back on Dec 9th, thought you might be interested [or not]
'These ratings changes by no means reflect anything on the tremendous operating condition of these names, but rather our view that an expanding economy could cause sector rotation and potential performance headwinds for these types of stocks like they did in 2010. Our other rating changes reflect the changing secular landscape of cybersecurity and a couple of downgrades of companies that are still working to improve their execution or revenue mix.
Downgrading high multiple names – AVLR, NET, CRWD, DOCU, OKTA, VEEV, ZM. We point out in our 2021 Outlook report that looking back at 2010, we found that the 20 highest multiple stocks at the end of 2009 underperformed the overall software industry average in 2010. If the current vaccines prove effective in manufacturing rates hitting scale, we believe the economic expansion starting in the June quarter could replicate that same environment from 2010.
Upgrading cyclically sensitive names – ADSK, ALTR, CDNS, INTU, PTC, VRSN, WIX. If economic expansion does materialize beginning in the June quarter, we believe these stocks will be direct beneficiaries. Design names have direct exposure to manufacturing, industrial, and construction, which should be core to expansion. INTU, VRSN, and WIX have SMB exposure that could benefit from new business creation following the spike of new business applications reported by the Census Bureau.
Secular changes in cyber security – downgrading CHKP, FTNT, PANW. The increasing shift of compute to the cloud will likely deemphasize the significant spend we have seen through the years on firewall upgrade cycles. Each of the above vendors has begun shifting its product portfolio to benefit from securing customer cloud initiatives, especially PANW. But the large revenue contribution that is still tied to on-premise firewall spend is likely to come under increasing pressure as 2021 unfolds, and that could be a headwind to stock performance.’
Long CRWD, AVLR, OKTA, ADSK.