Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money

79% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

Tricks of the trade

How to Day Trade Stocks & Indices

Learn how to:

  • Place your first trade
  • Identify 9 chart patterns
  • Pro strategies step-by-step

You'll also receive our newsletter and other Opto emails in accordance with our privacy policy.

Updates

Are Adobe and DocuSign share prices among the SaaS stocks set to surge?

In the face of volatility share prices for SaaS stocks such as Adobe, Zendesk and DocuSign are showing signs of recovery, while the likes of Twilio and Workday have shown resilience.

In the middle of February this year, as SaaS share prices ramped up, the Bessemer (BVP) Nasdaq Emerging Cloud Index [EMCLOUD] reached an all-time high of 1,423 points. But things changed in March. As markets were rocked by record volatility in response to the developing COVID-19 pandemic, the SaaS portion of the technology market fell further than both the Dow Jones and the S&P 500. 
 
On 16 March, the index’s price had dropped to a low not experienced since January 2019. It dropped 23% for the year-to-date and 35% from its record high. However, in the weeks that followed the index, along with a number of its constituents’ share prices, have been seeing a recovery.

23%

Year-to-date drop of the Bessemer (BVP) Nasdaq Emerging Cloud Index [EMCLOUD] on 16th March

 

Adobe [ADBE] share price

The creative software company performed much better than expected in 2019, with its share price climbing 46% over the twelve months. However, investors were shocked to see this drop in mid-March. A recent low on 12 March saw its share price 13% off since the start of the year.
 
Despite better-than-expected revenue gains of 19% year-over-year for the first quarter of the current fiscal year, Adobe is wary of the impact coronavirus might have. CEO and president of Adobe Shantanu Narayen recently told investors that the company would “focus on [its] long-term opportunity”. 
 
While Adobe is expecting to record revenue for the second quarter of $3.175bn, the year-over-year gain of 16%, while still positive, would be its slowest rate of growth since 2015, according to the Motley Fool.

$3.175billion

Adobe's predicted Q2 revenue

 
 
Nevertheless, analysts remain positive on Adobe’s share price prospects.
 
“Once the market settles, we think software will be one of the first segments to bounce back and we expect high-quality franchises like Adobe to be at the front of the line,” JPMorgan analyst Sterling Auty told clients, Barron’s notes. The firm upgraded the share price from neutral to overweight.

 

Twilio [TWLO] share price

Although the cloud communications platform saw its share price drop by more than a third in the first half of March, Twilio expects to be posting revenue higher than predictions on Wall Street —  between $335m and $338m for the current quarter compared to an expected $327.5m. However, it does expect to fall behind on profits, with expectations of a $0.09 to $0.11 loss per share for the current quarter.
 
This has not impacted valuations. The company is relatively young (it went public in 2016) and there is confidence among some that that, regardless of a potential slowdown in revenue growth, Twilio will still grow faster in 2020 than the broader market.

$3.275million

Twilio's predicted Q2 revenue

 
 
The overwhelming consensus among the analysts polled by CNN is to buy. Cowen’s Derrick Wood told The Street that the company is “just scratching the surface” of a large model and the seven million developers on its platform “will become increasingly important as developers are more instrumental in digital projects”.

 

Workday [WDAY] share price

In its latest earnings release, the human capital management cloud-solutions provider revealed strong figures. The revenue for the fourth quarter of 2019 was $976.3m, a 24% year-over-year increase, while subscription revenue of $839.7m beat expectations of $828m to $830m.
 
Even though Workday’s share price recently fell to its lowest close in two years of $113.87  — just nine months after an all-time high of $224.30 — the company hopes to continue to keep growing its customer base. By 2019 it had increased this by 23% from the previous year, according to Forbes. 
 
Like many SaaS companies, Workday’s subscription-based licensing model appeals to investors because of the promise of recurring revenue rather than relying on one-time purchases of software. It posted a 25% year-over-year increase in subscription revenue and expects it can grow this another 4% to $873m–$875m in the current quarter.

25%

Workday's year-over-year increase in subscription revenue

 
 
Of 36 analysts polled by CNN, 14 rate it a buy and 14 a hold.

 

Zendesk [ZEN] share price

Zendesk’s share price may have dropped 30% in the first half of March, but it’s showing signs of bouncing back. A recent announcement of a partnership with Tata Consultancy Services saw the share price jump 15% in one day, almost back to pre-sell-off levels.

15%

Zendesk's share price rise in 1 day after announcing partnership

 
 
In its most recent earnings, the company announced revenue for the fourth quarter rose by a third year-over-year to $229.9m. Zendesk hopes to see revenue in the region of $237m to $242m for the quarter ending 31 March, however, the impact of the pandemic on this is yet to be seen. 
 
The consensus rating among twenty-one analysts is a buy, according to MarketBeat, with 19 providing this rating and two to hold.

 

DocuSign [DOCU] share price

In the face of market chaos, in mid-March DocuSign posted fourth-quarter revenue of $274.9m, up 38% year-over-year, and topping estimates. Subscription revenue also increased by 38% to $258.1m, and the company expects this to increase to between $266m and $277m for the next quarter.

$274.9mllion

Docusign's Q4 revenue - a 38% year-over-year increase

 
 
The feeling among analysts is that DocuSign is one such company that won’t be adversely affected by the current situation. “While the number of business agreements being signed globally may decline, those that are continuing to work are enabled by DocuSign to close agreements without meeting face-to-face,” William Blair analyst Bhavan Suri told InvestorPlace. 
 
Of 16 analysts polled by MarketBeat, four have it as a hold and 12 have given the share price a buy rating. 

Continue reading for FREE

Join the 30,000+ subscribers getting market-moving news every week.

Written by

Free ebook

Tricks of the trade: 7 interviews with the world’s top traders

Get it now

Disclaimer

Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

Related articles