3 Top SaaS Stocks to Buy in September

With the Delta variant of the COVID-19 driving a resurgence in infections, several companies have already delayed their return to office schedules. For example, Alphabet Inc. (GOOGL) CEO Sundar Pichai recently extended its voluntary work-from-home policy from October 18, 2021, to January 10, 2022. This reality is expected to drive the software-as-a-service (SaaS) industry’s growth.

Furthermore, the consistent and rapid innovations in artificial intelligence (AI) and cloud computing could also help the SaaS industry grow handsomely in the coming months. According to Statista, the SaaS industry is expected to aggregate roughly $145.5 billion this year.

Given this backdrop, we think it could be wise to bet on established SaaS stocks Microsoft Corporation (MSFT), Dropbox, Inc. (DBX), and Cloudera, Inc. (CLDR). Their broad portfolio of products and services and consistent innovations should help them capitalize on the industry tailwinds.

Click here to check out our Software Industry Report for 2021

Microsoft Corporation (MSFT)

Technology giant MSFT’s broad product portfolio includes personal computers (PCs), tablets, gaming and entertainment consoles, and related accessories. In addition, the company is making several advances in the cloud space with the help of Microsoft Azure. MSFT is based in Redmond, Wash.

On July 14, 2021, MSFT announced the launch of Windows 365, a cloud service that introduces a new way to experience Windows 10 or 11 to businesses of all sizes. This represents a significant step towards the company’s  aim of creating a new category—the Cloud PC.

MSFT’s total revenue increased 21.3% year-over-year to $46.15 billion for its  fiscal fourth quarter, ended June 30, 2021. Its revenue from the Intelligent Cloud segment increased 29.9% from last year to $17.38 billion. While its operating income came in at $19.10 billion, representing a 42.4% year-over-year rise, its net income increased 46.9% to $16.46 billion. Also, its EPS was $2.17, up 48.6% year-over-year.

For its fiscal 2023, analysts expect MSFT’s revenue to be $216.75 billion, representing a 12.9% year-over-year rise. In addition, the company’s EPS is expected to increase 14.5% year-over-year to $10.08 in fiscal 2023. Also, it surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 39% in price to close yesterday’s trading session at $300.21.

MSFT’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our POWR Rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

Also, the stock has a B grade for Stability, Sentiment, and Quality. Within the Software-Application industry, it is ranked #15 of 147 stocks. Click here to see the additional POWR Ratings for Growth, Value, and Momentum for MSFT.

Dropbox, Inc. (DBX)

DBX is one of the leading global collaboration platform providers, providing online file storage and sharing services. The San Francisco company has approximately 700 million registered users across 180 countries. 

DBX acquired DocSend, a secure document sharing and analytics company with more than 17,000 customers, in March 2021. The acquisition is expected to help the company expand its product and services portfolio and help customers across industries manage end-to-end document workflows.

DBX’s total revenues increased 13.5% year-over-year to $530.60 million in the second quarter, ended June 30, 2021. Its gross profit came in at $423.50 million, representing a 16.1% year-over-year rise. Its non-GAAP net income increased 72.2% year-over-year to $160.50 million, while its non-GAAP EPS came in at $0.40, representing an 81.8% year-over-year rise.

Analysts expect DBX’s revenue and EPS to grow 11.8% and 55.9%, respectively, year-over-year to $2.14 billion and $1.45 in its fiscal year 2021. In addition, it surpassed the consensus EPS estimates in all the trailing four quarters. Over the past six months, the stock has gained 33.4% in price to close yesterday’s trading session at $31.70.

DBX’s strong fundamentals are reflected in its POWR ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.

In addition, it has an A grade for Quality, and a grade B for Growth. It is ranked #7 of 73 stocks in the Technology - Services industry. Click here to see the additional POWR Ratings for DBX (Value, Momentum, Stability, and Sentiment.)

Cloudera, Inc. (CLDR)

CLDR in Palo Alto, Calif., offers a portfolio of data analytics and management products, such as Cloudera DataFlow, Cloudera Data Science Workbench, Cloudera Enterprise Data Hub, and Cloudera Data Warehouse. It operates through two segments: Subscription and Services.

On August 16, 2021, CLDR launched Cloudera DataFlow for the Public Cloud, a cloud-native service for data flows to process hybrid streaming workloads on the Cloudera Data Platform (CDP). Dinesh Chandrasekhar, the Head of Product Marketing, Data-in-Motion at CLDR, said, "Cloudera DataFlow automates and manages cloud-native data flows on Kubernetes - and it is something only we offer."

For its fiscal second quarter, ended July 31, 2021, CLDR’s net revenue increased 10.1% year-over-year to $236.06 million. The company’s gross profit came in at $191.08 million, up 16% year-over-year. Its net loss decreased 7.8% year-over-year to $33.21 million. Also, its loss per share came in at $0.11 compared to $0.12 in the prior year's quarter.

CLDR’s revenue is expected to be  $1.01 billion in its fiscal year 2023, representing a 9.3% year-over-year rise. In addition, the company’s EPS is expected to increase 20.5% year-over-year to $0.53 in the next year. Also, it surpassed the Street’s EPS estimates in each  of the trailing four quarters. Over the past nine months, the stock has gained 29.4% to close yesterday’s trading session at $15.93.

It’s no surprise that CLDR has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has a B grade for Growth and Quality.

CLDR is ranked #10 of 60 stocks in the Software - Business industry. Click here to see CLDR’s ratings for Stability, Value, Momentum, and Sentiment as well.

Click here to check out our Software Industry Report for 2021

MSFT shares were trading at $299.22 per share on Thursday afternoon, down $0.99 (-0.33%). Year-to-date, MSFT has gained 35.41%, versus a 21.34% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

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