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In a note to clients on Wednesday, a UBS analyst said that the firm is more cautious on cyber stocks such as CrowdStrike (NASDAQ:CRWD), SentinelOne, Inc. (NYSE:S), and Zscaler (NASDAQ:ZS) into the print.
UBS took the stance based on the view that expectations are not pricing in any weakness.
Based on UBS’ August checks, the analyst said: “Anecdotal evidence of deal scrutiny impacting sales cycles is there and while efficacy remains a key purchase decision, checks suggested TCO and ROI are increasingly important factors. We see this supporting incumbents with polished platform consolidation stories.”
The analyst added that “broadly, pipelines continue to sound strong and we don’t get the sense that partners are cutting 2H outlooks. Comparatively, thoughts on CY23 pipelines are understandably opaque, but on the margin we’d argue partners sound positive on demand persisting beyond the next 2 quarters – citing the breach environment, regulatory/insurance changes, and supply-chain pressure as demand tailwinds.”
The analyst explained that across broader software, June quarter results have been “broadly better than feared,” especially for companies that were previously conservative.
“In total, the outperformance that cybersecurity saw over broader software through the first half of the year faded through July before closing entirely following June Q earnings, but has since opened back up over the past few weeks. This outperformance was strongest in April, when cyber concerns around Russia/Ukraine were highest and had faded through some 1Q earnings,” explained the analyst.
