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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.
Photo by Christin Hume on Unsplash