Cloudflare, MongoDB shares slump in broad cloud-management retreat

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• Cloudflare (NYSE:NET) and MongoDB (NASDAQ:MDB) shares both posted double-digit percentage declines Thursday as companies in the security and data-management sectors retreated following a pair of disappointing earnings reports and outlooks.
• As trading progressed, Cloudflare (NET) was down by more than 14% and MongoDB (MDB) slumped nearly 15% on higher than usual trading volume, but without any direct news involving either company.
• The cause of the declines appeared to be a case of guilt by association. Late Wednesday, data-warehousing company Snowflake (NYSE:SNOW) reported respectable fourth-quarter results, but gave a sales forecast that suggested its revenue growth is beginning to slow.
• Meanwhile, Okta (NASDAQ:OKTA) shares also fell almost 9% on negative reaction to the cloud-based cybersecurity company's latest results, which showed losses growing and sales climbing at slower rates than anticipated.
• Datadog (NASDAQ:DDOG) also had a rough go of it, falling almost 10% as it, too, got caught up in the losses spurred on by Snowflake (SNOW) and Okta (OKTA).

Comments

[Bogie 1]

Across the board. Even businesses admit they need to spend more but are all looking to save $$

[canyon]

@Bogie 1
For F500 type enterprises, spending money in these two areas is saving money. #bigpicture

[Bogie 1]

Folks let’s face it none of these companies, Snowflake included will ever grow into these PE’s of 100+ Revenues and earnings are all showing it. Even Palo Alto is way over priced. Competition is great but is limiting growth across the bi

[canyon]

@Bogie 1
You're very wrong. There will be winners. I don't have a crystal ball to name them now, but anyone who doesn't understand the trend (exponential, not geometric nor arithmetic) of data growth (IoT, 5g, AI, monetization) and IT security spend just has no clue of investing in the future of Enterprise IT.

[halba12]

@canyon yep but what valuation. they're all at high valuations even @ current prices. im not questioning their sales growth. Also there is competition in the long term.

[Nicholas Istvan Kiss, CFA]

Datadog also fallin in sympathy by 10% after more than stellar Q4 results and guidance tells me, that panic selling is sweeping through SaaS stocks again. I think sentiment is close to bottom as many indicators show extreme pessimism. This should be a good opportunity to use the remaining cash left (if there's any) to buy into this. These are companies with strong fundamentals changing how the way businesses work. They are merely affected by the war, have good pricing power, while Q4 results show still strong fundamental momentum. Furthermore in many cases valuations are also not a concern, beacause they converge to that of the general market in a few years.

[SkiTheGoodStuff]

I think it's time for the hyper-growth, "We can show a profit anytime we want" companies to do just that. Hopefully they can and maybe they can silence their new critics. It wasn't long ago we were criticizing CEOs for making their company's near-term bottom lines look good at the expense of their company's long term prospects. Perhaps somewhere in the middle is best.

[Meesher]

@SkiTheGoodStuff
NET and SNOW have very high chances of becoming monopolies in their respective industries. They already are the market leaders, but they have many competitors in their rear view mirror. Going for profitability now is just giving competition a chance to catch up.

They need to continue rapidly growing until network effects and switching costs become so high that their competition effectively dies.

[gutcheck]

@SkiTheGoodStuff easy they need to cut sbc to reasonable levels

[canyon]

Do you people have any idea what these companies do, how CIOs value their solutions, the value props they deliver, the substitute "options" competition offers?

I'm not saying they are great SPs now or horribly overvalued... but do you have any clue, and how they fit into a future where there's an explosion in (unstructured) data and every F500 has all of its production workloads in the cloud (currently not a single one of the F500 has it)? Pretty sure NET and MDB will be among the leaders of their respective niches.

[chmarpio]

Not much sens and I am happily selling fat puts on most of them. Most companies needs strong IT protection and "cannot afford" to save on IT infrastructure. On the other hand all these logistics and materials and labour inflation is and will mostly hurt value companies. Margin deteriorates and sale drops while tech companies carries almost zero exposure to "hard stuff". Annual results will show it in one year and after. Most things like that are not clear in 2 months horizon. Wait and see how value will copy of recent tech burst.

[Peterso21]

Net great company but their stock gives me a heart attack

[ritholtz47]

@Peterso21
What are the valuations we are looking now and good entry points to watch out. I sold some during results pump. Want to buy them back.

[Chris Lau]

They all have hyper- growth revenue. Great company. Bad stocks.

Not on my hypergrowth stock lost per blog post.

[ritholtz47]

@Chris Lau
What is your blog url?

[Chris Lau]

@ritholtz47
seekingalpha.com/...

[brainleft]

fine, make me add more.

[jeffk100]

every one of these overpriced bastards need to be cut in half yet again!

[brandonletsgo]

These kind of fast-food type Tech companies are going to be the first wave of casualties of QE reduction & higher interest rates. It will also affect the Public Cloud companies a great deal, although their revenue base is much broader than start-ups spending their OPEX budgets

[Purewater]

We bottom when NET trades at 10x sales or $35/share. Only 66% to go...

[Gregorian]

@Purewater c3.AI does approximately trade there already. They did not fall today as they may have fallen enough already.

[Bnh91]

@Gregorian IF NET ends up trading at 10x revenues you can expect c3.AI to trade at ~2-3x revenues and pretty much any growth stock you own to trade significantly lower. NET multiple isn't just going to crash to 10x unless there is a complete wipeout in the market or the narrative completely breaks.

[AI STONKS]

@Bnh91 true, but we can’t rule out further crashing with this market. Ugly today.