The Canadian Investor - SaaS Stocks Are Getting Crushed. Buy the Dip or Stay Away?

Episode Date: January 26, 2026

Tech has looked unstoppable thanks to AI winners—but a huge part of the market is telling a very different story. In this episode, Simon and Dan break down the brutal valuation reset hitting SaaS (Software-as-a-Service) stocks, with many major names down 30–50%+ despite still-solid underlying businesses. They explain the classic “moats” that made SaaS so powerful—switching costs, ecosystems, and data—and why AI agents and LLM-driven automation are now challenging the seat-based pricing model that many software companies depend on. The discussion moves through a rapid-fire list of well-known SaaS names to unpack what’s driving the drawdowns, where the market may be overreacting, and where the risk of disruption is real. Bottom line: some of these stocks may be turning into genuine value opportunities—but the old playbook may no longer apply, and investors need to underwrite what the business looks like 2–5 years from now, not what it used to be. Tickers mentioned: CSU, CRM, ADBE, NOW, ADSK, INTU, TEAM, WDAY, TWLO, DOCU, ADP   Check out our portfolio by going to Jointci.com Our Website Our New Youtube Channel! Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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Welcome to the Canadian Investor Podcast. I'm here with Dan Kent. We are back for a regular episode. if you're new to the show, I know we get some new listeners in the new year. Typically on the Thursday release, we'll do our news and earnings, and then on Monday we'll do concepts, look at individual stocks, sometimes look at other assets. We'll do these segments, but this one will be really focused on one big segment that we'll both be chiming in on. So we're doing it on SaaS stocks. So if you've never heard that term, that's software as a service. So think about software that you are using and you pay a monthly subscription for. That's typically most of these stocks will fall into.

So software as a service, they've been, they're definitely in the tech space. And I think a lot of people think all of tech is doing well with a lot of AI names that I've really powered the markets over the last few years. But if you start looking at some of these SaaS stocks, I mean, they've really struggled, especially over the last year. So we'll be talking about those. We'll be providing some names that we looked at, some well-known names that you probably have heard of.

So we'll go over what's causing it in our view, some of the names that have been really hit hard, and whether they're value traps or potential really good value in terms of investments, potential in the future. So that's kind of what we'll do on today's episode. Sounds about right, Dan? Yeah, you want me to just get right in?

into it. Let's, yeah, let's get started. Yeah, so, I mean, this is probably outside of Trump's, like, antics over the last while. I think this is probably one of the biggest stories on the market. It has to be because, like, these are not small companies. Many of them are, like, worth hundreds of billions of dollars. Like, we're talking like the Adobe's, the Salesforce, things like that. And I mean, there's been a huge, huge valuation reset in the SaaS space over the last year or so. So like we're talking and it's crazy to the development. We're talking like a year ago, these were probably some of the most sought after businesses and they traded at ridiculously high valuations because of that. And now they're like complete dumpster. Like nobody wants to own these

things. So lots of them are trading like 50% plus off their highs. I don't think a company like consolation software is there yet, but it's got to be pretty close. It's probably like 47, 48%. So yeah, I mean, it's a good segment to have because obviously a lot of people are going to be sitting here thinking like are these quality companies or, you know, has the industry changed. So I guess the first thing to go over would be what is kind of causing this. And it would probably be, you know, when you think of software, there's three core modes. I guess you could say the first one being switching costs, which would be, you know, the larger, the pain in the rear to switch that software, the less people will do it. Like, and I guess in terms of, are these software stocks like the majority of them are like enterprise level like if you're thinking about yourself how easy it would be for you to switch from say an Adobe Premiere Pro like the video editor yeah like you are not really the the majority of the businesses that these or sorry the majority the revenue these companies generate is from an enterprise level so like it's a lot easier for you to switch whereas you know a company with 2,000 employees it's not that simple so

think of those switching costs. I think it's worth noting, though, that there's also a middle ground, right? So maybe it's a good test to see if it's easy for you to switch because then it'll give you an idea. Yeah. What if there's a lot of small and medium businesses that will use these products? And if you have less than 10 employees, sure, it might be a pain to switch from certain products or software as a service, but it's going to be much easier than, like you mentioned,

a company that has 2,000 employees. So I think we just have to remember that there's a lot of small and medium businesses that will be using these kind of software as a service. And for them, it will be much easier to switch than some larger enterprises. Yeah. And I mean, one of the main pressures you can see

we'll talk about this in a bit is like AI is challenging this in a big way. But again, I'll talk about that a bit later. The second would be like ecosystem. So you have a single piece of software. You know, it doesn't really have all that large of a moat altogether, but you build out like an entire ecosystem where companies are, they get deeply, deeply ingrained in a lot of pieces of these software. It makes switching costs even larger. Like if you think of a company like Adobe, they have Acrobat, which is the PDFs.

