RE:RE:Get out while you still canHappy to clarify!
For anyone that is hoping and praying that the valuation will go back to $1bn, the current revenue and pace of increase is horrendously slow. Let's say 10x sales for a fast growing software company (50% plus per year let's say) means they need to hit $100mm in rev and still have a decent trajectory for growth.
At the current pace - eking out tiny revenue gains, struggling to get to and exceed $50mm per year it is highly unlikely that the stock will go anywhere. Hence the "this turd is going nowhere". Not to mention that they are growing quite a bit more slowly than the above mentioned rate. For companies with rounding error revenue its not uncommon to see 100%+ revenue growth in a year if the product is in high demand.
Other online learning stocks have seen some waning consumer demand, post covid, but their business segments have started to show some legs. Thinkific - a platform for individuals to host content - doesn't seem to be the kind of application that would lend itself to business sales as far as i can tell.
I hesitate to talk about cash flow drain because a lot of these companies manage to turn a break even cash flow, or close to it, buy using stock based comp. SO they could tread water for a long time in theory.
I'll respond point by point:
- i would understand why someone thought this might be a good investment
- $50mm is underhwleming if I was hoping for the valuation to improve. However it's especially underwhelmeing when looking at the pace of growth.
- Laying off sales people - snarky comment =)
- Not thinking about long term ramifications - my guess is they are doing this in response to investor pushback and hoping a break even will improve the valuation. If they had good growth prospects they likely wouldn't be laying off. INstead they would just be doing regular performance management.
- Revenue growth is so slow, that either each deal is worth peanuts or very few deals are being signed
- $10 - random number for emphasis
- Yes!
- My sentence means that if their offering were really worthy of a higher valuation then their sales would be growing at a much faster clip. For a SaaS business in year 1 or two of revenue generation I could abide lower revenue, but in year 3 and beyond if the product was going to catch on in any significant way it would be reflected in "hyper growth" YoY sales numbers.
Don't get too wrapped up in valuation. Either you buy into the story or you have to buy the company. If growth isn't there you have to buy the company, and unfortunately a $50MM revenue company with breakeven prospects is worth very little. If they turn $5mm in profit and a 20% growth rate they might be worth $100mm. I would suggest that if you're hoping for some kind of "pop" then this company just doesn't have the story to make that happen and now we're left only with valuation and that can be a brutal equation for comapnies that don't turn a profit.
Hope that clarifies! A bit of a ramble but hey...