Software stocks going through a relative breakdown

Software stocks in the U.S. and Canada are going through a “relative breakdown,” according to Jonathan Krinsky, chief market technician at Bay Crest Partners LLC. Krinsky cited an exchange-traded fund that’s linked to the S&P North American Expanded Technology Software Index in a report Tuesday. The ratio between the index and the S&P 500 fell 16% through Tuesday from a record set in December, according to data compiled by Bloomberg. Along the way, the ratio reached its lowest level in a year.

Software stocks

ETFs

• IGV   iShares Expanded Tech-Software Sector ETF

(by market cap)                        
Company name Mkt Cap▼

• MSFT  Microsoft  1.027T
• ORCL  Oracle  196.346B; enterprise application software
• CRM  Salesforce.com  117.825B : marketing tools
• SAP   SAP SE  167.375B; Germany; enterprise application software
• ADBE  Adobe   148.399B
• NOW   ServiceNow 50.937B : Information-technology service management software. Its self-service portal enables employees to access administrative and workflow tools. ServiceNow has expanded into software for human resources and customer service management.
• WDAY  Workday 46.461B : Pleasanton, Calif.-based Workday sells software for human capital management, such as payroll tools. It's expanding into financial management software. Workday acquired Adaptive Insights in 2018.
• ADSK  Autodesk  37.775B
• TEAM  Atlassian 31.541B : Sells collaboration tools for software developers and tech departments. Analysts say Atlassian's acquisition of AgileCraft makes a good fit with its project-tracking tools.
• VEEV  Veeva Systems 23.873B : medical software maker 
• SPLK  Splunk    19.291B : real-time operational intelligence; founded in 2003 
• OKTA  Okta 14.097B : identity and security management
• PAYC  Paycom Software 13.265B : human-resources software
• ULTI  Ultimate Software 10.498B : human-resources software
• DBX  Dropbox 10.3B : file-sharing platform; collaborative document operations for businesses.
• TTD  The Trade Desk 10.142B : specializes in “programmatic advertising”.  It automates the process of ad buying in real time. By searching the nearly 20 digital-ad exchanges, TTD allows advertisers to instantly find exactly who they want to target their ad to. Moreover, it’s able to do so whether that’s on their computer, smartphone or other devices.  The Trade Desk’s programs are so fast and successful, they are able to place roughly 9 million ads per second through their online auctions. This creates a much more efficient and cost-effective way for companies to reach consumers.
• ZEN  Zendesk  10.089B : marketing tools
• ZS  Zscaler  9.631B : cybersecurity
• COUP   Coupa Software  8.353B; cloud-based business spend management platform.
• AYX Alteryx 7.413B; provider of data analytics software; founded in 1997; had a successful IPO in 2017.
• HUBS  HubSpot 7.179B : Cambridge, Mass.-based HubSpot specializes in helping businesses automate marketing and sales operations. Its cloud-based platform assists clients in social media, search engine optimization and website content management.
• PLAN  Anaplan  6.773B
• SMAR  Smartsheet  5.599B : application for collaboration and work management. Competes with Microsoft Project.
• AVLR  Avalara  5.558B
• PS  Pluralsight 4.198B : online courses and certification programs.
• CSOD  Cornerstone OnDemand 3.456B : human-resources software
• APPN  Appian  3.264B
• FEYE  FireEye 3.037B : cybersecurity
• BL BlackLine 3.016B
• RPD   Rapid7  2.856B 
• ALRM  Alarm Holdings 2.586B : home security
• LPSN  LivePerson  1.697B; conversational commerce and AI software
• TWOU  2U, Inc.  1.608B: educational technology

+++KNBE  KnowBe4; Clearwater, FL; cybersecurity monitoring 

++INFA  Informatica; California; data management & analytics

++ZI  ZoomInfo; marketing

++NEWR

Acquisitions

• NUAN  Nuance Communications acquired by Microsoft (MSFT) for $19.7 billion, or $56 a share. (4/21) 
• PFPT  Proofpoint  6.695B : cybersecurity; acquired by Thoma Bravo at $176.00/share or ~$12.3 bln. (4/21) 
• RP  Real Page 5.567B : rental housing specialist; acquired by Thoma Bravo for $88.75/share (12/20)  

Software as a service (or SaaS) vs. cloud stocks

SaaS companies are now viewed by many analysts as cloud-computing stocks. However, the two technologies evolved separately.

• SaaS came first. SaaS pioneer Salesforce (CRM) was started in 1999. Amazon (AMZN)-owned cloud software pioneer Amazon Web Services, founded in 2006, didn't hit $1 billion in sales until 2012.
• The customers of SaaS companies purchase renewable subscriptions, rather than one-time software licenses. Customers receive automatic software updates via the web.
• Cloud customers pay as they go, leasing computing resources by the minute or hour via the web. That's not a subscription model. But SaaS also is an on-demand service, making it cloudlike.
• SaaS is one of three main categories of cloud computing, alongside infrastructure as a service (IaaS) and platform as a service (PaaS).
• SaaS “sits in the cloud.” So cloud computing offers additional services other than just SaaS, while SaaS is only that: software delivered to an end user from a cloud environment.
• SaaS companies post the best revenue growth. In addition, SaaS stocks engage in the most mergers and acquisitions. As a result, SaaS stocks trade at the highest multiples.

Tech stocks diverge as U.S.-China trade dispute plays out: software vs. semiconductors

Technology stocks are increasingly diverging from each other as a trade war between the U.S. and China drags on, according to Michael Shaoul, Marketfield Asset Management LLC’s chief executive officer. Shaoul compared software developers with chipmakers, which he called “a trade proxy,” in a report Thursday. He cited the ratio between the S&P 500 Software and Philadelphia Semiconductor indexes. The gauge closed Tuesday at its highest level since a bull market in U.S. stocks began in March 2009, according to data compiled by Bloomberg. The peak followed a 22% surge in less than six weeks.