By Adam Clark
While the Magnificent Seven are set to dominate the conversation around technology earnings. analysts at Oppenheimer see opportunities among less heavily discussed stocks.
Given that hopes are high that artificial intelligence will bring growth for technology companies, Oppenheimer analyst Ittai Kidron and colleagues were on the lookout for companies facing a low bar for expectations and that have given conservative guidance. Three companies they say could surprise the Street are Snowflake, Zscaler, and Monday.com.
Stock in Snowflake, a data cloud company, had fallen 40% this year so far through to Monday's close. Its second-quarter earnings disappointed the market, while investors have also been watching the progress of its privately owned rival Databricks.
"We believe [Snowflake's] current guidance leaves room for potential headwinds, storage revenue is likely to remain stable, and we see potential for outperformance behind improving consumption trends, especially among large customers," Kidron wrote.
The Oppenheimer analyst is backing Snowflake to report September-quarter revenue slightly above the consensus estimate of $899.3 million, while also slightly increasing its forecast for $3.36 billion in product revenue for fiscal 2025.
Snowflake shares were down 1.8% at $117.38 in early trading. Kidron has an Outperform rating on the stock with a target of $180 for the price.
Cybersecurity company Zscaler, another beaten-down stock, has dropped 15% this year through to Monday's close. The profit guidance in its latest financial report was disappointing.
That has taken the stock down far enough, according to Kidron. He expects Zscaler's sales for the October quarter to exceed the $604 million-$606 million it had told investors to expect and that management will signal a recovery in billings in the second half of its fiscal year.
"We see an attractive setup with potential for a beat-and-raise...guidance incorporates breathing room for recent GTM [go-to-market] changes, and we see potential for upside behind sustained demand, improving sales productivity, and momentum in cross-selling emerging products," Kidron wrote.
Kidron has a $230 target price and Outperform rating on Zscaler. The stock was down 0.3% at $187.49 in early trading.
The final pick, Monday.com, bucks the trend by having gained 54% this year through to Monday's close. However, Kidron still sees more room to run for the enterprise-communication software company when it reports September-quarter earnings.
"We expect another strong quarter of top- and bottom-line upside primarily driven by monday.com's core work management product and growing sales CRM [customer relationship management] adoption," Kidron wrote.
Kidron kept an Outperform rating on the stock and raised his target for the price to $325 from $275. The stock was up 0.1% at $289.90 in early trading.
Write to Adam Clark at adam.clark@barrons.com
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(END) Dow Jones Newswires
October 22, 2024 10:16 ET (14:16 GMT)
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