Piper Sandler downgrades several enterprise software stocks amid looming risks

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Piper Sandler downgrades several enterprise software stocks amid looming risks
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Several enterprise software stocks, including Salesforce (NYSE: NYSE: CRM ), Unity Software, and Asana, experienced a downgrade by Piper Sandler analyst Brent Bracelin today. The downgrade was attributed to five risks: inflated 2024 estimates, an "airpocket" risk due to AI focus, September downturn data, stringent valuations, and uncertain investor sentiment.

Salesforce, a recognized leader in the CRM market with historical annual revenue growth exceeding 20%, faced share volatility today. It was marked by an initial drop of 2.5% followed by a rally. The downgrade to a neutral rating from overweight is based on anticipated slower growth. Despite the company's recovery from the sharp sell-off in 2022, it remains 33% off its all-time high. Its growth rate has been reduced to about 11% due to weak macroeconomic conditions, which were the primary driver behind last year's stock depreciation.

Unity Software was downgraded due to a developer issue affecting its 2024 ad growth forecast. Asana was moved to underweight from neutral over renewal concerns. Alteryx (NYSE: AYX ) faced a downgrade over concerns about its 2024 recovery. Matterport was moved to neutral from overweight due to overly optimistic acceleration forecasts for 2024.

All these stocks experienced a pre-market drop today. In addition, Piper Sandler adjusted estimates and targets downward for 16 additional enterprise software stocks. Despite these downgrades, Salesforce still retains a BUY rating from Seeking Alpha.

The downgrades are driven by execution and M&A risks and uncertainty in AI monetization for Salesforce. For Unity Software, the downgrade is linked to a developer snafu affecting its 2024 ad growth forecast. Asana's downgrade is due to renewal concerns while Alteryx's downgrade is over concerns about its 2024 recovery.

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