NetSuite Already Sour?

Talk about a short honeymoon on Wall Street. When NetSuite, the software-as-a-service (SaaS) darling, went public a few weeks ago the stock skyrocketed. Now, Citi is telling investors to sell the stock. So what's behind Citi's recommendation?

First, keep Citi's "sell" recommendation in perspective. NetSuite shares have the highest valuation of the major SaaS companies -- even higher than that of, notes Barron's. Second, Citi expects sales and profits at NetSuite to grow rapidly through 2009, but not rapidly enough to justify NetSuite's lofty valuation.

The Citi recommendation provides a much-needed reality check to the SaaS market, where many folks have been predicting that SaaS companies are immune to an economic slowdown.

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