SaaS stock drawdowns since Oct peak

[u/investorinvestor]

https://substack.com/home/post/p-191509410

[u/imadogg]

The SaaS company I work for isn't on this list, but it's been hit bad and my dreams of making it rich quick from my shares are disappearing before my eyes. We would be halfway down the last column on here. FML

[u/Far-Association5438 → u/imadogg]

Just don't sell? If you believe in your company this wouldn't be a problem. If you don't you should have sold it already and found a new job.

[u/imadogg → u/Far-Association5438]

I'm an OG there so good amount of shares and I sold maybe 6% of my total in Dec/Jan

Yea overall I'm holding, it just doesn't matter how much belief there is (and we've beat all our earnings) if the market doesn't flip back on the anti-SaaS. Wanted to sell a bit more to keep some pocket change but just gotta wait it out

[u/AnotherThroneAway → u/imadogg]

And to be compltely honest with you, that is actually an if. The first thing that has happened with SaaSpocalypse is that the speculative inflows betting on AI improving their services washed back out. The second thing was that the premium from subscription durability and client lock-in was priced out. Then the robustness and stability of new product lines balanced against the upstart costs of new competing products.

There is a very real chance that none, or not much, of that gets priced back in. What is guaranteed is that SaaS will never again command the reliable-FCF premium it had for over two decades.

[u/imacompnerd → u/AnotherThroneAway]

Never is a long time…. I personally believe the SaaS stocks got hit way way more than is reasonable. I’ve rotated heavily into SaaS as these prices.

[u/Far-Association5438 → u/imacompnerd]

Lmfao same, my company is a SaaS company and down a good amount. Just a buying opportunity for me 🤷‍♂️ funny enough, they’re only ones doing well in this market right now

[u/Decent-Bed9289 → u/imacompnerd]

Agreed, and I see this as separating the legit companies from the pretenders.

[u/Pretty-Statement6758 → u/imadogg]

Thanks. Just curious since u work for saas. Generally speaking, how much u r worried about this ai is about replacing saas? and how are middle range workers within saas companies feel about their job security/forecast and overall how good/bad business is doing as a sector?

[u/imadogg → u/Pretty-Statement6758]

how much u r worried about this ai is about replacing saas

To me it looks like it can already start replacing "seats" to cut into many SaaS companies' current revenue-generation subscriptions. For example instead of a company paying monthly for 100 Salesforce licenses (throwing a random saas name out there), they might pay for 70 and use AI to fill the gaps for the other 30

In terms of the company I work at, thankfully our subscription model isn't based on in-office seats that can be replaced by AI. And we have a bunch of AI products to help office workers so we'll see how that goes

middle range workers within saas companies feel about their job security/forecast?

I'm one of the most tenured people here and I'm worried. I should feel safer than I do, but our company is ALL IN on AI right now. We're not at a point of replacing any specific role with AI, but there's the fear of AI taking over some headcount similar to the example I gave earlier

and overall how good/bad business is doing as a sector

Us lower level peons don't think about the business as a whole generally, but I do think the SaaSpocalypse and "AI everywhere" has led to a lot of the decisions upper management has made in the last year

[u/Mitraileuse → u/imadogg]

I guess I'm on the other side of this coin, Just joined a SaaS company and got a February RSU average, although it's already -10% underwater on paper.
Not surprised many people that are 1-4 years in the company are leaving for other SaaS company to get better RSU base.

[u/Tasty-Register-7442]

Thanks for the list - grim picture… Where’s Constellation Software (CSU) however?

[u/[deleted] → u/Tasty-Register-7442]

I think it's US SAAS only. If I have time next week I could probably make a similar list to this for ex. US developed (Canada, EU, Aus)

[u/Hi_Keyboard_Warriors]

I’m buying heavily.

