Benchmark Lifts Targets On 4 Enterprise Software Stocks

The broader software index was down since the election, as certain policies from President-elect Donald Trump could hurt the sector, especially stricter visas and tighter federal IT spending.

But, Benchmark Capital said the Trump rally has been kind to a handful of software stocks, particularly those names with lower relative valuations. The brokerage’s checks show that most software vendors are likely to report relatively good results for the December quarter.

“To date, our inputs with company managements, field personnel and potential buyers suggest that business fundamentals are fine, setting the stage for most software vendors to report relatively good December prints, in our view,” analyst Mark Schappel wrote in a note.

4 Enterprise Software Names In Focus

Schappel also raised the price targets on four enterprise software stocks, namely Pegasystems Inc. PEGA, Progress Software Corporation PRGS, QAD Inc. QADA QADB and RealPage, Inc. RP. Barring the Hold-rated Pegasystems, the analyst remains Buy rated on the other three names.

Pegasystems: Hold, $34 PT

Schappel raised the price target on Pegasystems to $34 from $26 due to the company’s ability to harness license upside from its conventional license revenue model and its exposure to large deals.

“[O]ur rating remains a Hold, though we’d happily upgrade if management began articulating a path to increasing revenue growth and profitability, rather than just revenue growth,” Schappel continued.

Progress Software: Buy, $34 PT

The analyst increased the target price on Progress Software by $3 to $34, despite its 19 percent recent run, as it still believes the company is a takeover candidate at these levels. 

QAD: Buy, $33 PT

Schappel hiked the QAD price target by $2 to $33 as the manufacturing focused software firm should benefit from the Trump’s pro-business policies. The analyst is also upbeat on the potential revenue and margin expansion opportunities from QAD’s ongoing cloud transition.

RealPage: Buy, $35 PT

In addition, the analyst upped the target price on RealPage to $35 from $33, reflecting the company’s improving competitive position and the emerging analytics opportunity in the rental housing industry.

The S&P North American Technology Software Index closed Wednesday’s trading down 0.98 percent to $457.04. The Technology SPDR (ETF) XLK opened Thursday's session at $48.73.