Cloud Software Stocks Soar Following Salesforce and Anaplan's Earnings

Rich software valuations are only getting richer after Salesforce and Anaplan beat estimates and shared upbeat demand commentary.
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Cloud software stocks are once more flying higher, aided by Salesforce.com  (CRM) - Get Report and Anaplan’s  (PLAN) - Get Report strong earnings reports and a seemingly insatiable investor appetite for high-growth, high-multiple tech firms.

Cloud CRM software giant Salesforce and cloud business planning software provider Anaplan are up 25% and 29%, respectively, after they each beat their July quarter estimates and issued above-consensus quarterly guidance. Each company also issued full-year sales guidance that was above consensus estimates, albeit a little below the outlooks they shared in February, before COVID-19 lockdowns took hold.

Salesforce and Anaplan's numbers are overshadowing a more mixed report from CAD/CAM software giant Autodesk  (ADSK) - Get Report, which is down a little over 1% after it beat estimates and issued in-line quarterly and full-year sales guidance.

A host of other software-as-a-service (SaaS) firms are up more than 5% following Salesforce and Anaplan’s reports, amid a 1.7% gain for the Nasdaq. Coupa Software  (COUP) - Get Report is up 11%; Adobe  (ADBE) - Get Report, Alteryx  (AYX) - Get Report and Workday  (WDAY) - Get Report are up 8%; Slack  (WORK) - Get Report and Okta  (OKTA) - Get Report are up 7%; and Shopify  (SHOP) - Get Report and Zendesk  (ZEN) - Get Report are up 6%.

Shopify rival BigCommerce BIGC, which went public three weeks ago, is up a whopping 40%, likely with the help of short-covering. BigCommerce has now more than doubled from its Thursday close, after having soared on Monday following an announcement about a partnership with Facebook  (FB) - Get Report to support Instagram’s checkout feature. The gains have come even though this partnership was previously mentioned in BigCommerce’s IPO filing and Shopify has a similar partnership with Facebook/Instagram.

Along with the top-line numbers that they reported and guided for, Salesforce and Anaplan’s disclosures regarding improved deal activity appears to be going over well.

Salesforce reported a 21% annual increase in its contract backlog (referred to by the company as its remaining performance obligation, or RPO), with organic growth of about 14%. The company’s current RPO, which covers revenue expected to be recognized within 12 months, rose 26%, easily topping guidance for 16% to 17% growth.

Also, Salesforce disclosed on its earnings call that it generated more new business than expected last quarter, with quarterly business activity “consistent with historical trends,” and that it saw a little less revenue churn than expected.

Anaplan, for its part, reported 36% RPO growth and 32% current RPO growth. The company also reported a 31% annual increase in the number of customers generating more than $250,000 in annualized recurring revenue (ARR).

Autodesk’s demand commentary was a little more cautious. On one hand, the company said on its call that usage of its products in China, South Korea and Japan is now above pre-COVID levels, and that it’s also seeing a recovery in parts of Europe. However, it added that new business activity fell by a mid-teens percentage, and that while business in the U.S. and U.K. has stabilized, it has “yet to show meaningful improvement.”

Wednesday’s gains spell a fresh round of multiple expansion for high-growth software firms that in many cases are already sporting sky-high valuations.

More than 15 U.S.-listed software firms with $4 billion-plus market caps now carry an enterprise value (EV - market cap minus net cash) that’s equal to more than 20 times their consensus revenue estimate for this fiscal year. And more than a dozen also sport EVs equal to more than 20 times their consensus revenue estimate for their next fiscal year.

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