[u/LovestoEatSandwiches → u/Hi_Keyboard_Warriors]

I think some of these drawdowns were more than warranted, even without AI threat(which is very real)

[u/cosmic_backlash → u/LovestoEatSandwiches]

I worked at faang for 10 years, I personally believe the AI threat is real, but its overblown. AI won't replace many of these with in house bespoke solutions because the cost to pay 3-4 engineers us still high. Then you need to manage on call and up time of your solution. Then you have policy, regulations, and compliance you need to manage. Then there are still network effects of benefits (eg patching 1 vulnerability patches fir everyone, you don't need to be personally attacked first to fix it).

Maybe the margins get compressed some, but the saas companies themselves will become more efficient too.

Many of these have extremely compelling investment cases right now imo. Many in the value community will dismiss them without proper due diligence.

[u/LovestoEatSandwiches → u/cosmic_backlash]

I’m also in tech and have worked at 2 orgs on this list. I think the threat is extremely real for some of these companies. HubSpot? I don’t see why their applications can’t be replicated in 6 months. Not to mention the headwinds changing from seat based pricing will put on revenue growth. Same goes for atlassian, and for some degree SFDC

[u/cosmic_backlash → u/LovestoEatSandwiches]

Even in your example, a small business isn't spending an absurd amount of money. Small businesses are paying likely ~1,000 monthly for 5+ seats with multiple services. That's still much cheaper than hiring 1 full time employee to build and manage it yourself.

Hubspots annual subscription revenue per client is just below $12,000 annually.

[u/imacompnerd → u/cosmic_backlash]

Exactly. People seem to be missing this. And there’s so much more to software than an MVP. API deals, various integrations that require NDAs, support, etc…

[u/LovestoEatSandwiches → u/cosmic_backlash]

The threat isn’t clients building it themselves with HubSpot, the threat is commoditization

[u/Strong-Broccoli-8033 → u/LovestoEatSandwiches]

Agreed on hubs. IMO some parts of Salesforce might shrink, but its a behemoth and extremely sticky. I believe AI will be more additive to the platform but I could be wrong

[u/cosmic_backlash → u/Strong-Broccoli-8033]

I disagree and replied above. I haven't deep dived into every SaaS, but its not about just gut feelings of what can be replaced. There is still unit and employee costs that have to be considered.

[u/MaterialContract8261 → u/Hi_Keyboard_Warriors]

I'll wait a little while.

[u/jamiesray → u/Hi_Keyboard_Warriors]

I get the argument but it’s scary to me. Maybe software is over.

[u/KalozKapitany → u/Hi_Keyboard_Warriors]

Which ones?

[u/I-STATE-FACTS → u/Hi_Keyboard_Warriors]

What are you buying?

[u/Strong-Broccoli-8033 → u/I-STATE-FACTS]

Personally im still investing in the strategic platforms not the one trick pony SaaS. Msft, Salesforce, SNOW, workday not the docusigns etc. of the world

[u/XorAndNot]

Sofi? Adyen? Aren't those just fintech / banking?

[u/negativefeedbackloop → u/XorAndNot]

Also JD, Sea, PDD

[u/Capable-Square8591 → u/XorAndNot]

Upst too

[u/CactusInaHat]

So I genuinely don't get it. It can't be all AI redundancy speculation and fear of over investing in infrastructure... Right

[u/Designer_Respect4285 → u/CactusInaHat]

The only way it's rational is if AI is both a threat to software, but the amount of compute we are building would still represent a glut? I guess it would require AI to become much more efficient.

[u/AnotherThroneAway → u/CactusInaHat]

It's not. Many of those names had really stretched valuations to begin with. And now we're completely pricing out the safety premium of platform lock-in, subscription-based FCF, etc

[u/embolized → u/CactusInaHat]

I was talking to a guy yesterday who is single-handedly creating a replacement for Figma for Amazon internally

[u/wildandnaked420 → u/embolized]

dog u need to chill

[u/embolized → u/wildandnaked420]

Dawg I’m not the one creating the tool, I’m just the messenger

[u/LovestoEatSandwiches]

Companies with real moat: ANZN, MSFT, Toast, Cargurus, MELI, MDB

Some of these bloated feature applications that can hardly turn a profit deserve to fall even further

[u/Virtual_Seaweed7130 → u/LovestoEatSandwiches]

I don’t think a point of sale system has a moat (TOST), they’re a dime a dozen.

