Chart of the Week: High Expectations for SaaS Stocks

January 8, 2021

Technology earnings chart

Software-as-a-Service (SaaS) stocks in the US had an extraordinary 2020 amid the global Covid-19 pandemic. Why was that the case?

Simply put, their services became even more necessary during lockdowns and as the work-from-home trend became the norm.

Names such as Zoom Video Communications (NASDAQ: ZM) and recently-listed Snowflake Inc (NYSE: SNOW) have seen revenue expectations from analysts soar (see below).

Perhaps it’s par for the course that high growth goes hand-in-hand with these kinds of stocks going into the latest earnings season.

For example, in its latest earnings release, Zoom upgraded its fourth-quarter fiscal 2021 revenue guidance to US$806-811 million.

Clearly, Zoom has been an exception given how critical its video-conferencing services has been. But what about the other SaaS stocks that have been darlings of investors of 2020?

The likes of Shopify Inc (NYSE: SHOP) in e-commerce, Crowdstrike Holdings Inc (NASDAQ: CRWD) in cybersecurity and DocuSign Inc (NASDAQ: DOCU) in digital agreements have all benefitted.

Can they continue to meet, beat and raise the bar on elevated expectations from analysts? That’ll be a key question for investors as we head into earnings season.

SaaS stocks earnings

Source: @Beth_Kindig, Twitter

Disclaimer: ProsperUs Head of Content Tim Phillips owns shares of Zoom Video Communications Inc, Shopify Inc, Crowdstrike Holdings Inc and DocuSign Inc.

Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.

He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.

In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.

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