Enterprise software companies Zoom Video Communications Inc (NASDAQ:ZM), Snowflake Inc (NYSE:SNOW), Intuit Inc (NASDAQ:INTU) and Workday Inc (NASDAQ:WDAY) have seen varying success in recent quarters. During short-term volatility, a JPMorgan analyst expressed long-term optimism for software companies to exceed Wall Street estimates.
The Enterprise Software Analyst: JPMorgan analyst Mark Murphy issued Neutral ratings for Zoom and Intuit and Overweight ratings for Snowflake and Workday in a Monday report.
Cautious Optimism: Murphy pointed to decreased hiring by enterprise software companies as evidence that the industry is operating as though it will not see a demand recovery.
“As a result, investors should expect ongoing choppiness, rarely expect upward guidance revisions, and assume that we are seeing a new normal as companies adjust to a higher cost of capital environment,” the analyst said.
However, the report remained optimistic about future growth.
“Net-net, we remain fundamentally bullish on the long-term trajectory for software and the underlying GenAI mega-trends,” Murphy said.
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Zoom Takeaways: Murphy outlined encouraging signs amid bottoming growth as a rationale for his Neutral rating.
“The Q1 guidance implies 1.8% y/y or -1.9% sequential Total Revenue growth, which would be the lowest sequential Total Revenue growth in the history of the company based on available data, and should represent a very achievable bar, in our
view,” Murphy said.
The analyst was also optimistic about the development of several flagship technologies.
“We remain positive on the momentum across Contact Center and Phone as well as the modern communications technology vision Zoom Video is executing on as it integrates GenAI capabilities across its platform,” Murphy said.
Zoom will report first-quarter earnings on Monday after market close.
Snowflake Takeaways: Murphy cited a change in “tone and tenor” ahead of first-quarter earnings for his Overweight rating. The analyst remained encouraged about new CEO Sridhar Ramaswamy‘s leadership during the company’s “reset growth.” He also was optimistic about several key performance indicators.
“…our sense is that bookings could show relative durability against easing billings and RPO comps and while we
don't see the current setup as lending toward further downward revisions in growth estimates, we believe a healthy debate remains around the FQ2 guidance possibilities and whether Snowflake would pass any FQ1 upside through to the full-year outlook,” Murphy said.
Snowflake will report first-quarter earnings on Wednesday.
Intuit Takeaways: Murphy mentioned positive and negative signs for the company as a rationale for his Neutral rating. The analyst was encouraged by a growth in E-filings during tax season and user satisfaction.
On the flip side, the analyst cited cautious management commentary of Intuit brand Credit Karma as a negative amid a prolonged higher interest rate environment.
Intuit will report fiscal third-quarter earnings on Thursday.
Workday Takeaways: Reiterating his long-term Overweight rating, Murphy expressed confidence that the company’s results will fall inline with guidance.
“…despite some near-term noise in cRPO dynamics, we continue to see a mid-teens growth glidepath (and mid/high teens for certain metrics at certain times) for the business at impressive scale,” the analyst said.
Workday will report first-quarter earnings on Thursday.
ZM, SNOW, INTU, WDAY Price Action:
- Zoom: down 0.22% at $64.02
- Snowflake: up 1.66% at $164.55
- Intuit: up 1.22% at $669.25
- Workday: up 0.38% at $258.90
(At the time of publication Monday.)
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