By Sam Boughedda
A Barclays analyst told investors in a research note Tuesday that the firm likes Splunk (NASDAQ:SPLK), MongoDB (NASDAQ:MDB), and Workday (NASDAQ:WDAY) for the off-cycle Q2 earnings cycle.
However, they are cautious on Elastic (NYSE:ESTC) and expect the highest volatility for Snowflake Inc (NYSE:SNOW).
"The share price reaction to CRM's earnings (slightly weaker cRPO but solid margins) will be the best guidepost to judge investors' appetite for the space," said the analyst.
Speaking specifically on Splunk, the analyst said they like the stock into Q2. "Splunk is re-focusing back to its foundational business of security and log analytics, which could be more resilient during tougher macro times and could incidentally help with broader platform adoption of observability solutions. Cross-selling cloud observability along with more sales emphasis on selling and converting term license customers to cloud could drive a solid cloud beat. With a strong positive FCF profile and a inexpensive valuation (~22.5x CY23 EV/FCF), we don't see too much risk compared to other software names," wrote the analyst.
On MongoDB, the analyst said it is one of a few companies in their space that acknowledged the deteriorating environment in its guidance, and it gave management the buffer to now be able to deliver Q2 results close to historic beat levels. "In an environment in which most other companies struggle with such an outcome we believe MDB should stand out and shares should react favorably," he added.
Finally, the analyst explained that Workday's back-office concerns seem priced in. We understand, if the world is going into recession, there will likely be a lower number of back-office transformation deals which would hurt WDAY," said the analyst. "However, we would argue that Q1 was more driven by weak sales execution which seems fixable for Q2 and paired with low expectations should allow the company to stage a comeback."