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Entering the first season of 2022 core revenue reporting, companies are falling Software as a Service, or SaaS umbrella, is faced with a challenging market that is likely to remain volatile for the foreseeable future.
That’s the opinion of a group of Morgan Stanley analysts led by Keith Weiss, who said they turned their attention to what they call “high -quality names” in an industry that has seen stock prices drop to full board this year. And in a volatile economic environment, the ongoing specter of the Covid-19 pandemic and Russia’s ongoing war against Ukraine weighing heavily on the minds of investors, the SaaS sector is seen likely to remain under pressure in the future.
“The prospects of rising interest rates and geopolitical turmoil are creating a challenging market backdrop,” said Weiss & Co., noting that SaaS companies have seen their share values drop. averaged 23% in the first three months of 2022.
However, Morgan analysts said that after surveying the corporate chief information officers, and examining product channels, “a surprisingly strong view on demand emerged,” which should benefit companies. of SaaS with stable enterprise customers, defensive information technology spending and strong margins.
Among the SaaS companies that Morgan Stanley says stand out in the current era is ServiceNow (NYSE: NOW), which Weiss said is “well positioned to benefit from a healthy business IT spending environment,” and a product line that should help the company capture IT market share. Weiss said the key factors for investors are what ServiceNow (NOW) management has to say about the durability of its growth prospects, and whether the company will be able to surpass its targets for profit margins. to be flat this year. Weiss has an overweight rating on the stock of ServiceNow (NOW).
ZoomInfo Technologies (NASDAQ: ZI) remains in Weiss’s favor due to strong growth in 2021 that gave the company “a solid setup towards 2022.” Weiss, who has an overweight rating on ZoomInfo (ZI) components, said the company continues to benefit from continued hybrid and remote working environments, which will be able to sell new and improved products in its existing customers, and the market declining ZoomInfo (ZI) shares.
Weiss said that Qualtrics International (NASDAQ: XM) should surpass its software competitors as it builds its presence in the experience management market where companies are looking for ways to get better real-time feedback from their employees and customer. Among the steps Qualtrics (XM) is taking is expanding its offerings to attract customers to the marketing, human resources and call center industries, which should lead to a premium on the company’s shares in the coming months. . Weiss has an overweight rating on Qualtrics (XM) components.
Morgan Stanley analyst Elizabeth Porter is excited about UserTesting (NYSE: USER), another makes user experience and software interaction. Porter, who holds an overweight and overweight rating, said the small-cap company’s shares have outperformed rivals this year, and have risen about 25% in the past three months. The company’s final results came in better than expected, and UserTesting (USER) also raised its outlook for its most recent quarter. Porter said UserTesting (USER) provides a “compelling” option for companies looking to gain more insights into their customers’ experiences during what Porter said is currently “uncertain.” economic environment.
Reports on technology revenues will begin to be high on April 19, when IBM (IBM) releases its first quarter report. The Morgan Stanley analyst recently raised its rating on IBM (IBM) to overweight, and set a $ 150-a-share target price on Big Blue stock.