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4 Stocks to Gain as SaaS Adoption Continues to Skyrocket

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The popularity of the Software as-a-Service (SaaS) model has grown exponentially over the years as organizations look for improved flexibility, reduced costs and time, among other benefits. SaaS has witnessed increased adoption, owing to the advantages that SaaS offers over conventional software applications have also led to its increased adoption.

With SaaS, businesses can simply opt for a relevant subscription model and start operating without having to install expensive software at their end, since they are provided by vendors via the cloud platform. The demand for SaaS is continuing to skyrocket and according to a BMC Software article, research has found that 99% of organizations will be using one or more SaaS solutions by the end of 2021.

The article further stated that around 78% of small businesses “have already invested in SaaS options.” This is because small businesses have a limited budget at their disposal, especially when they are starting out, making it costly and time-consuming to install and configure traditional software. Hence, they find it more convenient to opt for SaaS solutions.

As their requirements change over time, businesses can utilize more SaaS solutions by simply opting for the new offerings. Also, since the software applications are provided by vendors, businesses don’t have to worry about installing upgrades as that is taken care of by the vendors.

Collaborating online has become the need of the hour as the pandemic shifted organizations to a remote working model. SaaS adoption made this much easier as employees can access the cloud-based applications from anywhere and from devices like smartphones, laptops, desktops, and so on, with the help of an Internet connection.

Reflective of how much cloud computing, which includes SaaS, is in demand, Gartner predicted, in a report published on Aug 2, that by the end of 2021, global end-user spending on public cloud services is set to reach $396 billion. This will mark an increase from $313.853 billion in 2020 and the spending is also set to rise 21.7% and reach $482 billion in 2022. The report further stated that by 2026, public cloud spending is set to exceed 45% of all enterprise IT spending, compared to less than 17% in 2021.

Gartner expects spending on cloud application services or SaaS to grow to $145.509 billion this year, from $120.686 billion in 2020, and reach $171.915 billion in 2022. Per a separate report by Research and Markets, the global SaaS market is expected to witness a CAGR of 12.5% from 2021 to 2025, as mentioned in a Business Wire article.

4 Stocks to Buy Now

The adoption of SaaS seems set to grow ahead as businesses continue to shift to cloud, owing to its myriad advantages like scalability, lower costs, and so on. This makes it a good time then to invest in companies with strong fundamentals that can make the most of this continued upswing. We have selected four such stocks that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Paycom Software, Inc. (PAYC - Free Report) provides a cloud-based human capital management solution delivered as SaaS for small to mid-sized companies in the United States.

Shares of Paycom have risen 7% year to date and it currently flaunts a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings increased 3.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 25.8%.

The Trade Desk, Inc. (TTD - Free Report) operates a self-service cloud-based platform that allows buyers to create, manage, and optimize data-driven digital advertising campaigns in various ad formats and channels. On Jun 16, the company launched its services in India, allowing Indian digital marketers to realize the full potential of the open Internet.

Shares of this Zacks Rank #2 company have risen 13.8% over the past three months. The Zacks Consensus Estimate for its current-year earnings increased 21.9% over the past 60 days. The company’s expected earnings growth rate for the current year is 13%.

Microsoft Corporation (MSFT - Free Report) offers Microsoft 365 which is the productivity cloud that offers Office apps, intelligent cloud services, and advanced security. The company also offers its cloud platform, namely, Azure.

Shares of Microsoft have gained 32.3% year to date. The Zacks Consensus Estimate for its current-year earnings increased 3.6% over the past 60 days. This Zacks Rank #2 company’s expected earnings growth rate for the current year is 8%.

Nutanix, Inc. (NTNX - Free Report) develops and provides an enterprise cloud platform and it offers Calm SaaS, which is a ready-to-use, fully-managed automation software that aids in automating IT services and makes the services available in a secured and easy-to-consume package.

Shares of Zacks Rank #2 Nutanix have risen 27.3% year to date. The Zacks Consensus Estimate for its current-year earnings improved 21% over the past 60 days. The company’s expected earnings growth rate for the current year is 26.4%.


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Microsoft Corporation (MSFT) - free report >>

Paycom Software, Inc. (PAYC) - free report >>

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Nutanix (NTNX) - free report >>