They have Creative Cloud, which is, well, Creative Cloud would be their ecosystem. And then inside of that, they have, you know, Premier Pro, they have Acrobat. They have, what else? They have Photoshop. They have a whole entire different type of things. And when a company starts using five or six of these products, again, it kind of plays into that switching cost element. I think Microsoft is probably one of the best examples, right?

Of trying to make it as hard as possible for enterprises because if they start using teams, then you can incorporate a lot of their Microsoft office within teams. You can share stuff. And then you have probably Azure that you're using Microsoft Cloud on top of that. So there is all these different products on the enterprise level that make it much easier and much harder to switch. So Microsoft is probably one of the more resilient one, plus they have other lines of businesses, of course. Yeah, exactly. The third one here would be data.

So, I mean, there's a lot of data. A lot of these companies collect like mountains worth of data, which ultimately makes it harder to switch as well. I would say a company like Intuit would be a prime example, like the historical tax data it would have. Like Salesforce would have a ton of data on, say, customer service, you know, customers that they deal with, like contact information, all that type of stuff. So I would say that AI, again, is, it's perceiving to be a challenge to some of these moats. And obviously any sort of disruption in an industry that is priced this expensive, you're going to see massive declines. I mean, if we look to something like Constellation, it's gone from, and this has reported free cash flow. I know a lot of people like to talk about free cash flow available to shareholders.

but just if we look at price to free cash flow, reported free cash flow, it's gone from 45x back in May of 2025 to less than 17x today. And the crazy thing about a lot of this is a lot of the company's operations have not been all that impacted. They have been impacted to some degree, but not like materially, not something that you would think would draw this large of a decline. No, no, exactly. Smart investing doesn't have to be complicated or time consuming. With BMO all-in-one ETFs, you get a complete diversified portfolio wrapped up in a single ticker.

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I found an apartment on Airbnb that made all the difference. While I was on demand, it helped that I could cook some homemade meal in a real kitchen and just sit in a comfortable living room or rest in bed. Having a space that actually felt like home helped me focus on my recovery rather than the stress of the trip. It really got me thinking about our own place. That host had provided me with some much-needed comfort

when I really needed it, and maybe our home could do the same for someone else. Hosting our home on Airbnb would-led guests experience our neighborhood while giving us a little extra money to put toward a fun trip when I'm back on my feet. plus it's flexible we decide exactly when it makes sense to host our home.

Your home might be worth more than you think. Find out how much at Airbnb.ca slash host. Before you continue, we might as well look at some names you mentioned consolation software just to give some context as to how bad the drawdown has been. Now keep in mind some of these names

they might have a worse drawdown over a year, over six months, but I looked mostly over the last year how these companies have done. So for context here over the last year, the SNP 500 is up around 13%. Not total returns, just regular percentage returns. And then the NASDAQ is up 17%. NASDAQ is probably a better comp here because it's tech heavy, as most people would know. So Constellation Software, take your CSU, like you mentioned.

That one is down 38% over the last year. I mean, I did this yesterday, so it's probably down 40% as this. this point. It seems like it's down every single day every time I look. But it's even worse if you look in the last six months. So most of the drawdown actually happened in that period with 45% down. Salesforce ticker CRM down 31% over the last year. Adobe down 33% ticker ADBE. Service now. Ticker now is down 42%. Autodesk ADSK. That's down 14%. into it, ticker I-N-T-U down 13%. Again, all the last year.

Atlassian, ticker team, down 54%. Ward Day, W-D-A is the ticker, down 27%. Twilio, ticker T-W-L-O up 5.6%. And we'll touch on why some of these are up. Actually, Twilio is the only one that's up in the last year, but we'll just kind of go over why that's happening and we'll break down at the end as well, like what's been happening here, what are some of the fears of investors that's really pushing the stocks down.

The last two here, Docu sign, ticker Docu, the OCU, down 39%, and ADP, the payment processor, ticker ADP, down 14%. So just to give you an idea of the SaaS companies how much they've been struggling over the last year. So it's not just us putting, taking this out of our rear end, like it's some big drawdowns. I mean, so one name, right? At last end is down 54%. So you want to continue then and then we'll get back to each of those names and just give our take and what's been really weighing on those each individual stuff. Yeah, the one thing I'll say about something like, like this has only been a year, right? So you look at Adobe 33%, but if you look from like recent peaks, it's like 60 plus. So it's

been, yeah, it's, it's been quite the drawdown. And the one thing that's kind of shaking a lot of these stocks, I guess, at least in 2026 as well, but has been shaking them in 2025 as well is just LLMs and not only their ability to code now, but their ability to like execute tasks. So I mean, I've, I've played around with quite a few of these tools, like Claude in general. Cloud is the main one that I've used, and I've only used their browser one. I haven't really used Claude code or even now co-work, which I'll get to in a bit. So, I mean, just to give you an example, pre-GPT, so this was like 20-21. We paid like, it was like $15,000 or $20,000 to develop some stock screeners over on our premium platform, like ranking systems, interfaces, like filtering,

all that type of stuff. So I was just messing around with this and I completely revamped that screener from scratch with the ability to generate like custom reports, charts, etc. added more companies, more filterability, like custom screens, all that type of stuff. And I did it in like 30 hours. And I mean, I've shown you it. It's like. Yeah.

