The author did the common comparison of EV/S for enterprise software SaaS stocks (about 20) against the software sector in general (which is about 5). It feels timely mostly because the notable selloff of some of our favorite names. And because right now marks the one year anniversary of the market peak last year before the Q4 correction.
The author did acknowledge something special about these stocks and their subscription model, and thinks they may remain richly valued going forward. But she questions whether they can grow fast enough into big enough size to justify the current valuation, and warns that even hefty expectations beat may still result in market disappointment (at least in the short run).
The author did the common comparison of EV/S for enterprise software SaaS stocks (about 20) against the software sector in general (which is about 5). It feels timely mostly because the notable selloff of some of our favorite names. And because right now marks the one year anniversary of the market peak last year before the Q4 correction.
That’s an apples vs. aardvarks comparison as the author acknowledges. SaaS might include software in the mix but it is not software, it’s “Service” that cuts the clients’ expenditures in both capital assets and labor costs. That business model is the foundation stone of horizontal value chains, outsource everything that is not at the core of your business.
I’ve had a state of the art server for 15 years compete with offsite backup, offsite emergency server, and 24 hour staff looking after it, they update all the software and hardware as needed for all of $35 a month! You must have very special reasons for bringing that in-house.