The cloud software industry is set to have robust growth in 2020 and throughout the rest of the decade, and several stocks are poised to benefit the most, Piper Sandler wrote in a note on Wednesday.
Piper expects the entire software as a service (SaaS) industry to grow 28% to $210 billion in sales in 2020, with the potential to hit $1 trillion by the end of the decade.
“Both CRM and ADBE have new product tailwinds and margin levers in 2020 that could drive upside to Street [estimates]. After struggling in 2019 and several months of downward revisions to growth, we see stabilization and potential for 2H20 improvement at both TWLO and HUBS as potential catalysts for upward revisions and multiple expansion later this year. Increasing tax regulation and the need for automation keeps us bullish on AVLR that today only processes ~5% of sales tax receipts,” Piper wrote in its note.
Piper commented that the first half of 2020 could be a “digestion period” for the fastest-growing cloud stocks after their big gains in 2019.
“Our top ideas to own for the next decade [have] outsized potential to grow into multi-billion revenue streams by capitalizing on large market opportunities with differentiated technologies,” Piper wrote.