It looks nice. Yeah. And I mean, I have absolutely zero coding knowledge, like none whatsoever. And I built this thing out in less than a week. So Claude code. So what Claude code does, you have. effectively install it on your computer and it kind of it gives terminal access in your computer and it can dig around your files. So the easiest way like I can explain this is Claude on the desktop interface would kind of tell us how to fine tune the grading system in our screener, say Excel file or something like Claude code. You tell it. It would literally go into your file, make the changes, edit it, save it and let you know when it's done. So code was advanced. But then they came out. with this co-work that can be pretty much used by people with no coding experience. So it's like a

desktop interface. It came out on January 12th. So I haven't really played around with it a bit, but I mean, effectively it can work for you while you sleep. I mean, let's just say simple example, you're building a website for a client or something. It's late. You're going to bed. Like traditionally, you shut everything down until morning. Now you can just kind of give it to co-work and, you know, it'll do it while you sleep. It's absolutely nuts. And I believe Dan, folk mentioned this on X for like realtors. He said he like map scheduled books showing sent out calendar invites drafted and sent offers away for signing and like you know in that you know in theory he wouldn't have even

needed to be at a computer to do that and like historically like you would have needed somebody you would have been doing it yourself or you would have paid somebody to do do it like that. So probably the craziest thing about this all is co-work was built by code. So like AI is building its own AI. effectively. So they took Claude Code, which built co-work in 10 days. Great for productivity. Scary for humanity. Yes. Yeah. Like terrifying. Yeah. And I mean, if you just think of this type of stuff a company like Salesforce does, like I don't know Salesforce all that well, but I kind of know

they deal with like, you know, interconnection across a business, you know, like different departments looking at, you know, uniform workflows. We're talking customer data, communication, customer support, marketing, etc. Like, if Claude is. able to build a program, you know, that in theory reduces the workload needed for that type of stuff. It's a massive challenge for these types of companies. Because if we look back to those three motes, like Claude kind of crushes all of them. Like you can have a single agent that reads the data. They can work in any ecosystem and you don't really have to train a human. So switching costs are non-existent. Like, you know what I mean? Like if you're, if a business is deeply ingrained in a system,

and they have five human employees that are working and you want to switch, you have to retrain those employees, whereas, you know, this AI, it doesn't need that. Like it's, it's obviously, you know, you don't need to train it. You don't need to do anything to it. I don't know if you want me to go over the seat base model or you want to talk about the drawdowns. You want me to talk about the seats and why, I guess that's probably why this has impacted so much. Yeah. We can kind of, yeah.

Yeah, exactly. So you can go there. I'm just, I was browsing as you were talking, Claude. And I mean, the pricing. so you can get their max plan. I'm not quite sure what it includes. More usage. More data.

Yeah, more usage. So the max plan is $200 U.S.D per person. So if it can save you hiring, you know, paying someone to code your website at $200 a month, even if you factor in your time and the amount of money at your time costs, I mean, it's probably saving you at least 75, 80% of the cost, right? even if you factor in your own time and the value of that. Well, yeah, and it's like when I was using it, it was like, it was addicting.

Like at first, I had the free plan and then it like maxes you out. Yeah. Yeah. Like, oh, man, look at this. Look at what this could do. And like it maxes you out. So you're on the free plan. You max out your resources.

So you either have to paper usage or you upgrade. And I upgraded like, at first I was like, okay, like my usage resets in like five hours. I'll just come back to the computer. And then I was like, oh, screw it. I'm just going to upgrade to the next plan. And I mean, yeah. It's cheap, which again is like kind of weird for the profitability of these LLMs. Like I cannot imagine like the resources being used to actually do this stuff.

It can't be profitable at 200 bucks a month, but. But it's also getting commoditized. I know we're not doing an A&I episode here, but I mean, there's competitions. So it's not like they can increase the cost too much because they have a competitor that might offer it for the same capacity or capabilities for $50 a month less. So you're, they're kind of stuck in this pricing war. And as GPUs get better and better, they probably are able to perform more of this work for a cheaper price. Yeah. Because I mean, like the thing about it is if somebody were to have told me that this was $1,000 a month,

I would probably still use it for that month to build what I did. And then like it still save us a ton of money. But so I guess like the pressure on a lot of these software stocks is a fact they're seat based models. And this Claude co-work and the code will kind of make sense after this. But like these companies don't really sell a single subscription to a company. Like a smaller company like us, we probably only have one subscription. Yeah. We might have a couple seats.

