/status/1429074479880212493

$SHOP R&D/Rev vs $FB, $GOOG, $LSPD (1st chart)

$SHOP right up there. >20% of rev pre-COVID ✅
All down after COVID bec rev shooting up 😂
$LSPD v small

2nd chart shows the big size difference betw these players
➡️ $FB spends about 30x more than $SHOP in R&D
➡️ $GOOG is 40x

I started as a technology sell-side equity analyst at Societe Generale Securities in July 2000

A year later, the NASDAQ was 53% down
2 years later, it was 73% down

Those two years were a great education 😂 I started at the peak of the dotcom "bubble"

I was an electrical engineer who had worked in the tech sector for a few years.

I had my CFA level 1 & thought it seemed quite straightforward ;-)

I remember wondering why were people using Price to Sales multiples...

$AMZN

A friend asked me if I thought $AMZN 's rise over past few years was ridiculous

Spent some time looking at the fundamentals and I conclude that no, it ISNT ridiculous.

I think it's reasonable & seems to be tracking ok

Here's why

Short thread... Lets start with sales and go back 4 years

About 4 yrs ago
Rev $150B, P/S was 3.4x and price ~ $1,000

Today, rev has roughly tripled ($443B) and so has the price (~$3,300)

P/S (red line) is now 3.8
A bit higher than 4yrs ago but not ridiculously higher

$TWLO - Twilio chart storm - Aggressive grower

Sizeable co growing fast -> $2B at 60%
CPaaS expanding into cust experience mgmnt

Some say unprofitable & just buying growth

Let’s analyze some of the numbers

A short thread... FCF components

FCF running slightly negative

EBITDA & SBC mirror images (after SBC its ~EBITDA breakeven)
WCap & capex modest (WCap neg since ‘17)

“Cost” has been that # Shares has doubled in past 4y (acq played a role)

BUT

Rev is ~7X in that period ! Beast
Rev/sh >3X

Had a great chat with $DRIO Dario Health founder & CEO Erez Raphael last week

Started as B2C diabetes monitoring. Expanding portfolio & going B2B2C

I like that the CEO is passionate, knowledgeable & committed. Strong technology & financial background.

Lots of potential IMO They’re growing nicely, I think their product is good and they starting to make inroads into the employers and providers (B2B)

Technology side from Israel

Good team. Got enough cash onboard it would seem

Early days. Definitely one I’m going to be studying further.

Madness

$SNOW saying FY29 FCF target is $1.5B
Current MCap is $70B implying 8yr out MCap/FCF of 47 times

If FCF growth in FY29 is 30% (assume), then the share could go sideways for 8 yrs 😂

Current leading P/FCFs are 24-44x & FCF g are 11-50%

https://twitter.com/clueless_1337/status/1403161469877841925

Why on earth would they put out that (very low) FY29 target if the mkt cap is $70B today?

Are they crazy?

Unless they want the share price to go down?

Or I’m missing something ?

I listened to the presentation , he said FCF of 15% *plus*
So could be higher
But still

🤷‍♂️🤷‍♂️

$RBLX - Roblox Observations & thoughts

Been through the prospectus & IR materials

Bottom line - exciting, not cheap, worth studying further

Popular platform for games & interaction for kids but extending to wider age group & other use cases -> metaverse

A thread...

1/n 2
Disclaimer

I'm not an expert in the gaming industry & the metaverse

These are my general thoughts & observations after looking at $RBLX

I find it very interesting

FinTwit Summit 2021

So far, excellent. Big congrats to @SeifelCapital & @dhaval_kotecha. Slick & fantastic!

Speakers are excellent !

@FintwitSummit @morganhousel was great!
So much energy & wisdom

Loved the part about the simple & basic stuff that makes the difference in investing. That stuck out for me

If mkts closed for 5/10 yrs, and can only invest in 1 stock, it would be $BRK.A - Berkshire Hathaway. Diversification

Using AI for good

$NOW to acquire Element AI for an undisclosed sum. Article estimates $500m (~0.5% of ServiceNow’s $100b mkt cap)

Sounds good. Adding AI into $NOW ‘s workflows to assist enterprises to work better.

I have a lot of respect for the $NOW CEO, @BillRMcDermott

https://twitter.com/techcrunch/status/1333402807135854592

Element AI is a Canadian company founded and run by AI experts. The top skills are staying on at $NOW

They help enterprises to *use* AI to their advantage. NB for the future.

Just read the bios of the two top gents below. There are several more...

Downloaded & spent some time playing ROBLOX

Joined a ‘world’ called Brookhaven. Went to grocery store, then the bank. A girl came in and started shouting with a rifle, then bank alarm went off, lol Interesting, but I wasn’t sure what I was meant to do? Do you just walk around and try chat to other characters?

Likely not aimed at me. Suppose I need to experiment more.

But it didn’t ‘catch me’ in my first sitting

Tagging @Matt_Cochrane7 , @MadsC007

My thoughts on $TWLO 's Segment acq after listening to the conf call:

- Makes sense
- Solving something important - single view of customer
- Buying a leader in a related high growth space
- Raises TAM from $62-79B (27%)
- Accretive to $TWLO - paying lower mult

1/11 2/11

The CEOs of $TWLO (@jeffiel) & Segment (@reinpk) seem very good together.

Similar developer focus & vision

Could hear the excitement as they answered the conf call qs

All share deal makes sense to me

They're both young & talented so can do GREAT things from here