Cloud software faces a rough and uncertain time ahead as corporate budgets gird for a feared recession, but one analyst said that risk is not even among players in the sector and that investors need to be “highly selective” in their picks. In a Thursday note, Bernstein analyst Mark Moerdler said some cloud software companies like Workday Inc.
are showing almost no signs of headwinds, while companies like Microsoft Corp.
and Splunk Inc.
are “feeling the pain.”
is “in the penalty box,” the analyst said. “While the price point could be attractive to some, the risks that the wheels fall off the name are real.” “With many companies not yet guiding for next year and IT budgets not firm there is downside risk for those companies with 1) larger exposure to consumer and [small- to medium-business]; 2) offering non-critical workloads; 3) where the [return on investment] from installing the solution is not relatively quick; and 4) the difference from competitive solutions plus the cost of switching is not a large enough barrier for IT to switch to save money,” Moerdler said. Given how this past earnings season played out, Moerdler provided his lay of the land in the cloud software sector. The analyst said he would buy Oracle Corp.
and SAP SE
“for the risk reward with a near-term preference for Oracle.” ServiceNow Inc.
and Atlassian also get a buy from Moerdler “a …