Investment firm Evercore ISI believes that tech stocks Microsoft (MSFT) and Salesforce (CRM) are the most likely to hold up well if enterprise software spending slows down due to economic conditions. Analysts led by five-star rated Kirk Materne highlighted these two companies thanks to their strong AI capabilities and broad product offerings. On the other hand, IBM (IBM), Oracle (ORCL), and Workday (WDAY) may be more vulnerable to budget cuts in this environment.
In a recent survey by Evercore, 40% of respondents said that the demand for enterprise software had improved slightly over the past three months, while another 40% felt it had gotten worse. The remaining 20% said conditions stayed the same. According to the results, government sectors were seen as most at risk in the current macro climate, while healthcare and tech showed some resilience. In addition, industries like retail, finance, and travel were somewhere in between.
Interestingly, Microsoft and Salesforce were the most widely used vendors across different industries, with 90% and 95% of respondents using their software, respectively. Around 80% said they also worked with ServiceNow (NOW) or Workday. Materne added that most of the concerns are related to the Federal Reserve’s policy. However, categories like AI and cybersecurity are expected to remain strong, while back-office software could face more pressure.
Which Enterprise Software Stock Is the Better Buy?
Turning to Wall Street, out of the five stocks mentioned above, analysts think that CRM stock has the most room to run. In fact, CRM’s average price target of $1375.58 per share implies more than 32% upside potential. On the other hand, analysts expect the least from IBM stock, as its average price target of $260 equates to a gain of 5.3%.
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