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A Guggenheim analyst initiated research coverage of the Software Sector with a predominantly cautionary bias.
The analyst believes the near-term macro weakness “will likely persist for longer than most investors anticipate — and yes, even software is susceptible to macro forces.”
Still, the analyst is positive about the long-term potential of Software stocks as he argues that secular drivers “should result in significant appreciation in some cases,” although investors are warned that the sector will also experience some “ultimate busts.”
“Importantly, determining between the two won’t be easy, but we attempt to do so here and will continue to as the sector—and the macro backdrop—evolves,” the analyst wrote in an initiation note.
Among stocks that received a Buy rating, we highlight Oracle (NYSE:ORCL) and cybersecurity stocks like Palo Alto (PANW), CrowdStrike (NASDAQ:CRWD), and Zscaler (ZS).
Microsoft (NASDAQ:MSFT) and ServiceNow (NYSE:NOW) are started at Neutral while Salesforce (NYSE:CRM) and Snowflake Inc (NYSE:SNOW) have earned a Sell rating.