But like most of them are seat based. So if a company goes from 500 to 1,000 employees, the software company in theory doubles its revenue from that company. Like obviously not everybody at the company will have a seat, but they charge you per user. So many are kind of looking. at this stuff like Claude Code and, you know, Cloud Co-work and thinking, you know, how is this going to disrupt seat-based models? Like, all this is doing is helping people code faster. And the difficulty here is it's not just a coding thing. Like, the coding is pretty good, but it can pretty

much turn routine tasks of, you know, five employees. It can do it all itself. So let's just say these AI agents can do the tasks of, say, five employees. In theory, the company no longer needs those five employees or they're going to send they're going to give those five employees something else to do which ultimately reduces the seat counts so you know at at one point you might have had five employees that are touching a piece of creative at a company at adobe before it went live size branding copywriting asset managing etc now you just fire on this thing and it and it'll you know you need one person to run it and that's it so the only way around this really and they are starting to come out with like pricing systems on this

is to charge, they're going to charge way more for AI seats versus human seats. So if you have like an AI utilizing these platforms, they're going to charge you like way more. But I don't know how they would track that. It's, it's interesting. But I mean, a lot of people like they kind of sit here. I've noticed this quite a bit as a lot of people talk about like how this stuff isn't good enough. But I mean, the thing was released like eight days ago. Like if we think about like remember like even 18 months ago like cloud one was eight days ago co-work was released eight days ago yeah like the kind of desktop interface one and people are like oh it's you know it's not really all that good but like 18 months ago you like jam and I couldn't even put the right amount of fingers on a picture and now it's like it can create pictures of me with next to no issue like you couldn't tell a difference so like what is this going to look like in even like two years

Yeah. No, exactly. No, I think that's a good point. So now, I mean, do we want to go and talk a little bit more about the names we mentioned? Yeah, I think so. I'll actually, okay, I'll go over one more thing, which is the AI versus in the seats and then we can go with the companies and finish it off. So there's kind of the theory here that AI is now a tax on software companies because these companies are going to have to implement AI and adapt AI into their business, which is pretty much the exact AI that is kind of crushing their overall seat count. Like if you think about it, we use, like they're going to have to implement stuff like say in Adobe Premiere Pro that kind of, you know, automates cutting out portions of video you don't want to repetition or all that type of stuff. And that might be the exact same thing that costs a seat, like why you might need less people using these, these pieces of software. So they may cannibalize themselves. Exactly. So like I think outcome based cost is the only way around it. So let's just say, for example, you have 20 customer service agents answering a thousand tickets a month. You now have something like Claude, which can answer a thousand tickets a month on its own.

So you trim your workforce back to one or two people and slash your seat needs by like 90%. The only way I think they can get around this is say, we're not going to charge you per seat. We're going to charge you per result ticket. Like that's, I think that's the only way they can get around it. And there's not a lot, there's a lot of people I think right now who kind of believe that, you know, it's going to be tough to navigate. this. So that's kind of why that's like the surface level, you know, situation as to why a lot of these software companies are getting absolutely smashed. Yeah. And if they start charging like that, then they increase the incentive to create your own in-house system. Exactly.

When coding is becoming much easier. If you can replace, you know, 10 developers by just having one because Claude or whichever LLM you use is able to do the rest. and the one developer just basically make sure that, you know, just reviews the stuff that's done. But all the brute force work is done by the AI. At some point, it may just become too easy for not all companies, but a lot of companies to say, you know what, we'll just develop our own and then we'll develop our own tools. It won't even take that much time and it'll save us thousands or hundreds of thousands or millions of dollars. you kind of increase that incentive

is you start charging by result ticket or whatever it is they're using. Yeah, they're in, they're in a very tough situation right now. And I've seen a lot of people who are like very, very bullish on software companies right now. And like, obviously I own constellation. I'm still fairly bullish on constellation.

Like the vertical market side, I think is a little bit different. But I think we have to acknowledge the fact that that like it has changed. Like the situation has. change. These companies don't. And speaking of consolation, so let's go into it.

So let's go there. I'm trying to do my best for transitioning here. Consolation, I think you mentioned it. I think there's a combination of factors now. We both own consolation. I think it's a bigger portion for you or bigger portion of your portfolio allocation than me. For me, it's less than 2%. I mean, it was slightly above and then would the draw as well below at this point.

