The broad correction in high-growth software shares over the past quarter has presented opportunities to gain exposure to “category winners at attractive levels on a long-term basis,” according to BMO Capital Markets.
The Software Analyst: Daniel Jester upgraded the rating for Workday Inc (NASDAQ:WDAY) from Market Perform to Outperform, while reducing the price target from $330 to $295. In a separate note, analyst Jester reiterated an Outperform for Bill.com Holdings Inc (NYSE:BILL), while keeping the price target unchanged at $209.
The Software Thesis: Workday’s revenue growth could “gradually reaccelerate” to more than 20%, Jester said in the upgrade note.
The growth is likely to achieved on the back of “steady, mid-teens-like growth in the scaled HCM business,” which represents around 75% of Workday, and a recovery in the financial suite, “driven by renewed momentum in the mid-market, as evidenced by favorable ERP/core accounting sentiment from our Finance IT executive survey,” the analyst wrote.
In a separate note, analyst Jester said that Bill.com is a leader in a market that is rapidly digitizing back-office functions and “is a long-term beneficiary as payments shift from paper to electronic.”
“With shares down 50% from their peak despite what we would argue as little fundamental change in the business, we see this as an attractive entry point,” he added.
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