Software-as-a-Service (SaaS) stocks have become very profitable investments in the last few years as these companies transitioned from one-off purchases to subscription models that provide continuous income. This transition made SaaS shares sought after in 2020, especially as the economic downturn made these stocks look like steady, reliable investments as processes and workforces moved online. Looking ahead, it is becoming evident that SaaS companies will dominate the enterprise software market, they’re expected to form around 80% of the sector by 2030, up from its current state of 55%.
Thanks to the advancements in software technology, users’ data has never been safer, emerging trends have never been more intriguing, and communities of people have never been more digitally connected. With the explosion of cloud software as well, there are now dozens of new, exciting companies that are changing the way corporations do business by using these highly profitable platforms. Many believe that this is just the beginning in terms of what SaaS companies can do, making 2021 the right time to invest in these technologies if you haven’t done so already!
Adobe (NASDAQ: ADBE) software offers multimedia, creativity, and digital marketing software to its users. Since the company transitioned to the SaaS model in 2013, its share price has increased by over 1,300% as it provided more certainty over its revenue streams.
Its Q3 earnings report showed that revenue increased 14% year-over-year (YoY) to $3.23 billion. Furthermore, its digital media, creative cloud, and document cloud segments all experienced double-digit growth in the quarter as well. Fourth-quarter revenues are expected to increase by around 11%, with growth predicted across all of Adobe’s divisions. If you’re thinking about investing in SaaS companies, Adobe is one to consider for 2021 as the company has healthy revenue growth, robust cash generation, and low debt.
Atlassian (NASDAQ: TEAM) is an Australian-based SaaS company that excels in the cloud market by having pricing power and lowering customer’s search costs. The company’s mission is to “unleash the potential in every team” by building integrated applications to aid teams plan, collaborate, build software, and support products. The result? Developers love Atlassian, so much so that its customer base grew by 14% YoY in Q3.
Furthermore, an outstanding 98% of customers who have spent more than $50k with Atlassian remained clients for the following year, and over 90% who spent at that level purchased three or more products. This implies that their tools are extremely complementary and, after a while, difficult to move away from. The company announced Q3 revenue growth of $459.5 million, up 26% YoY, and added 8,600 new customers during the quarter bringing their total to over 182,000 customers.
DocuSign (NASDAQ: DOCU) is currently the industry leader in the e-signature and digital transaction sector. The company’s successes were aided hugely by companies and employees switching to remote working in 2020, thereby requiring a digital solution to get paperwork and documents signed virtually. DocuSign’s goal is to offer a complete digital contract management solution and plans to leverage artificial intelligence accordingly. By doing so, they have opened the entire agreement process to automation, resulting in them becoming the clear leader in an area with room for massive growth.
DocuSign is one of the hottest SaaS stocks in the market and its impressive Q2 earnings smashed analysts’ expectations. DocuSign posted revenues of $342.2 million, an increase of 45% YoY, and claims to have 500,000 customers and hundreds of millions of users.
Last, but by no means least on the list, we have cloud-based software company, Salesforce (NYSE: CRM). The company offers a customer relationship management service and a suite of enterprise applications such as analytics and marketing automation. The company also bought Slack technologies for over $27 billion in 2020, which is set to aid the company in its battle with Microsoft to become the leading software provider for enterprises.
Boasting a strong financial base, quality product offerings, and a healthy growth outlook, investors will find it hard to beat Salesforce stock. This statement was proved by the company’s smashing second-quarter earning results, pulling in revenue of $5.15 billion. Additionally, revenue growth over the last three years is over 27%.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
Financial Writer at MyWallSt
Nicole's favorite stock is Etsy because she loves its original and handmade items. She believes people are going to stop buying mass-produced items and start purchasing ‘one of a kind’ fashions and furnishings. In a world of sameness, Etsy has the advantage.