Obviously, there is Mark Leonard's departure, the founder. And obviously there were probably some key person risk involved with that. Although the new Mark, I forget his name, who took the help. Miller. I think there's a good argument to be made that you'll continue steering the ship. He's been there for pretty much two decades too. So he knows how the business is run. And I think has a similar philosophy to Mark Leonard.

Mark Leonard is still on the board. There's definitely some potential risk AI poses, the ones we just went over, when you have all these different businesses, different software businesses under your umbrella. And of course, as the company gets bigger and more software businesses get disrupted, it does raise some questions on how big do acquisitions need to be to move the needle,

but now also you have to be extra careful on the type of acquisitions that you make because how likely is that software that you acquire is likely, how likely is it to get disrupted? So I think these are all combination happening all in one that are pulling the distog down. We won't go too long for consolation software, but anything else to add before we move on here. Yeah, I guess the only thing I'll say is the like Constellation. Some of their stuff is seat based, but they're not like as exposed to like a company like Adobe or

Salesforce that is that is seat based. And yeah, I won't talk much on Constellation. I made a video on it yesterday. So it's like a 30 minute video kind of laying out everything. So if you want to hear that, you can go watch that. But let's, yeah, if you don't have anything else, let's move on to Salesforce. And we can always make an episode or segment a bit longer in the next month or two. Maybe when it's not as busy on the earnings front, we can do a video and go over constellation,

and give a little update there. I know it's a very popular name, one that Braden obviously does own. It's a decent chunk of his portfolio. Now moving on here to Salesforce and Service Now, so I kind of put those two in the same bucket because they are quite similar. The biggest fear here is that AI agents could lead to more automation. So you did mention that a little bit from companies and less needs for Salesforce seat. So I think that's probably the biggest risk factor for Salesforce right now.

Anything else that I'm missing? No. I mean, I think like they're kind of trying to develop the same thing that Claude is developing, I guess. Like kind of a they kind of combine a bunch of stuff. And, you know, they let like as I had mentioned the markets or sorry, the different areas of the company like interacting with each other. I think this one like worries me a bit, but I haven't looked into their agent force or whatever they're doing to kind of counteract this. So I mean, I don't really have much else to say.

That's fine. Yeah. We'll leave it at that. If it's something that interests you, it's down over 30%. I think both of them are down more than 30%. Yeah. Sells force 31% service now 42%. Do your due diligence.

because there might be some good value plays here, but there might also be some big value traps. It doesn't mean that it's down 40% that it will recover and it doesn't mean that it's down 40% that it'll keep going down. So keep that in mind. If you're a DIY investor ready to take control of your portfolio, BMO all-in-one ETFs simplify the process. Whether you're new to investing or looking to streamline your existing holdings,

These all-in-one solutions are designed to help you invest smarter. With management fees on popular portfolios now reduced to 0.15%, you get professional diversification at a lower cost. Check out the asset allocation ETFs at bemoetifs.com. I recently had to travel to Calgary for some medical treatments, and I wanted it to feel like a home away from home while I was recovering. I found an apartment on Airbnb that made all the difference. While I was on demand, it helped that I could cook some homemade meal in a real kitchen

and just sit in a comfortable living room or rest in bed. Having a space that actually felt like home helped me focus on my recovery rather than the stress of the trip. It really got me thinking about our own place. That host had provided me with some much-needed comfort when I really needed it, and maybe our home could do the same for someone else. Hosting our home on Airbnb would let guests experience our neighborhood while giving us a little extra money to put toward a fun trip when I'm back on my feet. Plus, it's flexible, we decide exactly when it makes sense to host our home.

Your home might be worth more than you think. Find out how much at Airbnb.ca slash host. Adobe, next on the list, I think this one is a well-known name. I think you talked about it a little bit, but Adobe was the only game in town for years with tools like Photoshop, Premiere Pro, Acrobat. You name it. The reality now is that you can do some really high quality work with tools like Canva. If you're doing some picture or some graphic designs, you can do that. A lot of AI tools now have image generators that do a really good job to the script for video editing. So all our videos for the podcast are done with the script and add a little bit of a learning curve,

but I've gotten really pretty good at using it and even combining it with Canva. Much easier to learn than Premier Pro. So anyone who wants to create content that's starting off, I would highly recommend the script over a Premier Pro. And I think a lot of small and medium businesses would probably do that, right, if they want to start doing their own stuff. and Adobe just has a lot more competition than it did just a few years ago. Yeah.

Like just three, four years ago. Think about like in 2021, 2020, it just, sure, there were competition. Canva, I think, was there. The script was probably around that time it was started, but it's nowhere near to the competition they have right now. Yeah, and I think like a lot of, there's a lot of Adobe bulls. Like a lot, I think Adobe is probably like the main one here, like the most bullish sentiment one. I guess you could see out of like a lot of the market. And I think, I mean, the growth is definitely slowing.

