Do SaaS stocks perform alike?
Ever since I’ve started following SaaS stocks on my Iphone, I’ve noticed that Workday and Hubspot’s historical price graphs looked a lot alike, but that Veeva’s didn’t. So I decided to plot them on a chart builder to see what they looked like against each other. Turns out they really do behave similarly (Hubs and Wday), and that indeed Veeva is on a different path (rocketing upwards):
As you can see, Salesforce, a much more mature play, is less correlated, showing a kind of “tamed horse” price trajectory when compared with both. When we take Veeva (the incredible growth story) and Salesforce (the mature daddy) out of the way, we see that Hubspot and Workday look a lot alike in terms of price action:
Two selloffs call our attention, around Jul'16 and Dec'16, about which I have no information or recollection (it’s been a long time since I haven’t followed the markets closely). But there seems to be something on general markets, since only looking at the main indexes shows the same patterns:
For reference, I’ve added Netsuite (which, before acquisition price action looked a lot alike the other graphs), so it looks consistent.
Not sure which conclusion to make here. It looks like SaaS seems to be a high-beta play for investors (more volatile than general markets, but basically following the same direction (so if the market goes up by 1%, SaaS goes up by 3%). This makes sense: growth is much higher, profitability is low, so it’s a high-octane bet as a sector. It also shows investors do pay a premium for specific amazing stories (Veeva) which they may be following closely.