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Morgan Stanley moves Box to Top Pick in Software; shares gain

Published 12/04/2023, 14:46
© Reuters.
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By Senad Karaahmetovic 

Morgan Stanley analysts remains positive on the SaaS sector despite limited visibility in the near term.

The analysts believe the sector is "well positioned LT with structurally improved profitability and compressed multiples despite durable and highly value recurring bases, now accounting for 56% of Enterprise Value, up from 28%/14% in the prior two years."

Along these lines, Salesforce (NYSE:CRM) and Workday (NASDAQ:WDAY) screen best in Morgan Stanley's analysis. For the former, the analysts see improving profitability and attractive valuation while Workday has "best-in-class" unit economics.

Additionally, they see ServiceNow (NYSE:NOW), Box (NYSE:BOX), Instructure (NYSE:INST), and ZoomInfo (NASDAQ:ZI) as well positioned.

Box is a new Top Pick in the sector, replacing Smartsheet (NYSE:SMAR). The analysts also reiterated the Top Pick designation on ServiceNow.

"We see an opportunity for shares to move higher, especially considering improving unit economics and low expectations for future growth," the analysts said in a note.

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