Because if you look back to 2021 or 2022, they were growing revenue at like a 20% plus clip. And that's slow to like 10%. So I know a lot of people are saying like it's not an issue. It's it's not getting disrupted. Like I think obviously, I mean, if you if your revenue growth rate has declined by half, you know, you're growing slower. I think this one, I think it's cheap right now, but it's also cheap. Because again, like a lot of their stuff, I think does have the potential to be disrupted or at least like, obviously I don't think Adobe's going to go anywhere overnight or anything. But I mean, there's a lot of alternatives now that, you know, are getting better due to AI. Like a prime example I'll give you with the script is you can use the script to like cut the silences out right out of the platform. Right. So like with it said, you said the amount of time. So if you want any silence more than three seconds to be cut down. to like one and a half second, you can do that.

Yeah. So on something like Premiere Pro, they don't have that. So you have to download or you have to sign up for like something like a fire cut, which is like an additional $500 a year. And then it's kind of an add on to the platform where you can do it. So like there's a lot of our alternatives. Like I think, I think they're going to face a bit of pressure. Yeah, exactly.

And I'm just showing here the other side for Adobe. Clearly you're getting the valuation looks pretty attractive. Freecast will has been growing. free cash flow per share has been growing nicely. I think the issue is when it comes to the growth and to what extent does it starts really slowing down very rapidly and maybe even drop off a cliff. It may be, you know, still good for three, four, five, six years down the line. But I think there's a good argument to be made that is going to face a lot of pressure.

The further out into the future we look, the more pressure it's going to face. But let's move on to the next one here. into it. So into it for those not familiar, they own TurboTags, they own QuickBooks, they own also MailChimp, I think they own a few other things. They make a lot of money, obviously, with TurboTax and QuickBooks. The long-term fear here is that AI will eventually allow the R.S. or Revenue Canada in banks to automate tax filings and bookkeeping completely. So therefore bypassing a software like QuickBooks or TurboTax. And also MailChimp, that one seems to to be the most right for disruption by AI.

I mean, just what AI can do right now, to me, it's, it would be, I've never tried, but I would assume that setting up an automating mailing list with one of those premier tools for, uh, in terms of AI, uh, LLM, like a Claude, for example, you were talking about, I have to imagine that is like relatively easy to replicate. Yeah. I mean, I guess like the mailing servers would be one of the issue because like if you're using a mailchimp or like a convert kit or something. you're kind of using their mailing servers.

But the Intuit thing, I think will the disruption maybe comes along with trust. I mean, as more, more and more people kind of learn to trust it, trust AI in general. Like would I run my tax filings, my company tax filings through an AI platform and trust that everything is correct and submit it? No, but I think as more time and time goes on, like I might. Like bookkeeping, I could see would be a big. that's that solves but I mean at what point are like enterprises and like you know even medium sized businesses is going to you know trust the automation of it is the question I guess

yeah no exactly but again these are the businesses that are most likely are more nimble yeah and you know you're not running a fortune 500 company on quickbooks unless you're um FDX but aside from that aside from that you're not running that no the next one of you're the list atlasium, a ticker team. Their core revenue comes from Jira and Confluence Seats, Sultus software developers. Obviously, you talked about how much some of these tools are useful for coding. And a terrifying narrative for investors that AI coding agents will allow one developer to do the work of 3, 5, 10, 20, whatever it is, I think everyone can see it that you're going to be able to do a lot more coding with a lot less human bodies.

And obviously, that affects are addressable market. Yeah, I mean, I think, I think the coding moat is done. Like, I think it's,

it's done. Like, there's almost little, like, obviously it's really, it's not that good right now. But I, I think a lot of people are kind of stuck in what is right now.

Again, like, what's it going to be in like two years? Like, if me was zero coding, knowledge can build out what I did. What's it, what am I going to be able to do in a couple of years? So yeah, the coding end of things, I would be very concerned. The one I'm saying of code, the one you missed, you missed Autodesk. Yeah, I was going to say speaking. Yeah, and that's a good one.

That's a good one. This one is really interesting. Again, we're doing this a bit more rapid fire, but Autodesk is tied to the physical economy. So, for example, for those not familiar with that, them, they own AutoCAD and Rivet. My dad, used to do home plans before he retired, and AutoCAD was you needed to have it. Back then it was licenses, but I believe they switched over more to a SaaS-based company here. And you have a couple of risks here for Autodesk. So you have with higher interest rates, fewer buildings are breaking ground, obviously. Especially in Canada, you're seeing that in the U.S.

