Many investors rewarded "pandemic winners", assuming a new growth baseline had been set. But Covid's impact was not one-dimensional, & 3 nuanced growth archetypes emerged after the system shock.
I guess the core of the problem is thinking that growth rates have significant auto-correlation. The reality is that the more you grow, the harder it is to grow, for obvious reasons. I think that many of used heuristics like BVP's growth endurance to model that maybe have given problems to investors.
The core problem notheless is that if you run some DCFs to many SaaS Cos (not those consumerCos), a 50% decline is an easy output to a 3% increase in discount rates (a mix in RFR and ERP). So I guess for many of these SaaSCos, time will tell that the market was roughly right about the growth trajectory, but the duration made the path very bumpy. DDOG 45% drawdown since Nov 1st isn't weird in the context of higher discount rates, in fact, it's just about what a conceptual model would predict.
Important to be aware that in many cases in SaaS there wasn't big misforecasts. This go the other way, a stock down 50% can have near to no bad news priced in, so also it's important to be aware.
You may like this essay: https://longform.asmartbear.com/docs/exponential-growth/
I guess the core of the problem is thinking that growth rates have significant auto-correlation. The reality is that the more you grow, the harder it is to grow, for obvious reasons. I think that many of used heuristics like BVP's growth endurance to model that maybe have given problems to investors.
The core problem notheless is that if you run some DCFs to many SaaS Cos (not those consumerCos), a 50% decline is an easy output to a 3% increase in discount rates (a mix in RFR and ERP). So I guess for many of these SaaSCos, time will tell that the market was roughly right about the growth trajectory, but the duration made the path very bumpy. DDOG 45% drawdown since Nov 1st isn't weird in the context of higher discount rates, in fact, it's just about what a conceptual model would predict.
Important to be aware that in many cases in SaaS there wasn't big misforecasts. This go the other way, a stock down 50% can have near to no bad news priced in, so also it's important to be aware.
Keep up with the good work!