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These 2 SaaS Stocks Are on the Rise Thursday

By Dan Caplinger – Aug 26, 2021 at 11:49AM

Key Points

  • Markets eased lower on Thursday morning.
  • However, two software-as-a-service stocks showed big gains.
  • Snowflake and Salesforce.com both reported earnings that made investors optimistic.

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Even as the broader market took a break, investors still like high-growth stocks.

Thursday morning brought at least a brief pause in the stock market's recent record run. Many market participants are focusing on the coming Jackson Hole Economic Policy Symposium, an annual event that features Federal Reserve officials, global central bankers, and economists from around the world.

With the potential for market-moving news to come out of the symposium, investors seemed cautious. As of 10:30 a.m. EDT today, the Dow Jones Industrial Average (^DJI 0.10%) was down 5 points to 35,401. The S&P 500 (^GSPC -0.12%) moved lower by 13 points to 4,483, and the Nasdaq Composite (^IXIC -0.18%) fell 37 points to 15,005.

Even with much of the market moving lower, though, some stocks posted solid gains. Especially noteworthy were a pair of companies offering software as a service (SaaS) to their clients. Below, we'll look more closely at what helped Snowflake (SNOW -2.79%) and Salesforce.com (CRM -1.66%) shoot higher Thursday morning.

Two people in an office, with one pointing at a computer screen.

Image source: Getty Images.

No melting for Snowflake

Shares of Snowflake rose nearly 4% Thursday morning. The provider of data cloud services reported strong second-quarter results late Wednesday that bolstered shareholder enthusiasm for the stock.

Snowflake's numbers showed persistent growth. Revenue doubled from year-ago levels to $272 million, with product-specific revenue climbing 103% year over year. Net revenue retention rates were strong at 169%, and remaining performance obligations surged 122% to $1.5 billion. Operating margin also increased, showing Snowflake's commitment to greater business efficiency. It now counts nearly 5,000 customers in its client base. Among them, 116 generated at least $1 million in annual product revenue.

The good times are likely to continue for Snowflake. The company issued guidance for revenue growth of 89% to 92% for the third quarter, with full-year gains likely to clock in between 91% and 93%.

Snowflake has tapped into favorable trends that have recognized the importance of being able to organize and access the voluminous amounts of data that companies now routinely collect. By integrating its service with those of other important SaaS providers, Snowflake has put itself in position to keep profiting from industry growth for a long time to come.

Salesforce keeps surging

Elsewhere, shares of Salesforce were higher by more than 4% Thursday morning. In its first quarterly report since its acquisition of workplace-collaboration software specialist Slack Technologies, Salesforce had investors feeling confident about its prospects.

Results were solid. Revenue climbed 23% in the second quarter of the company's 2022 fiscal year, and remaining performance obligations showed similar growth to $18.7 billion. Adjusted earnings inched higher by 3% year over year to $1.48 per share, surpassing what most investors had expected to see from this pioneer in customer relationship management software.

The company also expects the remainder of the year to be healthy for its business. Salesforce boosted its full-year revenue guidance by $300 million to a new range of $26.2 billion to $26.3 billion. Earnings should come in between $4.36 and $4.38 per share, $0.57 higher than its previous forecast.

Company officials said that the Slack acquisition is already paying dividends, with higher-than-expected contributions to sales growth likely to last throughout this year and beyond. Salesforce is capitalizing on strong business momentum, and that could keep the stock rising to new all-time highs and beyond.

Dan Caplinger owns shares of Snowflake Inc. The Motley Fool owns shares of and recommends Salesforce.com and Snowflake Inc. The Motley Fool has a disclosure policy.

Stocks Mentioned

Snowflake Stock Quote
Snowflake
SNOW
$149.74 (-2.79%) $-4.30
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$34,429.88 (0.10%) $34.87
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,071.70 (-0.12%) $-4.87
Salesforce Stock Quote
Salesforce
CRM
$144.56 (-1.66%) $-2.44
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$11,461.50 (-0.18%) $-20.95

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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