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Morgan Stanley: 3 Software Stocks That Could Be Big Winners

Morgan Stanley: 3 Software Stocks That Could Be Big Winners
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By    |   Tuesday, 14 January 2020 09:21 AM

Despite the industry’s big rally in 2019, Morgan Stanley reportedly has warned investors to be more selective in picking software stocks this year.

The iShares Expanded Tech-Software Sector exchange-traded fund (ticker: IGV) rose 34.3% last year versus the S&P 500’s 31.5% total return, Barron’s said.

“After a strong performance across software in 2019, full multiples and indications of a slowing software spending environment, investors likely need a finer filter to find the really compelling opportunities in the sector,” Morgan Stanley analyst Keith Weiss wrote on Monday, Barron’s reported.

Morgan Stanley offered three overweight-rated software companies:

Adobe (ADBE)

Morgan Stanley has a $410 price target for Adobe stock. Adobe has “one of the strongest franchises in software, benefiting from the secular shift towards digital marketing,” the firm’s analyst wrote. Adobe shares were up 1.5% to $344.94 on Monday.

Salesforce.com (CRM)

The firm has a $216 price target for Salesforce.com shares. “With a cloud-based platform automating and optimizing all stages of the customer life cycle, Salesforce.com looks best positioned to benefit,” Morgan Stanley’s analyst wrote. Salesforce.com shares were up 2.1% to $183.99 on Monday.

Microsoft (MSFT)

Morgan Stanley has a $189 price target for Microsoft shares. “As the IT conversation shifts from pure Public Cloud towards hybrid Cloud architectures involving enterprises utilizing a mix of on-premise and public cloud resources, Microsoft pulls ahead as the best secularly positioned firm in tech,” he wrote. Microsoft shares were up 0.9% to $162.86 on Monday.

However, not all chip-stock experts are as optimistic.

After a year in which semiconductor stocks defied conventional wisdom with a seemingly unstoppable rally in the face of gloomy fundamentals, some analysts are loathe to go all in.

With signs of a rebound in demand still scant, the key question for the new year is where chipmaker shares can go when they’re trading at the highest price to future earnings multiples in nearly a decade, Bloomberg explained.

Most analysts expect business to improve in 2020, aided by things like 5G technology and cloud infrastructure spending. But valuations are cause for concern, especially when accounting for lingering tariff uncertainty.

“It is challenging to argue that a good amount of the future return potential hasn’t simply been pulled forward on hope,” said Bernstein analyst Stacy Rasgon.

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Despite the industry’s big rally in 2019, Morgan Stanley reportedly has warned investors to be more selective in picking software stocks this year.
morgan, stanley, software, stocks
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2020-21-14
Tuesday, 14 January 2020 09:21 AM
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