SaaS After the Storm: Which Stocks Are Set to Recover?

"Is it time to buy?" "Or sell?" If you're following software stocks, you may be asking yourself exactly these questions. That is a Value question, and Value is exactly where the answer gets interesting. After the AI-driven selloff dragged the whole sector below the broad market on forward earnings for the first time on record, it is tempting to treat SaaS (Software as a Service — cloud-based software delivered by subscription) as one undifferentiated bargain bin. The data says otherwise. Across the twelve well-known names below, the Value Ranks could hardly be further apart, because lower prices did not make these companies uniformly cheap. Some are genuinely well priced after the drop, and others have barely been marked down on valuation at all.

When I put together this analysis, two names surprised me. Cloudflare was one. It is the kind of infrastructure company I would expect to look attractively priced after a sector selloff, because its network sits underneath so much of what AI agents actually run on. Instead it came out at the very bottom of our Value Ranking, still priced at a significant premium despite the crash. Salesforce was the other surprise, in the opposite direction. Together with SAP, it is the software that runs a huge share of the world's businesses, and yet both came out near the top of our Value Ranking, as cheap as they have been in years. And then there is Adobe, which nearly everyone seems to be down on right now, sitting quietly in the middle of the table.

That spread is the whole story of what happened to SaaS this year. The AI-driven selloff pushed the sector below the broad market on forward earnings for the first time on record, and it dragged everything down together without much discrimination. But lower prices are not the same as cheap valuations. Some stocks have genuinely recovered after the storm, with solid fundamentals and a price that now reflects them. Others are cheap for a reason that is worth understanding before you act on it. And a few never really came down in valuation terms at all, whatever their share price did.

The ones that are genuinely weathering the storm

The names at the top of the list are weathering the storm with their fundamentals intact, and their price now reflects that.

RingCentral and Open Text both score a maximum Value Rank of 100. They make a similar trade: modest growth in exchange for serious cash generation. RingCentral grew revenue around 5% in the first quarter to 644 million dollars, but it posted a record operating margin, raised its free cash flow guidance to around 600 million dollars for the full year, paid its first-ever dividend, and cleared its debt so that nothing is due until 2030. Revenue from customers using paid AI products doubled to more than 10% of the total. The Growth Rank of 55 is honest about where the ceiling is, but at this price, the cash does the talking.

Open Text is a Canadian version of the same story, with the added comfort of a Growth Rank of 75. Its cloud business has now grown organically for 21 straight quarters, GAAP net income jumped 86% in the latest quarter, and the company kept buying back stock and paying a solid dividend while a new CEO, Ayman Antoun, took over and continued trimming non-core assets around its Aviator AI platform. The one number to keep an eye on is the Safety Rank of 28, a reminder that years of acquisitions left some leverage on the balance sheet.

Intuit is the highest-quality name on the whole list. It has a Combined Rank of 98 and a perfect 360° View score of 100, and the Value Rank of 87 says you are not overpaying for that quality after this year's drop. The maker of TurboTax and QuickBooks is leaning into AI rather than bracing against it, with accounting agents now running across more than 50 million transactions a week and usage-based pricing arriving in August. Revenue rose 10% last quarter, the full-year earnings outlook went up, and the dividend was raised 15%. The market still sent the shares down 20% on results day. That kind of reaction is what creates a Value Rank of 87 in the first place.

Salesforce shares that Value Rank of 87 for the same reason. Agentforce, its digital-labor product, passed $1.2 billion in annual recurring revenue and grew more than 200%, and the Informatica acquisition deepened the data layer underneath the platform. The stock still fell roughly a third over the year. A Value Rank in the high eighties next to a franchise of this scale is the clearest example of a company that is strong at a good price.

SAP carries Europe here, and its Value Rank of 57 looks almost conservative sitting next to a Growth Rank of 83 and a maximum Profit Growth Rank of 100. Cloud revenue grew 27% at constant currencies, the cloud backlog reached 21.9 billion euros, operating profit climbed 24%, and the company launched a 10 billion euro buyback. The stock still ended the year down around 40%. Strong business, fair price, out-of-favour sector.

