Seeking Alpha

Cloud software stocks rally after NetSuite results, Pac Crest note

  • Cloud ERP/HR/e-commerce software vendor NetSuite beat Q1 estimates, reported strong deferred revenue growth, and hiked its 2014 top-line guidance.
  • Meanwhile, Pac Crest is reiterating an Outperform for Workday (WDAY +8.8% - competes to an extent with NetSuite) and Splunk (SPLK +5.6%), and thinks the companies, along with Neutral-rated Salesforce (CRM +3.6%), can attract growth investors at current levels. The firm adds the companies are trading below their average price/sales multiples for the last 3 years.
  • Workday is down 38%, and Splunk 47%, from their respective 52-week highs. But the companies still both go for ~12x FY16E (ends Jan. '16) sales. Price/billings multiples are a bit lower, but still steep.
  • Several other enterprise cloud software vendors are joining NetSuite, Workday, and Salesforce in rallying on an up day for the Nasdaq. NOW +7.7%. CSOD +5.6%. ULTI +4%. DWRE (a NetSuite rival) +3.2%.
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Comments (2)
  • absinop
    , contributor
    Comments (42) | Send Message
     
    As you navigate the "clouds", do NOT expect smooth going. A bumpy ride is in order, esp when the space gets crowded. BUT there are rays of sunshine for the smart investor who can differentiate between the legitimate meeting-market need companies from the me-too enterprises. GOOD LUCK.
    29 Apr 2014, 04:40 PM Reply Like
  • Momintn
    , contributor
    Comments (4802) | Send Message
     
    These bubble stocks are going to do the same thing gold has done. Hedge funds will hype it and then sell. Selling will compound more selling. You don't want to be here for the summer.
    1 May 2014, 12:50 PM Reply Like
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