UBS analyst Karl Keirstead focused on enterprise software stocks on Wednesday and issued ratings for 10 companies, including the industry’s largest players.
He prefers to focus on cloud players, and continues to warn traditional companies that are still selling local apps.
“On the one hand, we pay attention to the multiples of software stocks that have always been rich in revenue (and free cash flow). This multiple makes many technology investors anxious, but on the other hand, we are also concerned about more optimistic prospects, that is, we may be in a historic The era of technology investment-the golden age of software.” He concluded and emphasized the status of the field.
“Due to the new crown epidemic and the economic crisis that have changed the way of thinking of large companies and initiated a multi-year technology investment cycle, the enterprise software industry is facing a decennial demand catalyst, especially cloud-based companies.”
“Although we believe that software and cloud-based expenditures should grow well, the suppression of overall IT budget growth may cause the technology industry’s mood to drop slightly.”
Keirstead rated Microsoft (MSFT-US), Salesforce.com (CRM-US), ServiceNow (NOW-US) and DocuSign (DOCU-US) as “buy”.
VMware (VMW-US), Oracle (ORCL-US) and Citrix (CTXS-US) are listed as “neutral”, while Veeva (VEEV-US) and Splunk (SPLK-US) are listed as “sold” by him.
Here are his views on these 10 files:
Microsoft: “As major enterprises accelerate their adoption of cloud infrastructure, Azure revenue in 2021 and 2022 has growth potential.”
Sales force: “The COVID-19 crisis has initiated an important investment cycle and achieved customer engagement and support. Salesforce is in this trend.”
Current service: “Existing customers and strong partners are better than expected, and their spending growth prospects are solid.”
DocuSign:“Although the growth cannot be maintained at 60%, we have found that the switch to contactless contracts is strong enough to see the growth of Wall Street valuation in 2021.”
Working days:“Although some investors believe that Workday’s core software product “Financial” is beginning to rise, our views are mixed.”
VMware: “In order for the stock to work, local IT infrastructure spending must start to resume spending in the first quarter of next January, but the results of our search have not heard the company have such plans.”
Oracle“Oracle is working hard to promote its cloud infrastructure and database, but because it accounts for only 2% of total revenue, it is difficult to promote anything, and we have not heard that large enterprises have any interest in Oracle Cloud.”
Citrix: “The bleak outlook for its CIO’s spending has disappointed us with the strong growth of WFH (Work from Home) in the last quarter.”
Veeva:“The demand for cloud software solutions in the pharmaceutical/biotech customer market remains strong, but the current valuation of the stock is difficult.”
Splunk“We downgraded the company’s rating, and its growth may be close to 5%-20%. It is not Splunk’s ARR (annual recurring income) growth of more than 40%. The results of our survey do not seem to be in line with the stock price in the 2021 calendar year. Receive 13 times the level.”
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