Skies may be clearing, but read the small print

The middle of the list is where a decent Value Rank comes with a catch in another Rank, which is important to monitor.

Dassault Systèmes looks reasonably priced at a Value Rank of 55. The problem is the Growth Rank of 31 and a Revenue Growth Rank of just 17. First-quarter revenue grew only 3%, weighed down by the long slump in the global auto industry that provides so many of its engineering-software customers. A new CEO, Pascal Daloz, has taken charge and is leaning on a partnership with NVIDIA to find the next gear. The valuation is fair, but the growth is the question.

Adobe is the mirror image. Its Value Rank of 47 is reasonable, but its Sentiment Rank of 25 is the lowest in the whole group. The second quarter beat estimates, management raised guidance, AI-first recurring revenue tripled past 500 million dollars, and Firefly keeps growing. The stock still fell to a seven-year low, down more than 40% on the year and trading near 15 times earnings. The departure of long-serving CEO Shantanu Narayen, a shift to a freemium model for the AI tools, and fresh competition from AI design newcomers including Anthropic's Claude Design have left investors deeply sceptical. The Value Rank says the price has come a long way. The Sentiment Rank says you would be early.

WiseTech Global is the most structurally interesting name in the middle. A Growth Rank of 93 and a maximum Revenue Growth Rank reflect a 76% jump in reported revenue, lifted by the e2open acquisition. But the more important number is the response the company made to the per-seat pricing threat that is hanging over the whole SaaS sector: it moved roughly 95% of its customers onto transaction-based pricing, so that its revenue does not shrink when AI makes those customers more productive. That is a deliberate structural answer to the central fear driving this selloff. The Safety Rank of 33 reflects the cost of doing it: around 2,000 job cuts in a two-year restructuring and some governance noise around the founder. Great growth, smart repositioning, real near-term turbulence.

Trend Micro is the quiet end of this group. A Value Rank of 41 is solid, and the Safety Rank of 94 is the highest of all twelve names, backed by a strong balance sheet and a roughly 70% dividend payout. The Japanese cybersecurity firm beat estimates in the first quarter and grew its enterprise AI security revenue 50% past 1.3 billion dollars. This is the defensive corner of SaaS: cheap enough to be interesting and stable enough not to keep you up at night.

The storm did not mark these down

At the bottom of the list, the Value Rank is doing its most useful job: refusing to call a lower price a bargain.

ServiceNow has the highest Sentiment Rank in the group at 100 and a strong Safety Rank of 89, but the Value Rank of 27 is why the Combined Rank lands at a middling 46. The first quarter beat on every line and management raised its AI revenue target to 1.5 billion dollars. The shares still fell 17% on the day, the worst single session in the company's history, and the valuation multiple has compressed by more than half over the year. Analysts love it. It is just not cheap yet.

Snowflake and Cloudflare close the list at Value Ranks of 4 and 1, and both are growing fast. Snowflake's product revenue grew 34% with net revenue retention of 126%, and the shares jumped around 36% in a single session after the results and a 6 billion dollar cloud commitment from AWS. Cloudflare also grew 34%, its fastest rate in more than six quarters, and announced it was cutting roughly 1,100 roles to reorganise around what its CEO calls an agentic-AI-first model, with hundreds of billions of AI agent requests already flowing through its network every month. The Growth Ranks of 74 and 89 are real. What the Value Ranks of 4 and 1 are saying is simpler: even after a sector-wide crash, you are paying full price for these two. The growth has to keep compounding for years just to justify where the shares trade today.

After the storm

The title of this piece asks which stocks are set to recover, and I think that is the right distinction to make. Some of these stocks genuinely are: the fundamentals held up, the price came down to meet them, and the Value Rank reflects it. Others are headed in that direction but not quite there yet, either because growth has stalled or because Sentiment is so negative that the market will not give them credit until the numbers run for another few quarters. And a couple never really came down in valuation terms at all, because the market is still willing to pay for the growth story. The storm hit the whole sector but only some look like they will come out on top.