Piper Jaffray Cuts Price Targets Across The Board On Enterprise Software Names

• Shares of most Enterprise Software companies have been under significant pressure since the beginning of 2016.
• Piper Jaffray’s Katherine R. Egbert reduced the price targets for several companies in the Enterprise Software sector.
• Egbert cited growth concerns, disappointing results, and conservative guidance as the reasons for the sharp decline in shares in the sector.

The NASDAQ has lost about 13 percent since January 4. The worst hit were the high growth stocks as well as those with limited earnings support. The pressure on shares has been a result of growing macroeconomic concerns, disappointing results, and conservative guidance, analyst Katherine Egbert said.

The two megacaps that performed the best amid this scenario are Oracle [Rated: Overweight], which declined only 3 percent, and Microsoft [Rated: Overweight], which is down merely 9 percent. Egbert mentioned that these two megacaps continue to be the Top Picks.

“Recent conversations with domestic partners, resellers and customers do not indicate a near-term spending contraction. But if weaker-than-expected results continue, the valuation contraction could become a self-fulfilling prophecy - CxO's often look at stock at indices as leading economic barometers,” the analyst wrote.

The price targets had been reduced to reflect the recent multiple compression. “We moved all valuations to a multiple of cash flow, which is the best, most leading indicator for subscription-based businesses,” the Piper Jaffray report noted.

Price Target Reductions

Callidus Software Inc. CALD – Rated Overweight, Price Target from $22 to $20.
salesforce.com, inc. CRM – Rated Overweight, Price Target from $84 to $66.
Microsoft Corporation MSFT – Rated Overweight, Price Target from $66 to $62.
NetSuite Inc N – Rated Underweight, Price Target from $72 to $40.
ServiceNow Inc NOW – Rated Neutral, Price Target from $62 to $55.
Oracle Corporation ORCL – Rated Overweight, Price Target from $46 to $43.
Red Hat Inc RHT – Rated Overweight, Price Target from $95 to $78.
Incontact Inc SAAS – Rated Overweight, Price Target from $12 to $11.
Splunk Inc SPLK – Rated Overweight, Price Target from $78 to $35.
VMware, Inc. VMW – Rated Neutral, Price Target from $65 to $55.

Others

Citrix Systems, Inc. CTXS – Rated Neutral, Price Target from $76 to $78.
Workday Inc WDAY – Rated Neutral, Price Target at $48