We recently published a list of 10 Best SaaS Stocks to Invest In. In this article, we are going to take a look at where Block, Inc. (NYSE:SQ) stands against other best SaaS stocks to invest in.
Mobile devices are now running more sophisticated and complicated software applications, which supports improving demand for SaaS solutions that can be accessed only with the help of an internet connection. As of now, continuous innovation has been helping businesses in running their operations globally. It continues to improve scalability and flexibility in data storage. Experts opine that the SaaS domain has been aiding in major decision-making and strategy-building as dynamic technologies such as AI and ML have been intersecting with it.
SaaS Growth Drivers for 2025
As per Fortune Business Insights, the global Software as a Service (SaaS) market size was pegged at US$273.55 billion in 2023 and is expected to grow from US$317.55 billion in 2024 to US$1,228.87 billion by 2032. The US SaaS market is expected to grow significantly, reaching an estimated value of US$236.69 billion by 2032, courtesy of the adoption of public and hybrid cloud-based tools by enterprises. Overall, the SaaS market growth is expected to be fueled by numerous factors such as an increase in the adoption of public & hybrid cloud-based solutions, integration with other tools, and centralized data-driven analytics.
As per Straits Research, increased demand for smart devices and their applications has been aiding the broader market. Notably, end-user demand for intelligent devices is supported by the expansion of email, instant messaging applications, and video calls. This is expected to contribute to the expansion of the SaaS market. Also, higher spending on cloud-based solutions by end-use businesses can accelerate the expansion of the broader SaaS industry over the upcoming years.
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Key Trends Likely to Help SaaS in 2025
With continuous advancements in technology, changing market demands, and increased dependence on cloud-based solutions, SaaS trends have been redefining the future of digital transformation for companies. Fortune Business Insights believes integrating AI and ML with SaaS Solutions will fuel broad-based market growth. This means that the adoption of AI/ML is expected to change the SaaS industry in many ways, mainly by improving the critical features of several software solutions. Notably, customizing & automating solutions, augmenting security, and improving human capacity are possible by incorporating SaaS solutions and AI/ML abilities.
Furthermore, SaaS has been continuously evolving and transforming services among cloud computing technologies. As per Fortune Business Insights, the key trending factors of SaaS are expected to continue to evolve and outline the future of cloud technologies, innovation, efficiency, and business values.
Our Methodology
To list the 10 Best SaaS Stocks to Invest In, we used a screener and scanned through several online rankings. Next, we chose the companies that were popular among hedge funds. Finally, the companies were arranged in ascending order of their hedge fund sentiments, as of Q3 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
People using the Cash App paying for goods and services, highlighting the impact the of the company’s payment tools.
Block, Inc. (NYSE:SQ)
Number of Hedge Fund Holders: 64
Block, Inc. (NYSE:SQ) operates as a Saas business via its suite of software solutions which aid businesses manage various aspects of their operations. Monness, Crespi, Hardt upgraded the company’s shares from “Neutral” to “Buy,” offering a price target of $115.00. The upgrade stems from the strong growth in Cash App’s monetization, user base, and inflows, which are well-placed for continued expansion in 2025. This optimism is also aided by the progress made on Cash App Pay/Card functionalities and the unification of apps. In Q3 2024, Block, Inc. (NYSE:SQ) generated a gross profit of $932 million, up 16% YoY and Cash App generated a gross profit of $1.31 billion, up 21% YoY.
Elsewhere, Raymond James analyst, John Davison, upgraded Block, Inc. (NYSE:SQ)’s stock to “Outperform” from “Market perform” on January 3. This upgrade came off the back of analysts’ views about merchant GPV, which is expected to improve in 2025. The analyst has a high degree of confidence that Seller GPV will accelerate into the double-digits in 2025. Furthermore, the merchant business can get a boost from new distribution deals, international expansion, and product innovation, says Davison.
The integration of Cash App and Square ecosystems demonstrates a strong opportunity for Block, Inc. (NYSE:SQ) to create a seamless financial platform for consumers and merchants. This integration is expected to result in higher user engagement, increased transaction volumes, and improved monetization rates. With businesses seeking out cloud-based software to manage payments, sales, customer relationships, inventory, and other operations, Block, Inc. (NYSE:SQ)’s suite of SaaS products will become attractive.
Overall, SQ ranks 7th on our list of best SaaS stocks to invest in. While we acknowledge the potential of SQ as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than SQ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.