UKRAINE – 2021/05/25: In this photo illustration, Fastly logo of the US cloud computing services Our theme of Mid-Cap SaaS Stocks screens for software stocks that have a market cap of between $2 billion and $10 billion and have grown revenue by 50% or more over the last two years. These stocks have underperformed meaningfully this year, declining by about 7% year-to-date on an equally weighted basis, compared to the S&P 500 which remains up by about 21%. Now we think that the outlook for these stocks could remain somewhat mixed in the medium term. While the increasing digitization of business and the remote working trend through Covid-19 was a big driver of sales for software players, growth could cool a bit as companies gradually begin bringing employees back into the office, with Covid cases on the decline and vaccination rates improving. Secondly, with interest rates on the rise, investors could rotate from growth stocks into value. This could hurt the stocks in our theme, considering that they trade at an average price to sales multiple of about 14x, versus about 6.5x for the S&P 500.

Within our theme, Instructure Holdings , an education technology company, has been the strongest performer, with its stock rising by about 26% year to date. On the other side, Fastly stock has been the weakest performer, declining by about 45% year-to-date, due to weak quarterly results and also as the company lost business from its once largest customer, ByteDance.

Looking for stocks that stand to benefit from the growing digitization of the economy? Check out our theme of Internet Infrastructure Stocks

[8/30/2021] Fast Growing Mid-Cap Software Stocks To Watch

Our theme of Mid-Cap SaaS Stocks screens for software stocks that have a market cap of between $2 billion and $10 billion and have grown revenue by 50% or more over the last two years. The theme has underperformed this year, declining by about 9% year-to-date, on an equally weighted basis, compared to the Nasdaq-100 which is up by about 20%. However, the performance picked up a bit over the last week (five trading days), rising by about 4% versus the Nasdaq which was up by about 2%. We think there are a couple of trends that point to the continued strong performance of the theme. With Covid-19 cases surging once again in the U.S., companies are delaying their return to office plans and this should bode well for software stocks, which stand to benefit from the increasing digitization of business and the remote working trend. Valuations are also looking reasonable, given the correction over the last few months and the high growth rates that most of the companies in the theme are posting.

Within our theme, Instructure Holdings a company that provides learning-management systems used at colleges and schools, has been the strongest performer, rising by 20% so far this year (the company went private last March and re-listed once again in July 2021). On the other side, Fastly stock has been the weakest performer, declining by about 55% year-to-date, due to weak Q2 2021 results and also as the company lost business from its once largest customer, ByteDance.

[6/28/2021] Mid-Cap Software Stocks

Our theme of Mid-Cap SaaS Stocks includes software stocks that have a market cap of between $2 billion and $10 billion and have grown revenue by 50% or more over the last two years. The theme has underperformed considerably this year, declining by about -6.5% compared to the Nasdaq-100 which is up by about 13% over the same period. However, the underperformance is linked more to technical and macro factors, rather than fundamentals. While the businesses have largely continued to perform well, the anticipation of sooner than expected rate hikes by the U.S. Federal Reserve and rising inflation through the Covid-19 re-opening have caused investors to rotate out of high-growth stocks.

Overall, we think this group of stocks remains a solid long-term bet due to multiple factors, including greater digitization of business following Covid-19, higher corporate IT spending following a muted 2020, and also the broader pivot of the software industry to recurring revenue models. Within our theme, the stock Cloudera has been the strongest performer, with its stock up by about 13% year-to-date as the company agreed to be bought out by private equity firms KKR and Clayton, Dubilier & Rice, for $5.3 billion. On the other side, Fastly stock has been the weakest performer, declining by about -31% year-to-date, partly due to its mixed performance over 2020 and also as the […]

source Instructure, Fastly: Fast Growing Mid-Cap SaaS Stocks To Watch

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