Key Takeaways
- Bank of America upgraded price targets across 10 software companies as artificial intelligence disruption worries diminish and market confidence returns
- ServiceNow’s new target stands at $150, Snowflake at $395, while Figma reaches $33
- BofA analyst Tal Liani maintained Buy recommendations for ServiceNow, Figma, Snowflake, Box, Asana, and Zeta Global
- Adobe remains rated Underperform due to increasing AI-driven competitive pressures on its primary offerings
- Each of the 10 companies has surged a minimum of 41% above their yearly lows
The software industry has faced significant headwinds throughout much of the current year. Market participants have expressed concern that rapidly evolving artificial intelligence capabilities might displace critical software applications, a phenomenon dubbed the “Saaspocalypse” by some observers.
However, recent weeks have witnessed a notable transformation. A widespread recovery is taking hold throughout the sector, prompting Bank of America Securities analyst Tal Liani to increase valuations on 10 software companies.
According to Liani, these adjustments represent “broad-based multiple expansion across software,” without any modifications to fundamental earnings projections or business assessments.
The analyst attributed the sector’s resurgence to robust quarterly results from certain infrastructure software providers, diminishing worries about AI-related disruption, and enhanced investor confidence in both large-capitalization and application software segments.
The updated valuations include: ServiceNow elevated to $150 from $130, Figma increased to $33 from $30, Workday jumping to $205 from $140, Adobe rising to $220 from $190, Amplitude moving to $14 from $12, GitLab advancing to $45 from $38, Snowflake climbing to $395 from $330, Box improving to $39 from $37, Zeta Global reaching $34 from $29, and Asana lifting to $10.75 from $9.
All 10 companies have experienced share price increases of no less than 41% from their 52-week closing nadirs. Adobe has advanced 41% since touching $193.41 on June 25. ServiceNow has surged 52% from its April bottom of $83. Figma has rallied 59% from its June trough of $16.84.
BofA’s Top Investment Picks
Liani maintained Buy ratings on ServiceNow and Figma among large-capitalization software companies. He highlighted their superior growth characteristics and what he identified as developing opportunities to generate revenue from artificial intelligence features.
Within the infrastructure software category, Snowflake retained its Buy designation. Liani emphasized its sustained robust expansion and AI revenue generation capabilities. GitLab and Amplitude continued at Neutral ratings.
Among application software providers, Box, Asana, and Zeta Global all maintained Buy ratings. Liani characterized their growth trajectories as sustainable, with nascent AI monetization prospects taking shape.
Workday remained at Neutral while Adobe stayed at Underperform. Regarding both companies, Liani indicated that recent stock appreciation has exceeded any concrete evidence of fundamental business acceleration.
Adobe Confronts Headwinds
Adobe represents a notable outlier on the bearish side. The shares have declined 23% year-to-date, and Liani anticipates continued challenges.
He explained that artificial intelligence is simplifying content creation while introducing budget-friendly, AI-native rivals to the market. He also observed that AI-focused annual recurring revenue comprises less than 2% of Adobe’s total ARR and hasn’t yet produced measurable growth acceleration.
ServiceNow shares have similarly fallen 17% this year, although the company’s artificial intelligence revenue story has garnered greater optimism from Bank of America.
The software earnings reporting period is on the horizon. Market analysts will scrutinize whether these businesses can demonstrate genuine customer demand and tangible revenue generation from their proprietary AI capabilities.
These upcoming financial disclosures will significantly influence whether the current software sector recovery proves sustainable over the long term.
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