Software will be eating the post-pandemic world - RBC

Ziff Davis

11/06/2021 10:17

** RBC says it remains bullish on the U.S. software sector
despite a 6% drop YTD vs. NASDAQ's 10% rise 
    ** Brokerage sees continued strong growth in U.S. software
cos due to many secular tailwinds and says it believes software
will be eating the post-pandemic world
    ** Says hybrid work will become the norm and cos like Zoom
Video  ZM.O  and DocuSign  DOCU.O  will benefit
    ** Says it's important to differentiate these cos from "stay
at home" beneficiaries like Fastly  FSLY.N  and Twilio  TWLO.N 
    ** Investors generally more focused how profitable the
business can be "at scale", instead of current profitability
(assuming it is still growing) - RBC
    ** Says these include high gross margins, strong net
expansion rates, high sales efficiency and a large total market
    ** RBC thinks more use of software-as-a-service (SaaS) apps
will lead to power consolidation within larger platforms,
especially Microsoft  MSFT.O , Salesforce  CRM.N , and Amazon
 AMZN.O , while "potentially forcing M&A exits for some smaller
SaaS players"
    ** "We do believe there will be future pricing compression
(in Cloud), especially as Google Cloud Platform gets more
aggressive on pricing to gain greater enterprise traction" - RBC

 (Reporting by Aniruddha Ghosh in Bengaluru)
 ((Aniruddha.Ghosh@thomsonreuters.com; 91 83 83 81 2416;))