I think building has kind of slowed down a little bit. So new less building, whether it's office buildings or residential buildings, means fewer autocat and revet licenses. AI could hit its business pretty hard because just take a second to think about this. Will it eliminate architects, for example, who design buildings? No, probably not, but it will probably do something similar to developers, but it could lower the number of seats that the firm needs because an architect firm could eventually use AI to do all of the grunt design or junior work that was done in the past. And then you get the actual architects to review the work, tweak it a little bit, maybe AI made some mistakes here and there. But to me,

it's definitely similar to the kind of challenges you could see with coding. Yeah, but this is a good one because even while I developed my basement like last year and the entire the entire project, I didn't do any material counts myself. Like all I did, I drew the basement out. I drew the walls. I asked it how many two by fours I needed. It, I maybe ordered five extra. So you're talking like $10, $12 I went over.

The electrical, I drew out all the plugs and stuff and asked it how much wire I needed. And what wire I needed, nailed it. Drywall nailed it. And that was, that was 12, 18 months ago. So yeah, that's, and that's a simple basement development. Some people say, well, you know, these large companies aren't going to do that. They could very well do it to eliminate like very mundane tasks that, you know, they don't

mind replacing with some AI based. Yeah, exactly. Yeah, I did the same. So I have a new podcast studio that it's not fully completed just yet. But for those watching on video, they probably can see that it looks already better. I'm just missing a few things for my background. But I used AI to help me do the design. And then not to the same extent, but I had to do some patching.

I had to do some painting and just the amount of paint I needed. The actual paint color, the suggestions. They gave me the right paint color for the brand I was using. Yeah, it was really good. It gave me the correct amounts. I just saved a whole lot of time. So it's not to the same extent of redoing a basement, but I used it as well. Really useful.

Yeah, I mean, interior design is that's under ton of pressure as well. Yeah, exactly. Okay, the next one here. So we have only four less. We'll do pretty quickly so we don't go too long. So Workday, similar to Salesforce and Workforce now, AI agents could lead to more automations from companies and less need for their seats. A recession would also hit Workday hard because less employee means less Workday licenses require. So that's kind of the some of the risk here.

Any comments on Workday? No, I don't know. Like, I know very surface level what they do, but I don't have anything else. else to add. Okay. Now the next one, a name that was definitely very popular during the pandemic, a name that we heard about, a lot of people were asking us to talk about it. So Twilio, so I'm just sharing here just to see an extent here. So Twilio was the only name that was up in the past year. Now, what I'm showing is, yes, it was up in the past year, but if you're looking five years out, it's down 73% from the maximum drawdown.

So this one was a darling during the pandemic. So just to give some context here, yes, it's up, but it's definitely more value, deep value play, I think, for a lot of people looking at this name. Yeah, the valuation's not that cheap. But anyways, in the past company paid $2 million because building a communication system was hard. So basically with AI coding agents, again, a developer can now build a basic SMS, notification system, for example, in a weekend using generic cloud tools, which makes their business

right for disruption. So they do kind of the back-end communication stuff. And a lot of this coding and things that they build, their moat around, is starting to erode pretty quickly because of AI. And you can just really see the downward spiral of the stock, which

kind of coincides with when LLM, Chad GPD was released. Yeah, they're kind of like if you get a tax set, your Uber driver is there or you get like a text that you have a chiropractor appointment or something like the like the back end interface is kind of like that and and yeah I mean I could easily see that being disruptable for sure but again I never followed them all that much or commoditize right it's another one that you know you could have a company that could replicate a lot of their

offerings for fraction of the cost and then sell that over to some of some larger companies like Uber that need that service, that messaging within their application. Now DocuSign, this one, I think everyone has heard the name. DocuSign is a premium product for 90% of businesses. There's a lot of free signature tools there that are just good enough. And for a lot of businesses and like home users, it's just, you just don't need to pay that. And when you want a product you have to pay with, I think you can get a lot of these better products, alternative. to DocuSign that are a fraction of the cost. So I think that's the bare case for DocuSign.

It was a darling during the pandemic because it was the first big name in that space. But now I just, yeah, I don't have. I would not touch that with a 10 foot pull, but that's just me. I don't know about you. Yeah, like wasn't the, yeah, DocuSign, it was kind of like a company, like you could obviously sign stuff, but it would like automatically pull together contracts and stuff and like, you know, pre-fill stuff in with like customers. Like that's, yeah, I mean, I would argue that AI is already doing that very easily.

Yeah. Yeah. The stock is just, if you zoom out with the pandemic, the stock has just completely been crushed. I think it hit a peak of 300 something bucks and now it's trading at $56. So it makes sense. Obviously, when we were in like global walkdowns, you know, there's going to be a lot more digital signatures, digital. Yeah. Yeah.

