Image Source: Pixabay

Introduction

This article highlights the focus each of the 8 constituents in our model Pure-Play Cloud SaaS Computing Stocks Portfolio, their market capitalization, how each performed week-ending November 7th, in descending order, and in October, the catalyst(s) contributing to the change in their stock prices last week, and a chart showing the performance of the portfolio YTD.

What is Cloud Computing?

Cloud computing is the technique of processing, storing, and managing data on a network of remote computers hosted on the internet by cloud service providers rather than on a personal computer or local server using only as much compute power and storage as needed to meet demand. This theoretically allows for cheaper and faster computing because it eliminates the need to purchase, install, and maintain servers.

McKinsey estimates that cloud adoption could generate $3 trillion in global value by 2030 derived from reduced operational costs and digital risk, new revenue from innovation-driven growth and accelerated product development and hyper-scalability and from emerging technologies, including new cloud-based business models and integration with technologies like 5G, blockchain, and quantum computing. (Source)

What is SaaS?

SaaS, also known as cloud application services, makes software available to users over the internet, usually for a monthly subscription fee. They are typically ready-to-use and are run from a users’ web browser which allow businesses to skip any additional downloads or application installations. SaaS accounts for 38.5% of cloud computing revenue. (Source) For more insightful information you are encouraged to read Cloud Computing 101.

Our Model Pure-Play Cloud SaaS Computing Stocks Portfolio

1.  Datadog (DDOG): UP 17.5% w/e November 7th; UP 14.3% in October
   • Focus: operates an observability and security platform for cloud applications
   • Market Capitalization: $69B
   • Performance Catalyst(s): surged due to 
     • a strong Q3 earnings beat, bullish AI momentum, and upgraded guidance.
2. Snowflake (SNOW): DOWN 4.4% w/e November 7th; UP 21.9% in October
   • Focus: provides a cloud-based data platform that enables customers to consolidate data into a single source, build data applications, and share data and data products
   • Market Capitalization: $92B
   • Performance Catalyst(s): fell due to 
     • concerns about overextended valuations (it has a forward P/E ratio of 226x) and profit-taking.
3. Workday (WDAY): DOWN 6.1% w/e November 7th; DOWN 0.3% in October
   • Focus: provides enterprise cloud applications to help its customers manage their business and operations
   • Market Capitalization: $61B
   • Performance Catalyst(s): fell due to
     • weak billings growth (a leading indicator of future revenue) which raised red flags about customer acquisition and retention, and
     • investor concerns about the absence of a near-term catalyst (e.g., product launch, AI integration update), competitive pressure and slowing enterprise demand.
4. ServiceNow (NOW): DOWN 6.2% w/e November 7th; DOWN 0.1% in October
   • Focus: provides end to-end intelligent workflow automation platform solutions for digital businesses
   • Market Capitalization: $180B
   • Performance Catalyst(s): ​​​​​​​fell due to
     • valuation concerns (forward P/E ratio of 50x), and
     • lingering macroeconomic pressures despite strong fundamentals.
5. ​​​​​​​Zoom Communications (ZM): DOWN 6.4% w/e November 7th; UP 5.7% in October
   • ​​​​​​​Focus: primarily enables users to share messages, images, files, and content in desktop, laptop, tablet, and mobile devices; and a cloud phone system
   • Market Capitalization: $25B
   • Performance Catalyst(s): ​​​​​​​fell due to 
     • investor concerns about monetization and competitive differentiation, declining revenue growth an elevated forward P/E relative to peers with stronger margin profiles and
     • competitive pressure from Microsoft Teams and Google Meet, which are deeply embedded in enterprise ecosystems.
6. Atlassian (TEAM): DOWN 6.8% w/e November 7th; UP 6.1% in October
   • Focus: designs, develops, licenses, and maintains various software products
   • Market Capitalization: $42B
   • Performance Catalyst(s): fell due to
     • ​​​​​​​slowing Q3 growth and cautious guidance, citing macroeconomic uncertainty,
     • execution risk tied to  ending sales and support for its Data Center product and integrating two large acquisitions, which created visibility issues around long-term growth, and
     • investor concerns about the durability of its growth profile amid platform transitions.
7. Salesforce (CRM): DOWN 7.9% w/e November 7th; UP 28.1% in October
   • Focus: provides customer relationship management (CRM) technology that connects companies and customers together worldwide
   • Market Capitalization: $239B
   • Performance Catalyst(s): fell due to
     • the Royal Bank of Canada and Canaccord Genuity cutting their price targets, citing sector performance concerns and CRM’s competitive positioning, respectively.
8. HubSpot (HUBS): DOWN 19.0% w/e November 7th; UP 5.2% in October
   • ​​​​​​​Focus: offers a toolset for marketing automation and email, social media, SEO, and reporting and analytics; a service software to help businesses manage, respond, and connect with customers; and enables businesses to create new and edit existing web content
   • Market Capitalization: $29B
   • Performance Catalyst(s): fell due to
     • a lofty valuation, with a forward P/E of 40x, raising concerns amid broader tech derating,
     • a cut by JPMorgan cut of its price target, citing valuation risk despite maintaining an “overweight” rating and
     • a reduced insider ownership which added to investor caution

Chart Of Portfolio Performance YTD​​​​​​​

(Click on image to enlarge)

Source of Chart: PortfoliosLab.com

Summary ​​​​​​​

The portfolio was DOWN 7.2% w/e November 7th and was UP 5.2% in October.

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