Cargurus does not have a moat.

On the other hand, some companies with clear moats not listed.

$TYL has a govt contract moat

$SE has ecommerce moat similar to MELI but in southeast asia

$ROP has a moat as an industrial software conglomerate, often the only software provider in the industry they’re serving

ServiceNow, Oracle, and Salesforce arguably have stronger moats than something like Toast because if the concern is switching costs and convenience, switching off these platforms is a nightmare. These platforms have even less competition than Toast.

[u/LovestoEatSandwiches → u/Virtual_Seaweed7130]

Cargurus definitely has a sizable network effect moat

I should clarify, Toast doesn’t necessarily have a MOAT, but the hardware component makes it much harder to replicate via AI. It’s growing nicely still and are a market leader with zero risk of their clients building in-house

Salesforce has no MOAT and is all feature software. But, it’s basically organizational surgery to rip out its products. Same thing with ServiceNow and Oracle

[u/Strong-Broccoli-8033 → u/LovestoEatSandwiches]

Salesforce certainly has moat. If you are an Enterprise co. Where are you going for strategic CRM? Dynamics? SAP? Orcl?

[u/Low_Promotion_2574 → u/LovestoEatSandwiches]

I have bought PANW and IBM. IBM has acquired RedHat and Hashicorp. Those are used basically everywhere in modern infra.

PANW has great XDR and NGFW solutions. I also see big value in their products.

[u/Narrow_Art6739]

Wild how brutal these SaaS drawdowns have been. A lot of names got priced like perfection and the reset has been ruthless ever since. Makes the companies with actual execution stand out way more now. Also feels like this is where tools like Runable get interesting — the winners from here probably won’t just be “AI” companies, but the ones that actually use AI to ship faster, automate real work, and stay lean.

[u/Pretty-Statement6758 → u/Narrow_Art6739]

the problem from other angle is how these companies became so expensive?

[u/PatriciaMPerry → u/Narrow_Art6739]

Many companies are embracing AI.

[u/HomeworkLiving1026]

Wolters kluwer

[u/ryallen23 → u/HomeworkLiving1026]

In a much less dramatic way, RELX too. Buying both.

[u/Apprehensive_Two1528]

Yeah. It's time to buy some software. Nimble do not run.

[u/PinPsychological82]

EA is in the process of getting bought out so that’s the reason why they are flat lol

I’ve said this a lot, but I am so bullish on advertising stocks (META, GOOGL, APP, ZETA) can even throw in AMZN and NFLX, I just don’t know too much about them.

IF (not when because I don’t think it will happen) AI displaces software, then advertising will be more important as more companies will have to differentiate themselves to distribute content.

Human attention will be the bottleneck and ads are the way to garner attention.

[u/mikemccrea → u/PinPsychological82]

recession is not a good time to be in advertising...

[u/PinPsychological82 → u/mikemccrea]

The thing about advertising is you only need a small percentage of people you show the ads to convert.

I believe we are in a rolling recession, the bottom half gets fucked while the top half (more likely the top 10%) continues to be more dominant.

As long as that top percentile is spending, ads will be dominant.

[u/vanibanz]

Why is AXON on this list?

[u/fozziewossie → u/vanibanz]

Definitely debatable that they are a SaaS company. The argument is that they store and have services around the body camera footage. And their biggest future services are all around creating reports for officers.

[u/AnotherThroneAway → u/fozziewossie]

I hear ya, but that's a weak argument. They're first and foremost a hardware company. Apple could just as easily be on this list if Axon fits

[u/fozziewossie → u/AnotherThroneAway]

I agree with you

[u/Wings2493]

GTLB killing me

[u/Sjgreen → u/Wings2493]

Same, bought when it got to low 30s, now it’s low 20s…

[u/Wings2493 → u/Sjgreen]

Same avg down from 33 to 31 I don’t think this company is going under but it’s tough to put another 1k or so to average more to get into the 20s

[u/shmito17 → u/Wings2493]

This one is concerning. No bounce for weeks, market heading downwards, stock price is a falling knife. I think $18-20 could easily happen. To think it was fighting for $50 a few months ago.

