Software Stocks Experience Positive Analyst Upgrades This March
Software stocks may not always be at the forefront of investor preference, but they are gaining traction now. Analysts are raising targets for prominent companies, including Snowflake (NYSE: SNOW), Okta (NASDAQ: OKTA), CrowdStrike (NASDAQ: CRWD), Workday (NASDAQ: WDAY), and Zscaler (NASDAQ: ZS). The overarching message from analysts indicates a rise in coverage, improving sentiment, and increasing price targets, which collectively create a robust market tailwind for these firms.
Snowflake Leads Upgrades in March
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Leading the way, Snowflake is the most upgraded software stock tracked by MarketBeat. The company garnered 21 updates from 39 analysts, lifting the consensus price target to $205, reflecting a potential 30% gain from late March prices. This upgrade stems from impressive top and bottom-line performance alongside sustained double-digit growth and optimistic guidance.
Analysts attribute Snowflake’s success to new products and capabilities, particularly noting its recent partnership with Microsoft (NASDAQ: MSFT). This collaboration allows Snowflake to deploy OpenAI models on its platform, establishing it as the sole provider of both OpenAI and Anthropic LLMs. Analysts consider the company’s guidance conservative, especially given the positive momentum related to investments and AI developments expected in 2024.
Okta: Capitalizing on AI for Growth
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Okta is right behind Snowflake as the second most upgraded stock this March, with 20 revisions logged by MarketBeat. The price target has risen to $115, aligning closely with late March values. Notably, this consensus target is up nearly 10% since the company’s CQ4 2024 earnings report, driven by upward revisions.
These revisions indicate a potential 20% rise for Okta’s stock, which analysts believe could be a conservative estimate. Like many leading cybersecurity companies, Okta benefits from AI’s dual advantages—enhancing capabilities and increasing demands for security. As AI technology and data centers advance, the need for security measures strengthens. Analysts highlighted the company’s solid performance and exceeding guidance as key takeaways from the report.
CrowdStrike Receives Mixed Reception Amid Conservative Guidance
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CrowdStrike presents a different picture. While its Q4 performance was overshadowed by underwhelming guidance, analysts find this guidance to be conservative. The company is expected to maintain strong growth, albeit at a slightly slower double-digit pace, without compromising its robust margins.
Analysts believe CrowdStrike’s cautious outlook signals sustained business momentum above initial forecasts. Notable aspects include client growth and significant adoption rates among larger clients, which enhance overall business leverage. As a result, analysts adjusted their expectations, with target adjustments reflecting a consensus outlook suggesting approximately 18.5% upside from its position at $365.
Workday Drives Business Growth Through Automation
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Workday’s Q4 results displayed both top and bottom line strength, leading to a positive shift in analyst sentiment and elevated price targets. The late March consensus indicates a 20% upside, with potential for an additional 20% upon reaching the high-end target.
Analysts observed improving business trends and a clearer path toward achieving a 30% margin. Currently, 31 analysts recommend the stock as a consensus Moderate Buy, reinforcing a positive outlook.
Zscaler Expected to Increase by 15% to 20%
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Zscaler rounds out this month’s upgrades, ranking 9th. The cloud-based, zero-trust cybersecurity firm received 10 updates from 32 analysts, including new coverage from Morgan Stanley and an upgrade to Buy from Bank of America. Morgan Stanley initiated coverage at an Equal Weight rating without a specified price target.
The consensus price target suggests a 15% upside for Zscaler’s stock, with the potential for an additional 5% at the high end. Analysts considered recent results “healthy,” noting improvements in diversification and upsell capabilities. A highlight from the Q3 release was the increase in guidance beyond consensus expectations, which appears conservative in hindsight.
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