15 Apr These 4 SaaS Stocks Are Close to Their 52-Week Low: Should You Buy?
If you’re a growth investor, the software-as-a-service (SaaS) sector should be familiar to you.
SaaS businesses operate using a subscription model and deliver their services using cloud computing.
Such companies bill their clients on a periodic basis which may be as long as a year ahead, thus providing greater revenue certainty.
SaaS stocks with proven business models and strong moats have experienced rapid growth in the last two years, hastened by the onset of the pandemic.
However, in the last six months, growth stocks as a whole have taken a tumble.
The reason?
A rise in interest rates due to soaring inflation in the US, which recently hit 8.5%, the highest since 1981.
Here are four SaaS stocks that are trading close to a year-low and may qualify as great potential investments to add to your portfolio.
Okta (NASDAQ: OKTA)
Okta provides an identity management platform for corporations and provides secure and seamless access to applications hosted by its clients by managing the authentication and access levels for their employees.
The company’s share price has tumbled 42.2% in the past year to US$150.25, close to its 52-week low of US$135.46.
One reason for its decline was the disclosure that 366 of its corporate customers were impacted by a security breach that allowed hackers to access the company’s internal network.
Okta reported a strong set of numbers for its fiscal 2022 (FY2022) ended 31 January 2022.
Revenue jumped 56% year on year to US$1.3 billion, with subscription revenue making up the bulk (96.2%) at US$1.25 billion.
Billings rose at a faster clip, surging 76% year on year to US$1.72 billion.
Okta’s customer base stood at 15,000 and it enjoyed a dollar-based net retention rate of 124%.
The company believes it still has a long runway for growth as its total addressable market is estimated at around US$80 billion.
Salesforce.com (NYSE: CRM)
Salesforce is a SaaS company that provides customer relationship management (CRM) software through a cloud-based service to its clients.
The company’s shares have tumbled by 14.1% in the last 52 weeks and are trading at US$195.72, close to its year-low of US$184.44.
Similar to Okta, Salesforce also reported a creditable performance for FY2022.
Revenue climbed 25% year on year to US$26.5 billion while operating profit increased by 20.4% year on year to US$548 million.
The remaining performance obligations remained healthy at US$22 billion, up 22% year on year.
Salesforce is guiding for revenue of around US$32 billion for FY2023, up around 21% year on year.
The company’s total addressable market is projected to grow by 13% per year till FY2025 to around US$248 billion, providing ample opportunities for Salesforce to improve its top line.
Freshworks (NASDAQ: FRSH)
Freshworks is a SaaS company that helps to build and design software for information technology, customer service, sales and human resources departments for its clients.
The company has more than 50,000 customers using its cloud platform.
Freshworks’ shares have plunged around 60% in the past year to US$19.07, just a tad higher than its 52-week low of US$15.60.
For its fiscal 2021 (FY2021) ended 31 December 2021, the company announced that revenue shot up 49% year on year to US$371 million.
The number of customers contributing more than US$5,000 in annual recurring revenue increased by 28% year on year to 14,814.
The net retention rate remained healthy at 114%.
Freshworks is projecting a 32.3% year on year growth in revenue to US$490.8 million for FY2022 and will focus on targeting underserved segments in large, established markets.
The company believes it has a total market opportunity of US$120 billion based on a 2025 revenue forecast by IDC.
Blackline (NASDAQ: BL)
Blackline provides cloud-based services that help to automate and control the accounting financial close process for its clients.
Blackline’s shares have tumbled by 38.6% in the last year, scrapping a low of US$65.15 before rebounding slightly to the current US$71.28.
The company reported healthy top-line growth for FY2021, with revenue increasing by 21% year on year to US$425.7 million.
Free cash flow surged by 62% year on year to US$56.3 million.
Blackline added 121 new customers in the final quarter of 2021, taking its total customer base to 3,825 at the end of 2021.
Dollar-based net revenue retention rate stood at 109%.
Blackline acquired FourQ Systems to strengthen its statutory reporting compliance capabilities and also collaborated with Microsoft (NASDAQ: MSFT) to deliver greater finance automation to its Microsoft Dynamics 365 customers.
The company believes there is a large and under-penetrated total addressable market opportunity of US$28 billion comprising 165,000 target customers that it can tap on.
Disclaimer: Royston Yang does not own shares in any of the companies mentioned.