These companies are just so volatile, and so expensive. I mean as we can see this morning, the stock is down 10%.
As a growth investor, I'm not immune to 10% dips, but typically that would be around earnings time if they report a lackluster quarter. 10% random drop just due to traders selling a brutally overvalued stock isn't anything I want a part of, even if I may be sacrificing some short term gains.
BABY and VERY are ridiculously expensive right now. Baby is trading at 360 times earnings, while VERY is 650. So, you're paying $3.60 and $6.00 for every penny the companies make in revenue respectively.
We need some insane levels of growth from these companies to ever be able to justify those valuations.
Moving forward, if you think of these companies like presenting report cards every quarter, anything less than an A in top line growth is likely to cause prices to collapse. There is zero room for error here. This reminds me exactly of peak cannabis valuations, and they're dangerous.
Both companies are promising. I'm not knocking the companies themselves. However, we really have to consider the price we are paying. And right now, current valuations are presenting some pretty extensive risk.