[bfz]

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.

[0xy]

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]

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

[chollida1]

> 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]

It warms my heart to think I could still be graded on language use so late in life. How would you describe it?

[thematrixturtle]

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".

[bfz]

I was thinking somewhere vaguely along the lines of easy credit as something like heroin addiction/withdrawal, that's where poison came from. I guess it is awkward

[enriquec]

I liked it. Also because the markets have become decoupled from reality/fundamentals/value - like a sandbox - at this point. Also liquidity and fungibility of the money supply/sand =)

[rightbyte]

> sandboxes or their contents are generally not eaten.

In my experience that is not a correct statement for the target demographics.

[jhugo]

> It's a bit awkward since "poisonous" refers to things you eat

poisonous (adj.)

[...]

2. (figuratively) Negative, harmful.

Synonym: toxic

[Izkata]

Not a synonym, at least by the nouns they're based on. Toxin is a parent category that encompasses both poisons and venoms.

Poisons are something you do to yourself (usually by ingestion), venoms are injected by the other organism (such as a snake bite).

[jhugo]

I quoted from Wiktionary, feel free to update the definition there (with sources) if you disagree. Note that the "Synonym: toxic" appears underneath the second (figurative) definition, and in my opinion is perfectly correct; in figurative use poisonous and toxic are used in the same way.

[jxramos]

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=D....

[usrn]

I usually think of "poison" to mean "dampening." It still doesn't quite work here though.

[jason-phillips]

> Or even "toxic sandbox".

The Caddyshack Baby Ruth scene seems apropos.

Fed Floaters. Everybody out! Pool's closed.

[IncRnd]

> 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".

All toxic substances are poisonous. A toxin is a poison produced by a living cell or organism.

Poisonous Sandbox was elegantly simple, pithy even, and quite appropriate.

[bluefinity]

While "toxin" refers specifically to a poison produced by a living cell or organism, "toxic" does not -- it's a synonym of poisonous, directly derived from the Latin word for "poisonous".

"Toxin" is a newer invention, derived from "toxic" by adding the biochemistry-related suffix "-in" to indicate toxic substances of biological origin.

[dillondoyle]

how about kid in hospital after tasting sand from sandbox poisoned with the Fed's rat droppings

[augstein]

Its a perfect metaphor for the kind of environment the FED created in the last few years for risk assets imo.

[triceratops]

s/FED/Fed/g it's not an acronym for anything. It's short for the Federal Reserve.

[tmaly]

I am partial to litter box

[jjoonathan]

I like this. Everyone tries to bury their shit in the litter box.

[ipaddr]

You are always being graded you just got a report card earlier in life.

[LouisContant]

> The coming tightening of hiring will also inevitably mean the tightening of infrastructure budgets.

What indicates a coming tightening of hiring soon?

[claytonjy]

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]

Meta too

[pm90]

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]

Stock doing well -> public company CEOs want to justify by showing greater growth -> hiring

[Adraghast]

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.

[riffraff]

> 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)

[drited]

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]

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.

[themusicgod1]

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