Morgan Stanley Says It’s Time to Buy These 2 Beaten-Down SaaS Stocks

Atlassian's stronger-than-expected results and encouraging guidance helped lift beaten-down SaaS stocks, easing fears of a broad enterprise software demand collapse. Morgan Stanley's Elizabeth Porter remains constructive on Klaviyo and HubSpot, citing durable fundamentals, AI adoption, and room for estimate revisions; she rates both Overweight with $34 and $405 price targets, respectively. Klaviyo reported Q4 revenue of $350.2 million, beating by $16.22 million with EPS of $0.19, while HubSpot posted $846.7 million in Q4 revenue, beating by $16 million with EPS of $3.09.

Analysis

The key signal is not that software is “back,” but that investors are beginning to reprice dispersion inside the group. Names with clear workflow ownership and measurable AI monetization should continue to decouple from generic application vendors, while products that can be substituted by embedded copilots remain vulnerable to further multiple compression. That favors platformized marketing/customer-engagement software over horizontal point solutions because these tools sit closer to revenue generation, making budget cuts harder to justify.

KVYO and HUBS look better than the market is currently pricing because both can turn AI into revenue yield, not just cost takeout. The second-order effect is that AI diffusion may actually widen their moat: as customers generate more content and customer interactions, the value of unified data, identity, and orchestration rises. The risk is execution timing — if AI monetization stays aspirational into 2H, these names can still underperform despite good fundamentals, especially if the market keeps demanding estimate revisions before awarding multiple expansion.

NOW remains the pressure valve for the sector: it is the bellwether most exposed to the “why pay for separate software modules?” debate, so any continued weakness there can cap a broader SaaS re-rating. The catalyst path is narrow: either 1Q/2Q guidance inflects enough to prove demand durability, or the group stays range-bound and only the most differentiated AI-enabled platforms outperform. The contrarian view is that the selloff has already discounted a recession-like demand shock, so even modestly positive budget commentary can trigger fast short-covering over the next 2–6 weeks.

From a positioning standpoint, the better trade is relative value, not broad beta. The market is likely to reward companies where AI increases conversion, retention, or upsell rather than those merely adding copilots to defend seat counts. That implies a long/short spread can work even if software as a whole remains choppy.

Key Decisions for Investors

• Long KVYO vs short NOW for 1-3 months: KVYO has clearer AI-driven monetization and fresher estimate upside; NOW is the higher-risk multiple compression hedge if sector sentiment rolls over again.
• Initiate a tactical long in HUBS on any post-earnings weakness, with a 2-4 month horizon: target a re-rating if management shows even modest AI attach-rate improvement; risk is delayed monetization, which can keep the stock range-bound.
• Buy KVYO equity or 3-6 month call spreads on dips: prefer limited-risk upside capture because the stock’s downside is more sentiment-driven than fundamental unless customer growth decelerates sharply.
• Avoid chasing the whole SaaS basket; instead run a pair trade long KVYO/HUBS vs short a basket of lower-differentiation application names: the market is separating AI-operating-system winners from feature-level vendors.
• Set a catalyst watch on 1Q/2Q guidance revisions: if neither KVYO nor HUBS gets upward estimate revisions by early summer, trim positions as the re-rating thesis will likely stall.