Goldman Recommends 2 Small-Cap SaaS Plays Amid Dot-Com Boom Revival
Goldman Sachs has highlighted two intriguing small-cap names as AI valuations get crazier.
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With every month that goes by, I am more convinced the markets are reliving the Dot-Com Boom.
Much like that technology paradigm shift with its huge uptick in tech spending, the suppliers of the “picks and shovels” will make the lion’s share of the profit from this infrastructure boom. Except this time, it will be Micron Technology (MU) and NVIDIA Corporation (NVDA) instead of Cisco Systems (CSCO) making all that bounty.
Unlike the Webvans of the earlier era, the hyperscaler companies will survive. That said, I doubt any of them will garner an acceptable return on the investment for the hundreds of billions annually that they are applying to their AI infrastructure buildouts. Five years from now, I am fairly certain we will shake our heads on how so many pundits believed the likes of OpenAI and Anthropic merited roughly a $1 trillion valuation.
I continue to try to avoid the overly speculative areas of the markets for most of my covered call holdings. I was heavily weighted in the biotech/biopharma sector heading into 2026. That has served my portfolio well as biotech has surged forward as M&A volume in the first half of this year has already surpassed all of that in 2025. I have found much less value in this space in recent weeks after the sector’s rally.
My small caps have treated my portfolio well as the Russell 2000 was up approximately 21% in the first half of 2026, the best first six months of the year for the index since 1991. I continue to cast a wide net to find targets sporting reasonable valuations in what I continue to view as an overbought market.
Goldman Sachs earlier this week recommended a couple of small cap names that came across my feed via TipRanks. Both are recent additions to the covered call positions within my portfolio. The first stock that was mentioned Klaviyo, Inc. (KVYO). This is a company that operates a customer relationship management platform, that I posted a positive writeup about here on TheStreet Pro back on June 14. The stock has ticked up since that piece but remains in my buy zone.
Braze, Inc. (BRZE) was the second name on Goldman’s list and it entered my portfolio in June as well. The company is quite similar to Klaviyo and operates in the SaaS space as well. Braze provides a customer engagement platform that allows interactions between consumers and brands that provide a variety of capabilities to its clients. It also should be noted that both of these stocks had gotten hit by worries that AI will significantly disrupt the SaaS space but are starting to rebound.
The company has turned the corner on profitability. The company posted its last quarterly results in late May. Braze bested expectations with year-over-year sales growth of 30%. There was a sharper rise in clients spending $500,000 or more annually on Braze’s offerings. Management also boosted forward guidance slightly as well.
Braze posted record free cash flow of nearly $27 million in Q1 and has a debt free balance sheet that ended the quarter with roughly $390 million of cash and marketable securities on the balance sheet. The stock currently trades for just under $22.00 a share and sports an approximate $2.4 billion market cap. The median analyst firm price target on BRZE is in the mid-$30s. The consensus has profits increasing by two thirds this year to 63 cents a share followed by 98 cents a share of earnings in FY2027. BRZE is set up as a solid GARP play here. Options against the equity are also lucrative and have solid liquidity, which makes the stock a good, covered call trade for my portfolio.
At the time of publication, Jensen was long BRZE and KVYO.
