Scotiabank initiates coverage on 13 software companies

Investing.com — Scotiabank initiated coverage on 13 software companies in a note Tuesday, reflecting a balanced view of the sector amid evolving market dynamics. 

An analyst at Scotiabank (TSX:) highlighted the importance of AI-driven strategies in navigating the software industry’s opportunities and challenges.

The companies covered include Salesforce (NYSE:), Workday (NASDAQ:), ServiceNow (NYSE:), Autodesk (NASDAQ:), and Monday .com, all with Sector Outperform (SO) ratings. 

For Salesforce (CRM), Scotiabank set a price target of $425, representing a 24.6% upside. The report emphasized Salesforce’s focus on its Data Cloud and the potential for AI tools like Agentforce to boost multi-cloud adoption. 

Similarly, Workday (WDAY) received an SO rating with a price target of $340, reflecting confidence in its subscription revenue growth of approximately 15% over the next two years. 

Here is a full list of the companies covered:

• Autodesk (ADSK): Sector Outperform; Price Target (NYSE:) $360

• Asana (ASAN): Sector Perform; Price Target $15

• Salesforce (CRM): Sector Outperform; Price Target $425

• Sprinklr (CXM): Sector Perform; Price Target $7.70

• Dayforce (DAY): Sector Perform; Price Target $75

• Intuit (NASDAQ:): Sector Perform; Price Target $700

• monday.com (MNDY (NASDAQ:)): Sector Outperform; Price Target $325

• ServiceNow (NOW): Sector Outperform; Price Target $1,230

• Sprout Social (NASDAQ:): Sector Perform; Price Target $28

• Veeva Systems (NYSE:): Sector Perform; Price Target $235

• Workday (WDAY): Sector Outperform; Price Target $340

• Zoom Video Communications (NASDAQ:): Sector Perform; Price Target $85

• ZoomInfo Technologies (ZI): Sector Perform; Price Target $10.30

The bank suggests that companies with strong AI integration strategies, such as Salesforce and ServiceNow, are well-positioned to outperform. Meanwhile, those facing macroeconomic pressures, like Sprinklr and Sprout Social, may face hurdles in achieving growth targets.

They explain that companies like Salesforce, Workday, and Monday.com have consistently outperformed benchmarks like the IGV Software (ETR:) Index (+29% YTD). 

In contrast, they note that others, such as Asana and Sprinklr, have faced YTD declines, highlighting the sector’s variability. AI adoption remains pivotal, with market leaders leveraging data advantages to deliver measurable ROI through innovative solutions.

Despite challenges, including inflation and higher Treasury yields, Scotiabank remains optimistic about companies that can navigate economic pressures and capitalize on the monetization of AI. The analyst noted that “the fastest growers” and those demonstrating clear AI-driven use cases are best positioned for long-term success.