5 ms·

Worth recalling there are >5 rate hikes priced in for the remainder of the year, and that the problem with CloudFlare isn't just the speculation, but for their

by bfz 4y ago

Worth recalling there are >5 rate hikes priced in for the remainder of the year, and that the problem with CloudFlare isn't just the speculation, but for their legitimate business, the credit fuelling many of their customers, which are significantly concentrated in the tech sector. The coming tightening of hiring will also inevitably mean the tightening of infrastructure budgets. What built CloudFlare's excellent sales pipeline can just as easily obliterate it, but in any case will certainly leave at least a major dent. It's probably a great time to be getting into finops, and I don't think CloudFlare's fair value is anywhere remotely near $18bn. I think we'll discover before the end of this year just how many of the tech darlings were largely side effects of the poisonous sandbox constructed by the US fed.

LouisContant 4y ago
> The coming tightening of hiring will also inevitably mean the tightening of infrastructure budgets. What indicates a coming tightening of hiring soon?
- claytonjy 4y ago
  Seems notable that just today Uber's CEO sent a letter to everyone that said, among other things, that hiring is tightening. Just one firm, but a big well-known one.
  - no_wizard 4y ago
    Meta too
- Adraghast 4y ago
  The purpose of interest rate hikes is to dampen demand. The less demand there is for goods and services, the less need there is for workers to provide them.
- pm90 4y ago
  Stock doing poorly -> public company CEOs want to please wall street by showing greater revenue -> layoff (employees are largest cost center for tech companies)
  - theturtletalks 4y ago
    Stock doing well -> public company CEOs want to justify by showing greater growth -> hiring
chollida1 4y ago
> I think we'll discover before the end of this year just how many of the tech darlings were largely side effects of the poisonous sandbox constructed by the US fed ?? Poisonous sandbox? Is this an awkward way of referring to money printing? Or the low interest rate environment?
- bfz 4y ago
  It warms my heart to think I could still be graded on language use so late in life. How would you describe it?
  - tmaly 4y ago
    I am partial to litter box
    - jjoonathan 4y ago
      I like this. Everyone tries to bury their shit in the litter box.
  - thematrixturtle 4y ago
    It's a bit awkward since "poisonous" usually refers to things you eat, and sandboxes or their contents are generally not eaten. If you want to continue the sandbox metaphor, which I do like, "playing in the Fed's sandbox until the bottom fell out" might work. Or even "toxic sandbox".
    - jason-phillips 4y ago
      > Or even "toxic sandbox". The Caddyshack Baby Ruth scene seems apropos. Fed Floaters. Everybody out! Pool's closed.
    - jxramos 4y ago
      I think it works, toxins can transmit into the body not just through the ingestion route but also skin absorption among many other routes. So if there's toxins in the sand of the kind the skin is vulnerable to then that sandbox would be poisonous to the occupants. https://www.cdc.gov/niosh/topics/skin/default.html#:~:text=Dermal%20absorption%20happens%20when%20a,include%20pesticides%20and%20organic%20solvents https://www.cdc.gov/niosh/topics/skin/default.html#:~:text=D....
0xy 4y ago
Tightening of infrastructure budgets isn't often easy, you need to invest weeks of engineering time into a mere 6 figure yearly reduction in infra costs. Aside from that, Cloudflare is growing revenue not just overall but also on a per-customer basis, due to the expansion of products. Once Cloudflare releases products that allow it to more directly compete with AWS, it'll be repriced by investors. They've already stated that this is their goal. They're missing a compute product and a real database or KV store solution to be at the bare minimum. I think we'll see both, and at least one will happen in the near future. Cutting infra costs is not easy, especially when the costs of lapsing security spend are so high (how much did Equifax lose on reputational damage + cleanup work?). ($NET shareholder)
- weatherlite 4y ago
  They seem like an alright business, I'd wait for it to reach closer to IPO price before buying in.
drited 4y ago
Are you saying 18bn is way too high or way too low when you say ' lI don't think CloudFlare's fair value is anywhere remotely near $18bn?' I know it's down a lot but I'm asking because it started from such a loft valuation I have no opinion on NET but a lot of the cloud bubble stocks of the last few years needed to come down by 95 percent IMO to get closer to intrinsic value. To do that they'd first drop 90 percent, then drop another 50 percent from that point. Hence I don't know which you meant.
- bfz 4y ago
  Some more respectable commentators suggest the current environment is the start of a second tech bust, and although that seems sensational, it might be fair given current trends of shrinking credit, de-globalization, explosive inflation and rapidly collapsing discretionary spending seen at present. A reasonable starting point might be where it was prior to Covid QE and rate reductions (-61%), add one company-specific shock due to missed growth expectations (-30%), maybe +20% for real growth experienced over Covid in the meantime, and that already leaves us with $6bn, before accounting for the effect of the fed beginning to unwind their balance sheet (which starts in June, initially at around 1% per month) Incrementally buying at $18-$25 would definitely feel tempting in that scenario, assuming the fed delivered its claimed targets, and only with the understanding the IPO price should not be considered a floor. This is all before considering the reality their product isn't much more than a commoditized fly on the windshield of bigger vendors, and it's easily possible to imagine a Lightsail-like competitor appearing in the meantime.
riffraff 4y ago
> The coming tightening of hiring will also inevitably mean the tightening of infrastructure budgets. But cloudflare is also pretty cheap for many things, so that may bring in some more money from people downsizing from something like akamai, could it not? (I'm no expert just speculating)
themusicgod1 4y ago
CloudFlare is a poisonous sandbox constructed for the benefit of the US federal government. That's what made them 'valuable', that is their 'value'

by bfz 4y ago

LouisContant 4y ago

> The coming tightening of hiring will also inevitably mean the tightening of infrastructure budgets. What indicates a coming tightening of hiring soon?

