BofA sees the future of work opportunities
© Reuters. BofA sees the future of work opportunities – outlines 5 favorable software stocks
By Sam Boughedda
BofA analysts said on Monday that the firm favors software stocks Microsoft (NASDAQ:), Atlassian (NASDAQ:), Focus on video communications Inc (NASDAQ:), Smartsheet (NYSE:) and Box Inc (NYSE:).
In a note to clients focused on software stocks and the future of work, they told investors to “focus on the future of work given an approximately $90 billion increase in annual spending by 2026 and exposure to key secular trends: digital transformation, automation, productivity and distributed workforce”.
Analysts upgraded Box Inc to Overweight from Equal-weight. They raised Box Inc’s price target from $32 to $34 per share, while Smartsheet was cut from $62 to $54 per share.
After previously issuing a note at the start of the pandemic on the future of work, they said the company now sees greater opportunity, “but the competitive landscape addressing the market has intensified.”
Analysts said the future of work “represents a big market opportunity.”
“According to IDC, the categories we define as part of the future of work (communication and team collaboration, content management and workflow automation) are expected to double over the next 5 years, with growth at one CAGR of 14%, growing from $92 billion in 2021 to $179 billion in 2026,” they said.
Analysts added that an evolving and intensifying competitive landscape has become “more crowded, ripe for consolidation, particularly as vendors look to expand their capabilities.”
“Vendors are building and buying capacity to seize this big opportunity. The key investor debate is about the positioning and potential impacts of macroeconomic demand post-covid – which categories and which future of work suppliers will fall into the category. “nice to have” in a tougher macro “Taurus see the FoW categories of collaboration, coordination, and communication aligned with productivity; the mission criticality of content management; and automation focused on efficiency , cloud-based FoW providers have a compelling value proposition and ROI that should prove sustainable under budget review,” they wrote.
“The Bears are seeing weaker and uncertain demand after taking advantage of the covid tailwinds. Streamlining and consolidation of spending is likely, given that the ‘nice to have’ doesn’t hold up well on the defense list of a CIO.”