The SaaS-pocalypse has caused quite a violent reset in the valuations of many software stocks. And while the disruptive wave of AI might not yet be done marking down prices across the SaaS scene, I do think that it makes sense to at least check out the prices on merchandise, which some folks might see value in. Of course, just because shares are cheap and in free-fall doesn’t mean it’s time to go bottom-fishing before a bounce. It’s tough to time sustained bounces after steep declines.
With the S&P 500 roaring higher alongside the Nasdaq 100 while software remains in quite a trough, investors might have to ask themselves if the market has it wrong on AI’s disruptive impact on SaaS or if there are serious risks that the brave dip-buyers might have in their blind spots. Could both be true? Time will tell, but I do think investors should be more selective when it comes to the names.
Some SaaS stocks are built to pivot, adapt, and last, while others might not be treating the sell-off with the same degree of urgency (perhaps a code-red in order?) as they should. In any case, here are three SaaS names that I’d be willing to give the benefit of the doubt, even if we’ve yet to see the last of the great SaaS drawdown.
Adobe
Shares of Adobe (NASDAQ:ADBE | ADBE Price Prediction) are still down over 61% from their highs, and it’s becoming hard to buy into the company’s turnaround story as AI acts as a disruptive threat. Many sell-side analysts have also begun to lose faith in a company whose story seems to have broken.
Still, the stock is going for dirt-cheap prices at 14.89 times trailing price-to-earnings (P/E). And with impressive AI offerings of its own (Firefly) and an agentic AI system from Anthropic’s Claude reportedly coming aboard, it’s hard to bet against the firm as the market cap looks to stay above $100 billion.
With a smart acquisition of brand visibility platform Semrush in the books and a nice Nvidia (NASDAQ:NVDA) relationship as well, I certainly wouldn’t count Adobe out quite yet, even if there’s still more pain to come.
CrowdStrike
Anthropic’s Claude Mythos might have taken a big bite out of software earlier on. But as the vulnerabilities uncovered by the powerful model become more apparent, I think the value of a cyber platform like CrowdStrike (NASDAQ:CRWD) is being drastically underestimated. Sure, it’s natural to think that Mythos will lead to something that’s better than what cybersecurity vendors offer. But the reality of the situation is that CrowdStrike and Anthropic play on the same team.
Arguably, Project Glasswing may have given members a shot in the arm before a pandemic of agentic-enabled cyberthreats hit. I think CrowdStrike and the rest of the cybersecurity industry are made better because of Mythos and would treat the latest recovery bounce in a name like CrowdStrike as more than warranted.
Sure, the easy gains may have been made since CrowdStrike stock hit bottom. But I think a move to new heights could be in the cards as the firm looks to make the most of the helping hand it received. Agents are coming, and perhaps there’s no firm that’s better prepared than CrowdStrike.
Snowflake
Finally, we have Snowflake (NYSE:SNOW), which stands out as more of an agentic AI enabler than a firm that’s at risk of getting its lunch eaten. Just last month, Bank of America cited that Snowflake was likely to continue “accelerating” growth rates amid the AI spending boom. I think they’re right.
Snowflake is moving from data warehousing to becoming an all-around AI cloud play, essential for the wave of inference to come. While it’s tough to tell just how much growth could surge in an era of agents, I do think that AI’s disruptive potential should be a positive for Snowflake, given its new trajectory, rather than a negative. ‘Add smart AI-driven acquisitions into the equation, and I think it’s clear that Snowflake has the tools that firms need to really unlock the power of agents.
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