We’ve been looking at SaaS closely for a while now. Let’s do a recap of the "Top 8 SaaS Stocks" that I am tracking. I also want to reiterate that I believe SaaS stocks are recession-proof.
The leader in on-demand customer relationship management, Salesforce.com (NYSE:CRM) is one of my "Top 8 SaaS Stocks." The company just announced excellent Q2 2008 results which beat analysts’ expectations. One of its most ambitious efforts is to use an incubator and a platform strategy to spawn a large number of SaaS startups on its platform. Read my interview series with former general manager and SVP René Bonvanie on this effort. I am very bullish on this strategy. Salesforce.com will be the first SaaS company to cross a billion dollars in annual revenue. The stock is expensive, so look out for buying opportunities due to macro issues or short-term misses. The fundamentals are excellent on this company.
Concur (NASDAQ:CNQR) has been chosen because, like several of its counterparts, it has delivered strong earnings for the past year. I just covered the company's earnings in a post last Thrusday. The company recently signed a partnership agreement with American Express (NYSE:AXP) in which Concur will promote the American Express corporate card exclusively and in turn American Express will promote Concur’s expense management software. The deal with American Express and the company’s excellent earnings have sent the stock soaring approximately 20%. I interviewed the company’s CEO, Steve Singh, last year. Again, the stock is expensive, and you need to wait for a buying opportunity.
Taleo (NASDAQ:TLEO) closed at $21.60 Thursday up from $18.74 pre-earnings. This leader in talent management had a record quarter with revenue growth from the U.S. as well as international markets. The company signed a deal to acquire Vurv, which further strengthened its market position. Earnings coverage can be found here and an interview series with CEO Michael Gregoire can be found here.
A strong management team, flawless execution, and healthy sector growth are all good indicators for a long-term 'hold.'
RightNow (NASDAQ:RNOW) also declared Q2 2008 earnings that were above expectations. The stock closed at $16.54 on Thursday, up over $2.00 from its pre-earnings price. Earnings coverage can be found here. This past week’s Entrepreneur Case Studies series, which features RightNow founder and CEO Greg Gianforte, can be found here.
I love the company’s Montana roots - an enviable cost structure position leveraging a stable workforce.
Omniture, (OMTR) unlike the other SaaS companies, reported disappointing earnings, which the company largely attributed to acquisition-related costs. A more detailed report on its earnings can be found here. Despite its recent performance, the company is still one of my Top Picks because its core value proposition is still sound. It’s also a company that has shown signs of wanting to do a roll-up in the web analytics space, which is something that I like.
My discussion of Citrix’s Q2 earnings (NASDAQ:CTXS) can be found here. The stock had declined about 14% in the last six months, rising only after the earnings release, making it a good SaaS buy. As I mentioned earlier in the week, I still think it is a good target for acquisition by SAP (NYSE:SAP) or even Oracle (NYSE:ORCL) or IBM (NYSE:IBM). This is not a pure play SaaS stock, but rather a portfolio of good growth businesses, including virtualization.
On-demand performance and talent management solutions company SuccessFactors (NYSE:SFSF) last month crossed four million users worldwide. The company also reported record second quarter results of revenue growth of 71% y-o-y. This one has been featured on my Seven Stocks For Long-Term Hold.
Salary.com (SLRY), makers of on-demand data services that allow customers to compare salaries, reported its first quarter fiscal 2009 results on July 31 and the stock spiked almost 25% to $5.13 overnight. It has come down slightly now and closed at $4.30 on Friday. You can read my interview with on-demand pioneer and Salary.com CEO Kent Plunkett here. My guess is, either Taleo or SuccessFactors will look to acquire this one in the next 18 months, and if that happens, a 40-50% premium is in order.