SaaS companies revenue growth question

IT providers, price to customers goes down y-o-y primarily by passing on the productivity gains to the customer. On the other hand we have not seen similar trends with software vendors.

SaaS, is both software and some service bundled together. Will SaaS overtime charge less for the same service? I know most companies here are focusing on growing revenue by 30%, 40%, 50% etc and existing customers increase their spending y-o-y, but at what point it matures and plateau and when the decline, if any will occur in the product cycle?

While I had an AWS account Amazon would regularly lower the price.

My web host has maintained the same price for 15 or more years but has added useful features, more memory, and faster processors.

Is that a wash?

Denny Schlesinger

Like office 365 and Adobe Creative Cloud, the subscription pricing will not likely be reduced, but the functionality will be improved over time.

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Both are still young offering. The risk is not necessarily prices going down but the features included in the basic offering may require many users to switch from premium offering to base offering.

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Ouch…down 5% today! The market is crashing for SAAS stocks. Easy come…easy go.

Easy come…easy go.

That, my friend, is totally the wrong perspective. A dip can be a very interesting opportunity. It’s part of the normal scenery. Use it to advantage.

Denny Schlesinger

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5% move for these stocks are noise or part of the volatility for these stocks. If you cannot stomach that then you should not be investing here or limit your exposure. For ex: AYX is down today $5.5 or 6.5%, but for the 52 week period it is up from $30 to $80. You should be prepared to deal with 25% decline in a very short and rapid time.

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It looks like Mr (or Ms) Market wants these stocks trading closer to SMA 50, which is why ZS, MDB, AYX are taking a bigger hit. ESTC is holding in relatively well because it had already been dealt with by the market.

As Denny points out, those that didn’t want to pay up for stocks on such a run, they are getting an opportunity.

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