SaaS Stocks Up Nearly 15% Since July

After posting a dismal performance in the first half of 2008, software as a service (SaaS) stocks are rallying. In fact, MSPmentor's SaaS 20 Stock Index is up 14.7 percent since July 11.

Best of all, Wall Street hype isn't driving the recent SaaS rally. Instead, rapid revenue growth and solid earnings from multiple SaaS companies have restored investor faith in this emerging technology sector.

For the week ended August 8, several SaaS-centric companies -- including Athenahealth Inc. (ATHN), SuccessFactors Inc. (SFSF), Kenexa Corp. (KNXA), Concur Technologies (CNQR), Taleo Corp. (TLEO) and Omniture Inc. saw their stocks rise sharply.

Still, it will be difficult for the SaaS 20 Stock Index to fully overcome some of its early year declines. For its year-to-date, the index is still down 7.84%, MSPmentor reports.

I'm trying my best not to hype SaaS. It's early in the SaaS game, and market gyrations will surely continue. But recent financial results show that the SaaS market is heading in the right direction.

Disclosure: None

Comments

[Ranjit Nayak:]

It is very unclear as to how Wall street and investment professionals are classifying SaaS companies. The MSPMentor list includes Amazon, Dell and Ingram Micro. The natural questions are how much of Amazon's retail business is SaaS; what portion of Dell's revenue comes from software ; and what fraction of Ingram's revenue coming from the managed services?

A follow on question is- when will Wall street classify Fedex Kinko's as a SaaS offering? After all Kinko's provides a printing service online. When will Wall street group SaaS companies with business process outsourcing companies which deliver services using online software.

Ranjit Nayak

2008 Aug 12 10:29 PM