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4 Stocks to Take Advantage of the Fast-Growing SaaS Market

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·4 min read
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Organizations have been rapidly adopting the Software as a Service (“SaaS”) model for their business purposes, owing to the benefits it provides over traditional software applications. Notably, SaaS offers organizations a low-cost and time-saving model. This is because SaaS is provided by external vendors and doesn’t come with a licensing fee. In fact, the organizations simply have to pay for the software via a subscription-based model and can avail of the flexibility of upgrading or downgrading their packages, as required.

Moreover, since the software is already installed on remote servers, this means that organizations don’t have to spend time installing or configuring it at their end. Meanwhile, end-users don’t have to worry about spending additional time and money on version upgrades since the vendors upgrade them on their end, making the latest versions readily available to the end-users.

Notably, the COVID-19 pandemic has accelerated the demand for cloud-based applications and in turn, the SaaS model. As offices were shut across the world to combat the spread of the virus, businesses had to shift to a remote working model to continue their operations. This is where the SaaS model took centerstage as the software applications are hosted on remote servers, thereby allowing end-users to access them simply with the help of an Internet connection and continue their work seamlessly.

SaaS Adoption Poised to Grow

The adoption of the SaaS model seems poised to grow even as we move beyond the woes of the pandemic, thanks to the affordable and time-saving factors that make it more beneficial than the traditional software applications. Per a report by ReportLinker, the global SaaS market is expected to reach $272.49 billion in 2021 compared to $225.6 billion in 2020, at a CAGR of 20.8%, as mentioned in a GlobeNewswire article. Moreover, the article mentioned that by 2025 the global SaaS market is expected to reach $436.9 billion at a CAGR of 12.5%.

Meanwhile, per a separate report by Gartner, the worldwide end-user spending on public cloud services is estimated to grow 23.1% in 2021 within which, SaaS remains the largest market segment. Notably, Gartner predicted that the SaaS market is expected to reach $122.633 billion in 2021 from $102.798 billion in 2020.

4 Stocks to Keep an Eye On

The SaaS market is expected to grow in the future due to the affordable and time-saving benefits that it offers to organizations. This seems then to be a good time to look at the companies that can make the most of this uptick. Notably, we have selected four such stocks that carry a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alphabet Inc.’s GOOGL Google offers various SaaS products via its Google Cloud platform. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings increased 27.3% over the past 60 days. The company’s expected earnings growth rate for the current year is nearly 50%.

Adobe Inc.’s ADBE offers its Creative Cloud platform, which is a subscription service that allows customers to download and access the latest versions of its creative products like Photoshop, Illustrator, InDesign, and so on. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings increased 5.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 17.6%.

Microsoft Corporation MSFT offers Office 365, among other SaaS products. Office 365 is a subscription-based service comprising its Microsoft Office productivity suite, which can be used by signing in from any device. The company currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 5.8% over the past 60 days. The company’s expected earnings growth rate for the current year is 35.4%.

DocuSign, Inc. DOCU provides cloud-based software and its e-signature solution enables businesses to digitally prepare, sign, act on, and manage agreements. The company currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 22.2% over the past 60 days. The company’s expected earnings growth rate for the current year is 46.7%.

Zacks Top 10 Stocks for 2021

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Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
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DocuSign Inc. (DOCU) : Free Stock Analysis Report
 
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