claytonjy 4y ago
Seems notable that just today Uber's CEO sent a letter to everyone that said, among other things, that hiring is tightening. Just one firm, but a big well-known one.
- no_wizard 4y ago
  Meta too
Adraghast 4y ago
The purpose of interest rate hikes is to dampen demand. The less demand there is for goods and services, the less need there is for workers to provide them.
pm90 4y ago
Stock doing poorly -> public company CEOs want to please wall street by showing greater revenue -> layoff (employees are largest cost center for tech companies)
- theturtletalks 4y ago
  Stock doing well -> public company CEOs want to justify by showing greater growth -> hiring

chollida1 4y ago

> I think we'll discover before the end of this year just how many of the tech darlings were largely side effects of the poisonous sandbox constructed by the US fed ?? Poisonous sandbox? Is this an awkward way of referring to money printing? Or the low interest rate environment?

bfz 4y ago
It warms my heart to think I could still be graded on language use so late in life. How would you describe it?
- tmaly 4y ago
  I am partial to litter box
  - jjoonathan 4y ago
    I like this. Everyone tries to bury their shit in the litter box.
- thematrixturtle 4y ago
  It's a bit awkward since "poisonous" usually refers to things you eat, and sandboxes or their contents are generally not eaten. If you want to continue the sandbox metaphor, which I do like, "playing in the Fed's sandbox until the bottom fell out" might work. Or even "toxic sandbox".
  - jason-phillips 4y ago
    > Or even "toxic sandbox". The Caddyshack Baby Ruth scene seems apropos. Fed Floaters. Everybody out! Pool's closed.
  - jxramos 4y ago
    I think it works, toxins can transmit into the body not just through the ingestion route but also skin absorption among many other routes. So if there's toxins in the sand of the kind the skin is vulnerable to then that sandbox would be poisonous to the occupants. https://www.cdc.gov/niosh/topics/skin/default.html#:~:text=Dermal%20absorption%20happens%20when%20a,include%20pesticides%20and%20organic%20solvents https://www.cdc.gov/niosh/topics/skin/default.html#:~:text=D....

0xy 4y ago

Tightening of infrastructure budgets isn't often easy, you need to invest weeks of engineering time into a mere 6 figure yearly reduction in infra costs. Aside from that, Cloudflare is growing revenue not just overall but also on a per-customer basis, due to the expansion of products. Once Cloudflare releases products that allow it to more directly compete with AWS, it'll be repriced by investors. They've already stated that this is their goal. They're missing a compute product and a real database or KV store solution to be at the bare minimum. I think we'll see both, and at least one will happen in the near future. Cutting infra costs is not easy, especially when the costs of lapsing security spend are so high (how much did Equifax lose on reputational damage + cleanup work?). ($NET shareholder)

weatherlite 4y ago
They seem like an alright business, I'd wait for it to reach closer to IPO price before buying in.

drited 4y ago

Are you saying 18bn is way too high or way too low when you say ' lI don't think CloudFlare's fair value is anywhere remotely near $18bn?' I know it's down a lot but I'm asking because it started from such a loft valuation I have no opinion on NET but a lot of the cloud bubble stocks of the last few years needed to come down by 95 percent IMO to get closer to intrinsic value. To do that they'd first drop 90 percent, then drop another 50 percent from that point. Hence I don't know which you meant.

bfz 4y ago
Some more respectable commentators suggest the current environment is the start of a second tech bust, and although that seems sensational, it might be fair given current trends of shrinking credit, de-globalization, explosive inflation and rapidly collapsing discretionary spending seen at present. A reasonable starting point might be where it was prior to Covid QE and rate reductions (-61%), add one company-specific shock due to missed growth expectations (-30%), maybe +20% for real growth experienced over Covid in the meantime, and that already leaves us with $6bn, before accounting for the effect of the fed beginning to unwind their balance sheet (which starts in June, initially at around 1% per month) Incrementally buying at $18-$25 would definitely feel tempting in that scenario, assuming the fed delivered its claimed targets, and only with the understanding the IPO price should not be considered a floor. This is all before considering the reality their product isn't much more than a commoditized fly on the windshield of bigger vendors, and it's easily possible to imagine a Lightsail-like competitor appearing in the meantime.

riffraff 4y ago

> The coming tightening of hiring will also inevitably mean the tightening of infrastructure budgets. But cloudflare is also pretty cheap for many things, so that may bring in some more money from people downsizing from something like akamai, could it not? (I'm no expert just speculating)

themusicgod1 4y ago

CloudFlare is a poisonous sandbox constructed for the benefit of the US federal government. That's what made them 'valuable', that is their 'value'