Software-as-a-service (SaaS) companies have been hit hard since November 2021 when the re-pricing of the tech sector began. Year-to-date (YTD) the Nasdaq Composite contains most, if not all, SaaS companies lost 15% but it doesn’t tell the whole story.
Smaller tech companies dropped 30-40% which is not well reflected in the Composite because large tech companies make up about 20% of the index that “protects” it from more volatility. swings because the tech giants haven’t lost too much momentum in 2022.
In challenging market conditions, the revenue season for SaaS companies for 2022 is about to begin and here are three high -quality companies that must ride the market volatility in 2022.
ServiceNow (NYSE: NOW)
ServiceNow’s annual revenue grew between 2016 and 2021 by 33% to nearly $ 5.8 billion, benefiting from the growing demand for digital workflow services, especially during Covid lockdowns. The company estimates that its revenue will increase by at least 20% year-on-year (YoY) over the next five years.
The company should benefit from the ongoing IT spending environment with more workers and companies introducing remote and/or hybrid work. Earnings for Q1 were announced for April 27, the durability of growth will be key to watch that could influence the stock price.
The stock dropped sharply to start the year and is currently trading below the 20 and 50-day Simple Moving Averages (SMAs). The price rebounded twice from lows around $ 490 looking to climb. If there is a positive defeat in earnings and predictions, the price could rise to challenge resistance around the 200-day SMA.
Analysts agree when it comes to sentiment giving the stock a strong buy. The average next 12-month price they see is $ 674.24, which represents a potential increase of 32.90% from the current trading price of $ 507.33.
ZoomInfo Technologies (NASDAQ: ZI)
The company raised its revenue by 57% last year offering a good setup for 2022 earnings scheduled to be announced for Q1 on May 2nd. Offering a cloud-based, go-to-market intelligence platform, the company also benefited from the tailwinds of remote and hybrid work.
With smart acquisitions, the company raised its total addressable market (TAM) to more than $ 70 billion from strength to strength. Given the increased pace of earnings, the company may provide better-than-expected guidance that should lead to a re-rating of shares.
In late January 2022, the share price hit its low point and rebounded upwards to trade in an upward channel. The price is still far from the November 2021 highs but it is tightly tied between the 20 and 50-day SMAs. The trading volume does not change throughout the month and some sideways trading can be expected up to profits.
On Wall Street, the consensus is mostly united by strong buying, with the average next 12-month price predicted at $ 73.50. This means that the price is likely to rise 33.64% from the current trading price of $ 55.
UserTesting (NYSE: USER)
Running a SaaS platform that allows businesses to learn about customer experiences in the products they make, USER seeks to lift the market. The company listed on the NYSE relatively recently but the market for customer experiences is set to explode by 17.9% annually which could potentially benefit the share price in the future.
For the full year of 2021, the company increased its revenue by 45%, with a 76% increase in international revenue making up 20% of total revenue. It is reasonable to expect that the company will continue to put up stellar numbers and it is likely to grow above industry standards as UserTesting is still in the investment phase of its growth.
The stock performed poorly to start the year falling straight down, reaching a low in February. After a nosedive, the stock has recovered and is currently trading in an up channel creating higher and higher lows that may indicate a bullish growth of the stock price.
Analysts covering the stock are giving it a strong buy, predicting the next 12-month average price to reach $ 14. This predicted price represents a potential increase of 34.36% from the current trading price of $ 10.42. It will be interesting to monitor the progress of the company with a possible price increase for the stock in the near future.
The bottom line
As businesses look to embrace new ways of working remotely that are becoming more popular, the tools allow these three companies to be all on the same page wherever they work.
Stock prices have been hit hard but business prospects remain stable and intact. For investors who aren’t afraid of the penalty tech stocks received in 2022, these three companies could spice up any portfolio looking to have more exposure to high -growth companies.
Disclaimer: The content on this site should not be considered investment advice. The investment is speculative. When investing, your capital is at risk.