Investment firm Loop Capital says demand for enterprise software is starting to “calm down,” but two of the industry’s most established companies, Workday (NASDAQ:WDAY) and Salesforce (New York Stock Exchange: CRM), are “largely spared”, the firm said.
Analyst Yun Kim wrote that while there aren’t enough data points to determine which projects and companies are “more vulnerable” in the current environment, the companies that are contributing to digital transformation are not affected.
“[O]Feedback we’ve received from our industry contacts indicates that digital transformation initiatives that are driven by solutions from larger, more established software vendors such as [Salesforce], [Workday] and SAP are largely unaffected by the current slowdown in spending,” Kim wrote, adding that checks with two companies “indicate broadly stable business trends that are consistent with their prior quarters.”
Workday Stocks (WDAY) fell nearly 1.5% to $163.69 in pre-market commerce on Tuesday, while Salesforce (CRM) fell nearly 2% to $157.38.
Still, Kim said Workday (WDAY) and Salesforce (CRM) should remain cautious in their outlook for the rest of the year, as have other enterprise software vendors.
Workday (WDAY) is expected to release its fiscal first quarter results on May 26, while Salesforce (CRM) is expected to release its report on May 31.
Additionally, Kim noted that the IT labor market is beginning to ease, with some signs of a thaw, further adding to the picture that the IT spending market has shown “signs of slowing in recent weeks as many large companies are taking a more conservative approach to spending going forward.”
On Monday, investment firm Cowen cut its price target on Salesforce (CRM), noting “mixed” checks entering fourth-quarter earnings for the cloud computing company.