r/investing
NTSK - My Michael Burry stock
Bullish on NTSK due to cheap 2.7x EV/ARR valuation, 29% ARR growth, and nearing FCF inflection, despite near-term GAAP losses.
- Extremely cheap valuation at 2.7x EV/ARR for a cybersecurity company growing ARR by 29%.
- Approaching a free cash flow (FCF) inflection point, which typically leads to multiple re-rating in the cyber sector.
- Strategic AI integration with Anthropic's Project Glasswing and Claude Compliance API provides a strong data security moat.
- Ugly Q1 FCF, ongoing GAAP losses, and high stock-based compensation (SBC).
- Real risks of share dilution, insider selling, and brutal market competition.
- H2 revenue acceleration is still unproven and needs to materialize.
Either this going to be the next big repricing in cyber or I’m about to learn an expensive lesson.
Netskope IPO’d, ran to 28, and is now around 8 and change. Market cap is roughly $3.4B, but they have about $1.1B of cash, so EV is roughly $2.3B.
For that, you’re buying:
$845M ARR
29% ARR growth
$201.6M quarterly revenue, up 28%
77% non-GAAP gross margin
30+ Fortune 100 customers
60%+ new logo growth
FCF last year was positive and this year guided
That’s like 2.7x EV/ARR for a cyber company still growing ARR 29%.
The market seems obsessed with ugly Q1 FCF, GAAP losses and SBC. Fair enough, but the bigger picture is that Netskope looks close to the FCF inflection point. We have seen this before in cyber: spend hard, land enterprise customers, expand the base, margins improve, FCF turns, and then the multiple re-rates.
The AI angle is not total fluff either. Netskope joined Anthropic’s Project Glasswing and already integrates with Claude Compliance API. It sits inline, sees enterprise traffic, controls policy and inspects data movement. If employees, copilots and agents start spraying data everywhere, that matters.
I hear losses are real, dilution is real, insiders have sold (a small amount), competition is brutal, and H2 acceleration still needs to happen, but that’s why it’s cheap.
The market is pricing this like broken SaaS. I think it’s a cyber platform near FCF inflection.
Current Position: 3,500 shares and adding, plus 50x Jan 2027 $20 calls
What am I missing?
"Netskope IPO’d, ran to 28"
Priced at $19, opened next day at $23, went to about $28 on the first day or so and has pretty much straight lined lower since to $8 in less than a year.
It's cheap but the problem becomes you could have said that in the low teens. How long does it stay cheap and are you underplaying the reasons why it is? Never heard of the company but that is a particularly lousy chart since the company went public - the opinion of the market on this company doing all the things you hope for (and well) certainly doesn't seem positive.
IMO, this is the kind of thing that is a small % of the portfolio that leaves you room for flexibility if a turnaround takes much more time than expected or doesn't happen. If you start to see the turnaround, you will still have time to add. Too many people want to be contrarian and think that they have found value gold (the Burry comparison....) and turn something like this into a very large position then quickly get frustrated if it doesn't act as hoped immediately.
The Burry title and what sounds like the position size are concerning, but good luck and hope it does well for you.
The thing I’d be most worried about isn’t valuation. It’s whether the market is correctly pricing in the possibility that growth slows before the FCF story fully plays out.
If I'm not reading wrong, they are buried in debt. The prospect of rates raising or the AI bubble deflating does not help their case.
You'll get diluted before anything else. I wouldn't get near it unless I see the debt to assets ratio below 70%.
I hear you, but 700 mil debt, 1.1 billion in cash and cash alternatives?
What is new logo growth?
SaaS term for new customer, as new revenue can come from cross selling, if they’re not adding new customers future growth could slow as people are go with alternatives and upselling/cross selling will slow as customers take on more of their entire offering
Thanks