Software stocks aren’t always favored, but now is a good time to own them. Analysts are lifting targets for leading names and indicating significant gains for stocks like Snowflake (NYSE: SNOW), Okta (NASDAQ: OKTA), CrowdStrike (NASDAQ: CRWD), Workday (NASDAQ: WDAY), and Zscaler (NASDAQ: ZS). The theme from the analyst data is that coverage is increasing, sentiment is firming, and price targets are rising, providing a strong and steady tailwind for their markets.
Snowflake Is the Most Upgraded Stock in March
Snowflake is not only the most upgraded software stock but also the most upgraded stock on MarketBeat’s tracking page. The company received 21 updates from 39 analysts covering it, lifting the consensus price target to $205 or a 30% gain from late-March price levels. The cause is top and bottom-line outperformance, sustained double-digit growth, and better-expected guidance.
The analysts mentioned that new products and capabilities were driving results, including the latest deal with Microsoft (NASDAQ: MSFT). This deal allows Snowflake to deploy OpenAI models on its platform, making it the only company of its kind to offer both OpenAI and Anthropic LLMs. Additionally, the guidance is viewed as conservative in light of improving momentum linked to 2024 investments and AI.
Okta: Riding the AI Wave for Long-Term Growth
Okta is the 2nd most upgraded stock in March. MarketBeat logged 20 revisions for this company, lifting the price target to $115 or roughly in line with late March price points. However, the consensus target is up nearly 10% since the CQ4 2024 earnings report and is being led higher by the revisions.
The revisions suggest this stock could rise by 20%, which may be an early and conservative estimate. Like other leading cybersecurity firms, Okta is supported by AI’s dual tailwind. AI improves their capability and drives needs. The more advanced AI, data centers, and business technology become, the more need there is to secure them. Takeaways from the report include top—and bottom-line outperformance and better-than-expected guidance.
CrowdStrike Falls, But Analysts View Guidance as Conservative
CrowdStrike is an outlier, with its Q4 performance overshadowed by less-than-expected guidance. However tepid, the guidance is solid and calls for sustained, if slowing, growth at a high double-digit pace with a strong margin, allowing the analysts to look past it in favor of the bigger picture.
The bigger picture is that CrowdStrike’s guidance is likely cautious, and business momentum will be sustained at a higher-than-forecast pace. Critical details include client growth compounded by penetration and large clients' high-module adoption rates that provide business leverage. The analysts’ response was to reset their expectations. Just as many analysts lowered their targets as raised them, narrowing the range to align with an above-consensus outlook or about 18.5% upside from $365.
Workday Automates Business Acceleration
Workday’s Q4 results include top and bottom line strength and better-than-expected guidance, leading to a firming analysts' sentiment and a rising price target.
The consensus in late March is a 20% upside, with revisions leading to the high end, another 20% when reached.
Analysts noted improving business trends and a more straightforward path to a 30% margin. Thirty-one analysts rate the stock as a consensus of Moderate Buy.
Zscaler Forecasted to Rise by 15% to 20%
Zscaler rounds out the list, ranking 9th for most upgraded in March. 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 at Equal Weight with no recorded price target.
The consensus price target forecasts a 15% upside for this stock, while the high-end range adds 5%. Analysts viewed the latest results as “healthy,” noting signs of diversification and improvement in upsell capability. The highlight from the Q3 release is the improvement in guidance to above-consensus levels, likely conservative in hindsight.
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The article "Analysts Are Upgrading These 5 Software Stocks—Should You Buy?" first appeared on MarketBeat.
