Citi sees software as well positioned, is a buyer on the pullback

Citi is taking a mostly “glass-half full” view of the application software group. The bulk of the group’s recent challenges relate to seasonality and IT budget, interest rate “head fakes” coming into Q1 from Q4, the analyst tells investors in a research note. However, the firm would not rule out select generative artificial intelligence re-prioritization, which Citi thinks may persist at traditional software-as-a-service and seat-based models. The firm is a buyer of the pullback in software and believes the sector is well positioned to outperform into year end with improving IT budgets, a more favorable rate backdrop, traditionally stronger positive estimate revision seasonality, and incremental generative AI monetization trends across. Citi’s top picks are Shopify (SHOP), MongoDB (MDB), and Elastic (ESTC). Its other Buy-rated names are Similarweb (SWMB), Microsoft (MSFT), HubSpot (HUBS), Autodesk (ADSK), Braze (BRZE), DocuSign (DOCU), Nice (NICE), ServiceNow (NOW), Veeva (VEEV), Snowflake (SNOW), CCC Intelligent Solutions (CCCS) and Teradata (TDC).