Wunderlich Describes The Software Landscape

Following the strong performance of Software names in the first half, some investors may believe there is limited sequential upside in 2H16, Wunderlich’s Ryan MacDonald said in a report. He expressed confidence, however, regarding the performance of Paycom Software Inc PAYC and Proofpoint Inc PFPT, rating both stocks as Buy and citing them as the top picks.

Analyst Ryan MacDonald noted that among the worst performing stocks so far in 2016, there seemed to be value in Hortonworks Inc HDP, Palo Alto Networks Inc PANW and PFSweb, Inc. PFSW. These stocks had underperformed year-to-date, despite their strong fundamentals. MacDonald has Buy ratings on all three names, and expects these stocks to “bounce-back” from their current depressed levels in 2H16.

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Stock Performance

“The first half of 2016 has brought a lot of volatility to the public markets with the market bottoming in early February,” the analyst wrote. He mentioned that shares of Hortonworks, Palo Alto Networks and PFSweb had lost 51.2 percent, 30.4 percent and 26.2 percent, respectively, in 1H.

Markets had rallied in the final week of the prior quarter, after getting over the “initial shock” of Brexit, MacDonald stated. He added that shares of Paycom Software and Proofpoint Inc had surged 6.6 percent and 7.1 percent last week.