Morning Markets: SaaS and cloud stocks are in great shape, according to our favorite index.
It’s SaaS week in Silicon Valley and the stocks of modern software companies are acting like it. According to the BVP Nasdaq Emerging Cloud Index, the recently re-named basket of cloud and SaaS stocks that we use as a barometer for market sentiment regarding the category, things have never been better.
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Indeed, it appears that the Cloud Index set a new all-time high today. Given the youth of the reformed stock collective, it’s hard to say if the index across its various incarnations reached an all-time high, but if not the metric is incredibly close to doing so.
Per Bessemer, the following chart paints the picture of SaaS and cloud stocks being a hair off of their record closes, at most:
All this goes to say that the fear has been squeezed out of the market, at least as it pertains to the companies that fit under the cloud rubric. The largest tech companies have not recovered as much as smaller-cap software shops.
For startups, the return-to-form means that public comps are winsome again, and revenue multiples likely back to where they were before December’s unsettling Brief Period of Concern. For investors, the exit possibilities of their investments have perked back up; since public SaaS shops are trending up, so too are expected values of startup M&A and IPOs.
It’s no surprise then, that Slack recently filed to go public. The well-known company will shoot for a stiff revenue multiple it seems, which it may manage given its history of quick growth and apparent efficiency. But if the market had kept falling as it did as 2018 came to a close, what reason would Slack have to go out when it didn’t need the cash, and might have to float at a down valuation? Little.
The good times are back. Again. As they have returned every time that I can recall. Eventually, things won’t snap back. Perhaps the next time. But not this time.
Top Image Credit: Li-Anne Dias.
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