What are the best stocks to invest now?
I wrote about the SaaS stocks a month ago here when they were in the middle of the correction process. Now, the cloud stocks reached some levels that might suggest a price acceptance from investors. Of course, there is no guarantee, but let's look at how their enterprise value to the next 12-month revenue is now.
Even if their valuation is still high, these companies have recurrent revenues and high margins. Yes, it is true, their EV/NTM was insane, but it seems that investors accept more and more these numbers as they are discounting the future potential. It is still huge now, but will it be seen the same in 5 years?!
Of course, they can decrease more. My observation is based on the support they just met. Nothing is guaranteed, but if they consolidate here, they might be good investments.
Cloudfare ($NET)
EV/NTM: Peak: 84.5x, Now: 32x. Decrease: 62%
Price: Peak 221$, Now: $84. Decrease: 62%.
Cloudfare showed a Doji with a big bottoming tail. It is very hard to know if this is a bottom, but definitely, this is an area to watch. Most probably, the price will form a base for a few weeks and then it might go back to the highs. Of course, if the market is healthy and no surprises come on board (like bad earnings, invaded moat, business shifts. etc).
$60 seems to be a good support, an early partial entry for investing can be a good idea. Another partial might be when the price will be over the SMA200. Starting DCA can also be a good solution.
More or less, the same idea is for all the following companies.
Snowflake ($SNOW)
EV/NTM: Peak: 119.3x, Now: 41.1x. Decrease: 66%
Price: Peak 429$, Now: $225. Decrease: 48%
Datadog ($DDOG)
EV/NTM: Peak: 52x, Now: 32.4x. Decrease: 38%
Price: Peak 200$, Now: $138. Decrease: 31%
Crowdstrike ($CRWD)
EV/NTM: Peak: 47.4x, Now: 20.3x. Decrease: 57%
Price: Peak 299$, Now: $170. Decrease: 43%
Zscaler ($ZS)
EV/NTM: Peak: 52.8x, Now: 30.2x. Decrease: 43%
Price: Peak 376$, Now: $239. Decrease: 36%
BILL.com ($BILL)
EV/NTM: Peak: 63.2x, Now: 27.6x. Decrease: 56%
Price: Peak 349$, Now: $169. Decrease: 52%
Monday ($MNDY)
EV/NTM: Peak: 55.8x, Now: 18.3x. Decrease: 67%
Price: Peak 450$, Now: $190. Decrease: 58%.
Sentinel One ($S)
EV/NTM: Peak: 94.7x, Now: 30.4x. Decrease: 68%
Price: Peak 78$, Now: $40.8. Decrease: 48%
As per this analysis, the best stocks that showed a good RS (relative strength) during this time were Datadog ($DDOG) and Zscaler ($ZS). There might be other stocks too, but I filtered them based on their fundamentals and growth opportunity.