Yeah. The last one here on the list is ADP. So ADP is definitely dependent on the economy. So if companies are not hiring and adding new employees on their payroll, it caps the growth for ADP. Now ADP does payroll processing for a lot of large companies. There is plenty of more modern options for smaller companies out there that is eating to its market share. So on the smaller side, there's some more nimble companies. And then if you're thinking of going more global, if you're a large company that has operations across countries,

and you're looking for a robust system. ADP, it's not always the easiest to implement across different jurisdiction. I actually saw this firsthand with my previous employer that was opening offices and one of them was in Singapore and they required to have the payroll actually done there. Well, I was done in Canada, but everything done according to Singapore rules. And I remember my payroll colleagues were really, they took, it wasn't easy to get that implemented. And apparently, I don't know the other platforms really well.

I just know the ADP fairly well because I was in HR and payroll was within our team, even though I was working on the pension side. But apparently platforms like Deal, D-E-E-L are much better for this type of use case. So ADP is also getting some pressure there. This one is probably the one that as I would say a bit more staying power, just because that's something large enterprises, they probably don't want to mess around too much with payroll and having a company that's usually pretty well versed

with different government regulation within the jurisdiction that they're operating in. And if they have a reliable payroll system, that might be the last thing that the companies will want, especially the large clients, don't want to mess with. So ADP is probably the one that I think will be a bit more resilient here.

Yeah, like if you go back, to say like a constellation, like a mission critical piece of software. Like yeah, you would argue that this was pretty close. I mean, the ramifications of an error would be quite high. So yeah, I don't know ADP very well, but I can't imagine like large corporations are going to want to turn over payroll to AI until again, that trust level is very, very, very high. Yeah, exactly. So we'll have to see.

But I think there's a good overview. There's definitely some more names that we can, didn't talk about. There's just so much we could fit in without not going into too much detail and, you know, doing too many companies. If we just wanted to do a really surface level view, maybe we could have put in a few more, but we wanted to give you just a general idea of what's happening with each. So there's definitely some, I would say there is some value to be found, but I think you have to pick the right one. Which one is the right one? I really don't know. I haven't dug deep enough. But clearly the market is bearish on a lot of these names. So if if your thesis is that, you know, the disruption won't be as great and you really hard getting it at a big discount, then there could be some pretty good turnaround plays in here.

Yeah. I mean, I would say like the market is obviously always forward looking, but I think with a lot of these companies, you need to throw out anything they've done in the past. And if you're going to buy one of them, you really need to be thinking about where they're going to be in two or three years. Like what the company has generated like free cash flow wise, let's say over the last two, three years. Like I think it's completely irrelevant. Like what you need to be thinking about is what they're going to be generating in two, three years time. Because I mean, a lot of these companies look fairly cheap. Well, I guess I don't want to say cheap, cheaper.

But obviously, you know, you have that disruption potential, which is not zero. Like if you, I find if you head on like something like X, there's a lot of people who are kind of pushing that like a lot of these companies like the chance of disruption is zero. It's definitely not zero. Like there's no way. There's no way it's zero. The market doesn't, you know, the market is fairly efficient. It can be wrong, but like they don't sell off companies 60% when there's zero chance of disruption.

It just doesn't happen. No, exactly. I know we talked a lot about Adobe, but this is probably the best example to show. I mean, the valuation. whether you look at the trailing 12 months or have started you looking forward. I mean, it's trading at a P of 15. Yeah.

Price of fee cash flow of 15 as well. This is something that was never, never the case for Adobe. It was always trading in the, what, probably in the 30, 40 even at some point. Yeah. So it's just something to keep in mind. So there you go.

So you see the price to earnings just to show an example for a joint DCI viewers. So you have it, let's just say, general that it was trading around like in the 30s. That's kind of the, let's say more of the norm. Of course, it sometimes would go as low in the 20s as well. But for the most part, Leggie was trading in the 30s or higher.

And now you have them trading around, yeah, and trailing 12 months of 12, but 4 to 15. So clearly, even if growth slows, but it stays decent, this could be a good value play. But again, I think there's still some pretty big disruption risk. Yep, you got to be, you have to be very careful with, like, if you look, if you're looking at a company like Adobe and seeing that they trade at only 12 times free cash flow, like that's not, it can be a bargain, yes, but the market is also pricing in a lot of difficulties in the future. So don't look at that number. Look at, you know, what you think they're going to do over the next three years, five years. Yeah. Well, put great way to end it on. Thank you a lot for listening. If you haven't done so, really appreciate if you could give. us a five-star review. If you'd like to see our full videos, get the podcast ad free in our monthly portfolio update. Go to join tcI.com. We will be back on Thursday with a regular news or a news and earnings episode. So just stay tuned. Hopefully there's going to, I think there's going to be

some more Canadian names. Yeah. We'll be back on that Thursday. Thanks everyone. The Canadian Investor Podcast should not be construed as investment or financial advice. The host and guest featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.