- As the world's economies grapple with the impact of the coronavirus and spending slows across the board, things are going to get messy in the software industry.
- But there are still some standout companies who are well-prepared to weather the crises and bounce back stronger than before.
- Some of them are seeing their business increase thanks to work-from-home mandates. Others are big-name companies that have become more affordable right now.
- Here is Morgan Stanley's picks for the 10 enterprise software stocks to buy right now, plus a short list of ones to watch - including names like Microsoft, Atlassian, Box, and Salesforce.
- Visit Business Insider's homepage for more stories.
Although the stock market has rallied a bit on word that Congress is nearing a massive $2 trillion stimulus deal, the Dow Jones is still down significantly since the start of the year.
That means there are bargains to be had among tech stocks that have great fundamentals and good potential, but that are seeing their share prices sink in the short-term economic crises.
In a research note Wednesday, Morgan Stanley stock analyst Keith Weiss warned that the world's economic troubles will definitely be hitting the software industry, particularly in the next quarter which begins next week.
He calculates that companies will reduce their spending on software by as much as 35% next quarter, and by 10-15% in the following quarters, and that the hit from slashed budgets will likely trickle into next year. That's due to the nature of the cloud software subscription model, where fewer contracts signed today could result in less revenue for software providers next year.
But, he says, there's a big, bright side. "While the near-term impact looks significantly negative, likely leading to messy Q1 and Q2 earnings, we remain optimistic the secular demands driving business prior to COVID-19 - digital transformation, shift to public cloud, increasing automation, etc. - will remain firmly intact once the macro clouds clear."
In other words, while the market outlook may be bleak today, the need for IT software and services isn't slowing down. That means that there are bargains to be had today, and probably even more bargains tomorrow.
Weiss says that these 10 stocks are particular bargains right now: