Nasdaq SaaS Stocks Are Making Big Moves. Here's Why. – The Motley Fool

Date:

- Advertisement -

Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
Motley Fool Issues Rare “All In” Buy Alert
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More
The Nasdaq Composite (^IXIC) has been volatile in 2022, and investors have hoped for an end to its bear market in the near future. Futures contracts on the index moved higher in premarket trading Wednesday, as the Nasdaq aims to try to post a monthly gain for November if it can finish with a gain of 0.1% for the day.
One big driver of the Nasdaq’s year-to-date declines has been the poor performance of software-as-a-service (SaaS) stocks, and a couple of companies in that industry posted their latest financial results late Tuesday afternoon. Investors took the news from human resources software specialist Workday (WDAY 17.17%) positively, but they seemed more concerned about how cybersecurity company CrowdStrike Holdings (CRWD -14.75%) fared. You’ll find more details below.
Shares of Workday rose 9% in premarket trading Wednesday morning, following the release of its fiscal third-quarter financial report for the period ending Oct. 31. The enterprise cloud application provider for finance and HR departments saw solid gains in revenue figures for the period, giving shareholders some confidence in Workday’s future prospects.
Workday’s revenue for the quarter rose 20.5% year over year to $1.6 billion, with subscription revenue growth of 22%. Total subscription revenue backlog figures grew at an even faster 28.5% rate to $14.1 billion, showing continued long-term commitments from subscription clients. Operating cash flow improved slightly from year-ago levels, topping the $400 million mark.
Unfortunately, Workday didn’t do quite as well on its bottom line. Adjusted operating income fell 5% to $314 million, and that contributed to a 10% drop in adjusted earnings to $0.99 per share. Nevertheless, those figures were slightly better than what most of those following Workday had expected to see.
Even as the current macroeconomic environment has increased the amount of uncertainty that Workday faces, co-CEOs Aneel Bhusri and Chano Fernandez still believe that companies undergoing digital transformation efforts will continue to choose its finance and HR software to boost efficiency. With its growing artificial intelligence and machine learning capabilities, Workday’s software platform should help it emerge stronger than ever once the economy starts to recover.
Shareholders in CrowdStrike Holdings weren’t as fortunate, as the cybersecurity platform provider’s stock fell 18% in premarket trading following its release of fiscal third-quarter financial results for the period ending Oct. 31. Despite faster revenue growth rates than Workday’s, CrowdStrike wasn’t able to convince shareholders that it will be able to avoid a slowdown in the tough economic environment.
CrowdStrike posted a 53% rise in total revenue to $581 million, with annual recurring revenue climbing 54% year over year. Adjusted operating income jumped nearly 80% to $90 million, and adjusted earnings doubled from year-ago levels to $0.40 per share. CrowdStrike added 1,460 new subscription customers during the three-month period, bringing its total to 21,146, up 44% from where it was 12 months ago.
CrowdStrike’s guidance for the full fiscal year remained encouraging. The cybersecurity software provider expects sales of between $2.223 billion and $2.232 billion, with adjusted earnings of $1.49 to $1.52 per share. Yet investors weren’t entirely satisfied with fiscal fourth-quarter guidance, which implied somewhat slower growth rates than they preferred to see.
More concerning were CrowdStrike’s comments about longer delays from clients as they go through internal approval processes before closing on subscription sales deals. If that has a marked impact on annual recurring revenue in the future, it could signal a longer-term change in behavior among businesses spending on cybersecurity specifically and on SaaS services more broadly. That would have implications not just for CrowdStrike, but for the whole software industry.
Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike Holdings, Inc. and Workday. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
Market-beating stocks from our award-winning analyst team.
Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/01/2022.
Discounted offers are only available to new members. Stock Advisor list price is $199 per year.
Calculated by Time-Weighted Return since 2002. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns.
Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.
Making the world smarter, happier, and richer.

Market data powered by Xignite.

source

- Advertisement -

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Share post:

Subscribe

ADVERTISEMENT

Popular

More like this
Related

IMF predicts global public debt will be at 93% of GDP by end of 2024

Global public debt will exceed US$100 trillion by the...

World Bank’s Banga says more bilateral debt forgiveness needed

World Bank President Ajay Banga said on Thursday (17...

Ghana, creditor panel agree on debt restructuring, paving way for IMF cash

Ghana has finalised a pact with its official creditor...

Nigeria strikes deal with Shell to supply $3.8 billion methanol project

Nigeria has struck a deal for Shell (SHEL.L), opens new...