An Introduction
The sell-off in cloud computing SaaS companies in the last 2 months (DOWN 6%, on average, in April and DOWN more than 15% in May) may come as a surprise, given the overall strength of the semiconductor industry – a (CAGR) of 37.3% from 2023 to 2030) and, according to Fortune Business Insights, the expected CAGR of 18.4% between now and 2032 in the global cloud computing SaaS market and the expected continued major increases in the average rental rate of data centers (cloud computing allows organizations to rent rather than buy IT) which rose 14.5% in 2022 and 18.6% in 2023 last year (source). It really shouldn’t be, however, given the extent to which many top software companies are experiencing a combination of growth and valuation concerns.
What is SaaS?
A pure play company concentrates all its efforts on a single line of business, and in this context, it’s cloud computing. Notably, those companies that are highly diversified, i.e., do not generate at least 50% of their sales from cloud computing products and services, are excluded from our new Pure-Play Cloud Computing SaaS Stocks Portfolio of 11 companies which is replacing our Cloud Computing SaaS Stocks Portfolio which contained some nonpure play constituents.
The munKNEE Pure-Play Cloud Computing SaaS Stocks Portfolio
Below are:
- Company Description: offers video, voice, chat, and content sharing through computers and also offers a cloud phone system
- Market Capitalization: $19B
- PEG Ratio Valuation: 3.45 HIGH
- Momentum Direction and Level: UP @ 46 RSI
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Most Recent News, Analyses, and Commentary:
- Zoom Video Reports Q1 Financial Results
- Company Description: provides a cloud-based customer relationship management (CRM) platform for businesses
- Market Capitalization: $31B
- PEG Ratio Valuation: 3.18 HIGH
- Momentum Direction and Level: UP @ 48 RSI
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Most Recent News, Analyses, and Commentary:
- HubSpot Reports Q1 2024 Results
- Company Description: provides end to-end intelligent workflow automation platform solutions for digital businesses
- Market Capitalization: $135B
- PEG Ratio Valuation: 1.65 LOW
- Momentum Direction and Level: UP @ 35 RSI
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Most Recent News, Analyses, and Commentary:
- Brokers Suggest Investing in ServiceNow: Read This Before Placing a Bet
- Company Description: offers products and services to manage and secure customer identities and a suite of security capabilities that protects customers from different types of malicious traffic
- Market Capitalization: $15B
- PEG Ratio Valuation: 1.37 LOW
- Momentum Direction and Level: DOWN @ 26 RSI
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Most Recent News, Analyses, and Commentary:
- Okta Announces First Quarter Fiscal Year 2025 Financial Results
- Company Description: designs, develops, licenses, and maintains various software products
- Market Capitalization: $41B
- PEG Ratio Valuation: 0.93 VERY LOW
- Momentum Direction and Level: DOWN @ 28 RSI
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Most Recent News, Analyses, and Commentary:
- Firing on All Cylinders: Atlassian Q1 Earnings Lead the Way
- Company Description: provides enterprise cloud applications to help its customers manage their business and operations.
- Market Capitalization: $56B
- PEG Ratio Valuation: 1.06 LOW
- Momentum Direction and Level: DOWN @ 24
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Most Recent News, Analyses, and Commentary:
- Workday Stock Plunges Amid Soft Subscription Revenue Guidance
- Company Description: offers Data Cloud which enables customers to consolidate data into a single source to drive meaningful business insights, build data-driven applications, and share data and data products.
- Market Capitalization: $46B
- PEG Ratio Valuation: 8.14 VERY HIGH
- Momentum Direction and Level: DOWN @ 28 RSI
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Most Recent News, Analyses, and Commentary:
- Snowflake Misses Earnings and Operating Margin Guidance; Shares Drop
- Company Description: a provider of customer relationship management (CRM) technology
- Market Capitalization: $225B
- PEG Ratio Valuation: 1.23 LOW
- Momentum Direction and Level: UP @ 31 RSI
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Most Recent News, Analyses, and Commentary:
- Salesforce Stock Sinks, Dragging the Dow and These ETFs With It
- Company Description: operates an observability and security platform for cloud applications
- Market Capitalization: $37B
- PEG Ratio Valuation: 4.05 HIGH
- Momentum Direction and Level: DOWN @ 32 RSI
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Most Recent News, Analyses, and Commentary:
- Datadog Stock Sinks Despite Earnings Beat as Guidance Fails to Impress
- Company Description: provides an integrated cloud-based security solution to secure a range of combination of platforms and offers website and application performance solutions
- Market Capitalization: $23B
- PEG Ratio Valuation: 1.64 LOW
- Momentum Direction and Level: DOWN @ 30 RSI
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Most Recent News, Analyses, and Commentary:
- Cloudflare Stock Plunges as Sales Outlook Disappoints—Monitor This Key Price Level
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- Company Description: provides general-purpose database platforms worldwide and offers professional services comprising consulting and training
- Market Capitalization: $17B
- PEG Ratio Valuation: 7.03 VERY HIGH
- Momentum Direction and Level: DOWN @ 14 RSI
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Most Recent News, Analyses, and Commentary:
- MongoDB Stock Plunges On Weak Guidance—Watch This Key Chart Level
Although SaaS companies benefit from recurring revenue streams, their long-term growth depends on adding new customers and expanding spending from existing customers. Innovation is a key driver of customer retention and expansion, but so is the economic cycle.The customers of these SaaS companies traverse the whole economy, making SaaS companies particularly vulnerable to the ripple effects of a broader slowdown. Guidance by Salesforce and other companies suggests that customers are maintaining tight spending and are mindful of their costs — which is a theme worth monitoring for the health of the broader market rally.More By This Author:Small Cap AI Stocks Portfolio Jumped 18% In May
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