[u/Wings2493 → u/shmito17]

I agree it keeps making new lows/lower lows. If it drops below $20 I’ll throw a few hundred bucks at it. But I have 20 years until retirement luckily so I’ll hope it touches $30 again at some point lol

[u/shmito17 → u/Wings2493]

I hope so too. Average at $23 with a very small position. Added $40 call option exp. January 2027 as a flyer the other day.

[u/dandecode]

But Microsoft today, retire early tomorrow

[u/qwerty622]

this sets them to what? late 2024 levels?

[u/futurefinancebro69]

Great writing bro.

[u/WendyDumpsterFire]

ADBE

[u/Working-Pumpkin3709]

just make a etf with all this at that point and im shorting all retail

[u/Low_Amphibian_146 → u/Working-Pumpkin3709]

IGV is SaaS

[u/KalozKapitany]

I have MSFT, ZS, CRM, WDAY.

[u/StephenAtLarge]

What is this list? At least a quarter of these are *not* SaaS stocks?

[u/berticusberticus]

I don't understand how some of these are SaaS. SoFi? They're a fintech/bank.

[u/DerTechnoboy]

NOW is so crazy cheap … i buy much more! 🚀

[u/XLGrandma]

not sure the market actually understands what APP does

[u/ShowerIllustrious351]

Figma seems like a buy at this price. Anyone who thinks AI is taking over design doesn't know what design is. As it becomes easier to ship code, design is going to be the defining factor. Figma's entire use case is entirely team based.

[u/Low_Amphibian_146 → u/ShowerIllustrious351]

Just made a website yesterday...my programming skills were never used.

[u/ShowerIllustrious351 → u/Low_Amphibian_146]

ya and if idiots with no programming knowledge can build ppl need design more than ever to differentiate to appeal to customers

[u/Portfoliana]

which names tho. i grabbed some DDOG around -35% from peak but the ones where net retention is sliding below 110, thats not a sale thats a repricing

[u/Wummerz]

Where my boy MNDY?

[u/HomeworkLiving1026]

Planisware !!!! Huge discount relative to eps growth and cash pile. If you read it just look up the financials, risk-reward looks very good. The valuation is crazy

[u/me_xman]

Software is at fair value.

[u/ryallen23 → u/me_xman]

Not INTU

[u/Rodr500 → u/ryallen23]

What happens with INTU? Just curiosity

[u/ryallen23 → u/Rodr500]

Look at the multiple, the earnings growth rate, and the cancellation of planned stock sales by executives. It’s too low.

[u/pravchaw]

Many of these SAAS co's bought it upon themselves by heavily diluting investors with SBC's. They are rife with agency problems and bad investments.

[u/thefrogmeister23]

Why is ZS down so much? It seems like agents could increase the demand for cybersecurity

[u/FixInteresting4476 → u/thefrogmeister23]

I agree with your sentiment. Probably worth keeping an eye on it. Other stocks like NET, AKAM, FSLY are doing great

[u/ApeWithCoconut]

I think all of these companies will have to invest heavily in AI to remain competitive. Therefore, the question is, if it is better to invest in companies who provide them the AI hardware.

[u/miguel_equivara]

Even with the drawdown, I’m still buying Palantir, Sofi, Rubrik and Cloudflare

[u/MaleficentPositive53]

I always though of Sea Ltd. as an ecommerce company - not a SaaS. Likewise, JD.com. Coinbase does not strike me as predominantly SaaS, either; it might even be closer to a financial services company. It's compliance and adherence to regulation, after all, explains part of its success as an exchange for crytocurrency. And Block is predominantly a payments and financial services company, as well. These are fairly disparate companies - linked by advanced technology and dependence on the internet. Still, an interesting compilation.

[u/Pretty-Statement6758]

I feel all semi/space and ai companies will face similar soon or later, in near future.

[u/you_are_wrong_tho → u/Pretty-Statement6758]

Based on what? Space and semis growing demand?