A two-month rally in enterprise software and cybersecurity stocks gave way to profit-taking on Monday when shares in Salesforce.com (CRM), Workday (WDAY), Twilio (TWLO), Atlassian (TEAM), Splunk (SPLK), and a slew of other companies took a hit.
Both the IBD Computer-Software Enterprise and Computer-Software Security groups had their worst day since Jan. 3. Both groups bottomed on Dec. 24 amid a broad sell-off in technology stocks.
Shares in enterprise software and cybersecurity stocks weakened in September and October, predating the correction in technology stocks that followed in late 2018.
Rather than being a precursor to another technology downturn, Monday’s sell-off in enterprise software and cybersecurity stocks could simply be profit-taking. Many stocks popped recently on better-than-expected earnings.
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While some analysts have turned cautious on valuation, stock downgrades in the software sectors have been few following the run-ups. Richard Davis, a software analyst at Canaccord Genuity, told IBD that company valuations had rebounded nearly back to all-time highs.
“Fundamentals are good, valuations were a stretch, nothing more, nothing less,” he said in an email.
Salesforce Falls Before Earnings
Shares in Salesforce dropped 3.7% to close at 158.50 on the stock market today. Salesforce earnings, reported late Monday, topped views but its April quarter guidance lagged estimates.
Twilio stock slipped 6% to 116.10. Workday stock lost 5.2% to 179.22. ServiceNow (NOW) stock sank 2.7% to 236.97.
Atlassian stock fell 5.6% to 104.71 while Splunk stock tumbled 5% to 127.91. Okta (OKTA) plunged 8% to 79.56 ahead of earnings due Thursday.
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