April quarter earnings continue this week in Needham's broader Enterprise Software space with Salesforce, Inc (NYSE:CRM), UiPath, Inc (NYSE:PATH), Phreesia Inc (NYSE:PHR), and Veeva Systems Inc (NYSE:VEEV) declaring their results shortly.
Sentiment within Needham's broader universe markedly improved last week, with the IGV up 5.6% for the week with several stocks up more than 10%, versus recent weekly trends that have been lower for nearly two months.
The NASDAQ was up 5.7% for the week and the S&P 500 up 4.9%.
Within the Digital Health segment, the set-up for PHR and VEEV is attractive, heading into each company's respective 1QF23 print analyst Scott Berg observed.
With PHR management's right-sized investor expectations for growth investments, Berg expects 1QF23 to be the low watermark for adjusted EBITDA checks indicating that hiring has slowed over the past quarter.
Berg expects strength in subscription and life sciences to offset any payment processing weakness on the top line.
For VEEV, strong customer wins announced over the past quarter will alleviate investor concerns around the FY23 guidance.
While concerns around the growth deceleration in the commercial cloud are likely to persist, Berg expects Vault strength to offset.
The above, along with strong FCF generation and discounted valuation, make current levels an attractive entry point Berg observed.
Berg remained positive on PATH, noting the current labor shortages and broader inflation concerns as incremental demand drivers for its process automation platform.
Berg remains cautious on CRM even though its valuation appears attractive.
While Berg's industry work suggests the large Digital Transformation deal environment has returned for CRM, he continues to hear Marketing and Commerce Clouds experiencing competitive pressures.
Berg waited on the company's ability to drive operating margin expansion consistently.
Price Action: CRM shares traded lower by 0.42% at $164.40 on the last check Tuesday.
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