TEAM, WDAY, ZS Eye Worst Quarter Ever Amid SaaS Slump — Which Stocks Could Rebound The Most?

• Heavyweights Microsoft and Oracle, as well as a key ETF tracking Saas stocks, are down about 27%.
• Investors and analysts expected stocks to regain lost ground, with the most upside seen in ServiceNow shares. 
• In terms of valuation, Adobe is the cheapest in the software group.

With the March quarter nearing its end, the scale of the selloff in software stocks is coming into sharper focus, along with the opportunities it has created. In the three months, Atlassian Corp shares dropped 60%, Workday shares dropped 42.2%, and Zscaler shares dropped 41% – their worst quarterly performance on record.

Shares of Microsoft, the leader in office productivity software, declined 26% and are heading for their worst quarter since the 2008 financial crisis. Noted software companies, Adobe and Salesforce, dropped about 33%. 

Tech Market Mayhem

A wave of new AI tool launches, particularly from Anthropic, combined with investor concerns over overheated tech valuations, hammered shares of software companies once praised for their high margins and predictable revenue streams.

The pressure intensified after a broader market selloff in March, tied to the ongoing U.S.-Iran conflict, which has now stretched into its second month.
 

While some software stocks saw brief rebounds, the broader quarterly picture remains firmly in the red. The iShares Expanded Tech-Software Sector ETF (IGV), which tracks Saas companies, declined a whopping 27.3%, while the Invesco QQQ Trust Series 1 (QQQ), which tracks Nasdaq-100 stocks, dropped 8.3%.

NOW, ADBE, ORCL On Radar

Still, investors and analysts believe some tech stocks may have turned attractive. For instance, analysts, on average, believe ServiceNow could rally nearly 90% from current levels – that’s the highest stock forecast among the top SaaS stocks (see table).
 

Source: Koyfin

They also believe Oracle stock, which has been pressured with debt concerns, could rally 76% in the next 12 months.

In terms of valuation, Adobe is the cheapest in the group. Adobe’s forward 12-month price-to-equity ratio is below 10, the lowest level since October 2011. Interestingly, the company’s CEO, Shantanu Narayen, recently announced that he will be stepping down and Adobe has launched a search for his successor.

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