Enterprise software stocks have been in rally mode again, and it’s not hard to imagine why. In addition to clocking in better-than-expected quarters, these software plays stand to benefit greatly from artificial intelligence (AI) and its productivity-enhancing effects in the workplace.
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Undoubtedly, Microsoft (NASDAQ:MSFT) is the enterprise software kingpin that’s shown us all how to effectively turn cutting-edge AI tech into profits. In 2024, I’d look for other enterprise software players, like INTU, NOW, and MNDY, to take a page from its AI playbook. And that entails more than merely “sprinkling” a bit of AI across various software platforms. It may change how workers use enterprise applications to get jobs done faster and more accurately.
It’s an exciting time to be an investor and an even more exciting time to be in enterprise stocks while they’re still viewed favorably by the Wall Street community. Therefore, let’s check in with TipRanks’ Comparison Tool to see where the previously mentioned trio of workplace software stocks stand going into the new year.
Intuit (NASDAQ:INTU)
Intuit is quickly becoming one of my favorite workplace software companies to benefit from AI’s rise. The company behind hit accounting software Quickbooks and its more mature TurboTax tax-preparation software has been staying innovative to protect its corner of the software market.
The stock has been soaring since bottoming out late last year. Year-to-date, it’s up a whopping 52%, thanks in part to strong recent quarters (the latest quarter saw adjusted earnings per share of $2.47 vs. the $1.98 consensus) and hopes for AI-driven growth in the near future.
Undoubtedly, Intuit already has a relationship with a slew of small businesses out there. As it improves its platform and looks to empower its users to do more with less with the help of AI, I view Intuit’s QuickBooks platform as one of those indispensable value-adding software platforms poised for impressive growth. For this reason, I’m staying bullish on the stock alongside the Wall Street crowd.
Furthermore, Intuit seems closer to turning AI innovation into actual cash flows, at least closer than some other firms out there that are merely “dabbling” with the technology. Tax preparation and accounting seem like fields that could be vastly improved with the help of AI.
One of the new AI features coming to its tax offering is AI analysis of one’s return. Tax lingo can be tough for many to deal with. With some AI, it’s suddenly crystal clear. That’s a big deal — one that leads me to believe that the 37.2 times forward price-to-earnings (P/E), roughly in line with the application software industry average of 36, is not high enough.
What’s the Price Target on INTU Stock?
Intuit stock is a Strong Buy, according to analysts, with 16 Buys and three Holds assigned in the past three months. The average INTU stock price target of $623.82 implies 3.8% upside potential.
ServiceNow (NASDAQ:NOW)
ServiceNow is another powerful enterprise software company that’s been on a hot run of late, now up 76.5% year-to-date and 102% off its lows of last year, to hit a new all-time high of over $720 just yesterday. Solid quarterly results and increased enthusiasm over the company’s role in the AI race are big reasons many analysts have been in a hurry to upgrade the stock. I stand with analysts and am staying bullish on shares heading into 2024.
Most recently, UBS Securities hiked NOW stock’s price target to $820 from $650. Why the huge hike? UBS analysts are factoring in the company’s Pro+ AI SKU into its financial models, and it sees the technology playing a larger role in the growth story, moving forward. Indeed, UBS is right on the money. Enterprise software (or ITSM in the case of ServiceNow) plus cutting-edge AI tech seem like the perfect formula for growth.
Going into 2024, we’ll gain a glimpse of just how much of an impact AI can have on ServiceNow’s fundamentals. I have a feeling UBS may need to upgrade its target again in the new year as the company looks to unleash the power of its platform.
Of all the enterprise tech firms embracing AI, ServiceNow may be the one that does it best. Even near highs and a now-lofty 56.5 times forward price-to-earnings multiple, I still don’t think the stock is absurdly valued in the slightest.
What’s the Price Target on NOW Stock?
NOW stock is a Strong Buy, according to analysts, with 28 Buys and one Hold assigned in the past three months. The average NOW stock price target of $681.62 implies that shares are fairly valued at the moment.
Monday.com (NASDAQ:MNDY)
Last but not least, we have Monday.com, a workplace project management platform that’s starting to pick up traction after getting clobbered severely during its 2021-22 sell-off, which saw shares shed more than 78% from peak to trough.
So far this year, the stock is up 59%, a minor rally relative to the implosion in the rear-view mirror. After increasing its full-year outlook and winning some fans from the analyst community, it seems that the Israel-based enterprise tech firm is ready to continue its recovery in the new year. Given this, I find it hard not to be bullish.
For the full year, Monday.com expects 2023 sales in the $723-725 million range, up from $713 million. Also, adjusted operating income is now expected to be in the $47-49 million ballpark, up from $24-28 million. That’s quite a hefty jump on the bottom line.
Last month, DA Davidson upgraded shares to Buy, also remarking on the “geopolitical risk” of the Israeli firm. With “strong cash generation,” as outlined by DA Davidson, and a modest multiple, Monday.com stock certainly seems like one of the workplace software plays to keep watch of in the new year as we look for AI innovation to take center stage.
What’s the Price Target on MNDY Stock?
MNDY stock is a Strong Buy, according to analysts, with 13 Buys and two Holds assigned in the past three months. The average MNDY stock price target of $211.21 implies 10.7% upside potential.
The Bottom Line
Enterprise software stocks are full of potential going into the new year as they look to turn AI innovation into real cash flows. Of the trio of names presented in this piece, Monday.com holds the most upside potential (10.7%). At this juncture, I think it’s the best buy of the batch.
