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On Monday, RBC Capital Markets provided insights into the software sector as companies prepare to report off-quarter earnings for the first quarter of 2025. The firm observed that demand trends remain stable and valuations have increased, yet it continues to favor consolidators in the industry. The IGV software index has shown notable performance, rising 5% year-to-date (YTD) compared to the S&P 500’s 1.5% YTD increase. Notably, since its low on April 8, the IGV has surged by 31%.
Off-quarter earnings are expected to be generally positive, with slight upward revisions to April results and guidance that is in line to slightly higher. RBC Capital’s AllSaaS index is currently at 7.3x forward twelve months enterprise value to sales (FTM EV/S), which is near the midpoint of its 52-week range. Analysts at RBC have adjusted their stance on several software stocks, leading to changes in price targets (PTs) and earnings estimates.
Specifically, RBC Capital has raised its price targets for CrowdStrike Holdings, Inc. (NASDAQ:CRWD), Okta, Inc. (NASDAQ:OKTA), and Zscaler, Inc. (NASDAQ:ZS), while lowering the price targets for Elastic N.V. (NYSE:ESTC) and GitLab Inc. (NASDAQ:GTLB). The firm conveyed a somewhat favorable outlook for CrowdStrike, citing positive checks and potential for consensus net new annual recurring revenue (NNARR) for Q1 to be beatable. Okta is viewed optimistically due to favorable risk/reward into earnings and long-term trends in the identity market. InvestingPro data shows Okta’s impressive 76.32% gross profit margin and strong YTD return of 61.55%, with 30 analysts recently revising their earnings estimates upward. The company is scheduled to report earnings on May 27, 2025, and according to InvestingPro’s Fair Value model, the stock appears slightly undervalued at current levels.
Palo Alto Networks, Inc. (NYSE:NASDAQ:PANW) is expected to post slightly better results versus expectations, according to RBC Capital’s checks that improved in April. SailPoint Technologies Holdings, Inc. (NYSE:NYSE:SAIL) is seen with a neutral setup, balancing expected slight beats with pending IPO lockup concerns. Zscaler, recognized for strong demand trends, faces high investor sentiment which could make the earnings setup tricky, yet modest upside to results is anticipated.
RBC Capital also mentioned other companies such as Nutanix, Inc. (NASDAQ:NTNX), UiPath Inc. (NYSE:PATH), PagerDuty, Inc. (NYSE:PD), and Snowflake Inc . (NYSE:SNOW), providing various outlooks for their earnings reports. Snowflake, in particular, is highlighted as a top large-cap idea for 2025, with favorable market sentiment and expected Q1 upside. Autodesk, Inc. (NASDAQ:ADSK) and Samsara Inc. (NYSE:IOT) were also mentioned, with neutral setups but potential catalysts that could drive positive revisions throughout the year.
In other recent news, Okta, Inc. has seen several updates from analysts and developments in the market. KeyBanc Capital Markets increased its price target for Okta from $135 to $155, maintaining an Overweight rating. This adjustment reflects confidence in Okta’s strategic initiatives and its position in the cybersecurity sector, despite ongoing competition from companies like Microsoft (NASDAQ:MSFT). DA Davidson also raised its price target for Okta to $145 from $125, citing long-term growth prospects despite industry challenges. The firm remains optimistic about Okta’s ability to surpass its conservative fiscal guidance for 2026.
BMO Capital Markets adjusted its price target on Okta to $135, maintaining a Market Perform rating while noting potential revenue upside for the April quarter. The firm sees the consensus revenue estimates for fiscal year 2026 as potentially conservative. Additionally, Okta’s inclusion in the S&P MidCap 400 index is expected to enhance its visibility and appeal to a broader investor base. This development follows the index reshuffle due to Amcor (NYSE:AMCR)’s acquisition of Berry Global Group (NYSE:BERY).
Finally, Citizens JMP maintained a Market Perform rating for Okta, highlighting the company’s valuation in relation to its peers and the challenges it faces in expanding its product offerings. The firm’s analysis reflects a balanced risk/reward scenario, considering the competitive landscape and Okta’s strategic position in the market.
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