Investment firm Piper Sandler downgraded its ratings on three enterprise software stocks on Tuesday and reduced price targets for numerous companies, as investor sentiment towards the sector remains persistently weak. The firm's analysts wrote in a note to clients, "The bearish thesis can be simplified to two points: first, efficiency gains from AI will suppress or reduce the growth in corporate headcount, creating a headwind for software companies that charge on a per-seat basis; second, the emergence of 'natural language programming' capabilities from leading large language model providers means customers will be able to create applications themselves, rather than purchasing from existing software vendors." The analysts added, "We anticipate 2026 will mark the fifth consecutive year of slowing growth for the software industry. Slowing growth coupled with long-term disintermediation concerns have already driven valuation downgrades for companies within our coverage list."
Piper Sandler downgraded Adobe (ADBE.US), Freshworks (FRSH.US), and Vertex (VERX.US) from "Overweight" to "Neutral," and significantly slashed their price targets from $479, $20, and $32 to $330, $12, and $20, respectively. The institution also lowered the price targets for Amplitude (AMPL.US), Asana (ASAN.US), BlackLine (BL.US), Braze (BRZE.US), Figma (FIG.US), HubSpot (HUBS.US), Salesforce (CRM.US), Oracle (ORCL.US), Klaviyo (KVYO.US), monday.com (MNDY.US), ServiceTitan (TTAN.US), and ZoomInfo (GTM.US).
Despite the ongoing pessimism surrounding the software sector, the analysts added that they remain optimistic about Microsoft and ServiceTitan, naming them as their two top picks for 2026, even as the technology industry remains in the "early stages of the AI product adoption curve." "We believe Microsoft is perhaps the best pure-play in the AI application space currently," the analysts wrote. "Our survey of CIOs in the second half of 2025 indicates that respondents are becoming more positive regarding Azure and Copilot activity. We recommend buying on any pullback following Microsoft's Q2 FY2026 earnings report." The analysts further noted, "For ServiceTitan, numerous growth drivers (such as the Max/Pro product, commercial business, roofing projects, expansion into new verticals) give us confidence that its FY2027 revenue has the potential to exceed expectations."
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