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The Wall Street Publication > Blog > Markets > Cloud Shoppers Not Just Seeking Bargains
Markets

Cloud Shoppers Not Just Seeking Bargains

Editorial Board Published March 22, 2022
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Cloud Shoppers Not Just Seeking Bargains
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Private-equity firm Thoma Bravo’s Anaplan deal is likely to help buoy a battered cloud sector.

Photo: Richard B. Levine/Zuma Press

Anaplan PLAN 27.69% wasn’t the cheapest cloud stock—nor the most beaten down. Both points should help buoy a battered sector.

The maker of cloud-based software used for business planning and analytics said late Sunday it struck a deal to be acquired by private-equity player Thoma Bravo for $10.7 billion in cash. The per-share price tag of $66 represents a 40% premium to the price Anaplan was fetching late last week, before a pair of activist investors reported sizable stakes in the company. It’s also roughly on par with the stock’s price in early November, before market sentiment began to turn against cloud companies and other richly valued sectors.

Anaplan’s case wasn’t helped by a poorly received third-quarter report later that month. Billings for the quarter narrowly exceeded Wall Street’s forecast by 1.5% after averaging an 8% beat over the previous five quarters, according to FactSet. The stock sank 15% following that report. Still, Anaplan had been faring better than many of its cloud-software peers. Before last week’s lift, the shares were down only 28% over the preceding six months, compared with a 35% drop for the BVP Nasdaq Emerging Cloud Index in that time. Anaplan’s multiple of around 8 times forward sales last week was also around the peer index’s median.

In other words, Anaplan’s buyers weren’t just shopping in the bargain basement. The harsh rerating over the past few months has taken down even the most popular names— Snowflake has gone from trading around 70 times forward sales in mid-November to just around 30 times now. But most aren’t in that echelon; the median multiple on the BVP index is now just under 8 times forward sales compared with 14 times six months ago.

Hence, the Anaplan deal “should provide support for software valuations that have been hit hard this year due to fears around a rising rate environment and macroeconomic uncertainty,” Brent Thill of Jefferies wrote on Monday. Brad Reback of Stifel also projected “takeout to remain robust in coming quarters”—especially for companies with enterprise values under $15 billion still growing at more than 15% annually. Investors haven’t gotten the message yet; the BVP index slipped more than 1% Monday along with most other broader indexes.

In cloud software, it’s still a buyer’s market.

Write to Dan Gallagher at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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