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The week after Thanksgiving could determine if cloud software is still too fat or if there are some tasty leftovers for Wall Street.
It has been a rough month for cloud-software stocks, which experienced their worst week on record to kick off November and have seen cold rain continue to fall amid a perceived slowdown in business spending after a wave of cloud adoption in the first two years of the pandemic. Early results from Atlassian Inc.
TEAM
and Twilio Inc.
TWLO
started the downfall, and recent earnings have not revived the sector.
Autodesk Inc.
ADSK
signaled a slowdown in business spending on Tuesday as executives trimmed their billings outlook for the year, leading Mizuho ‘s desk analyst Jordan Klein to conclude that the week after Thanksgiving could be the tipping point for software earnings.
“I do not want to be overly dramatic here,” Klein wrote in a Wednesday note, “but after a very rough year,” along with software lagging tech and the S&P 500, “the software sector feels poised to potentially roll over hard if a slew of key results next week are disappointing.”
The slate of cloud-software companies reporting next week is long, and led by two of the biggest names in the sector: Cloud pioneer Salesforce.com Inc.
CRM
and hot young name Snowflake Inc.
SNOW,
which both report on Wednesday. They will be preceded by Intuit Inc.
INTU,
Workday Inc.
WDAY,
and CrowdStrike Holdings Inc.
CRWD
on Tuesday, and joined Wednesday by Okta Inc.
OKTA,
Splunk Inc.
SPLK,
Nutanix Inc.
NTNX,
Box Inc.
BOX
and Yext Inc.
YEXT
Cloud-security name Zscaler Inc.
ZS
rounds out the week on Thursday along with Veeva Systems Inc.
VEEV
and UiPath Inc.
PATH
| Ticker | Expected report date | FactSet EPS consensus | FactSet revenue consensus |
| INTU | Tue., Nov. 29 | $1.19 | $2.5 billion |
| WDAY | Tue., Nov. 29 | 84 cents | $1.59 billion |
| CRWD | Tue., Nov. 29 | 32 cents | $575.1 million |
| CRM | Wed., Nov. 30 | $1.22 | $7.83 billion |
| SPLK | Wed., Nov. 30 | 25 cents | $847.5 million |
| OKTA | Wed., Nov. 30 | (loss) 24 cents | $465.4 million |
| SNOW | Wed., Nov. 30 | 4 cents | $539.4 million |
| ZS | Thurs., Dec. 1 | 26 cents | $340.7 million |
Morgan Stanley analyst Keith Weiss said Salesforce looks best-positioned this earnings season among cloud companies in that execs are under the gun to show better-than-feared demand, margin protection and efforts to derisk 2023.
“With companies generally playing catch-up in regards to pushing the impacts of deteriorating macro conditions into 2H22 guidance, CY23 consensus estimates likely remain too high across many names, particularly given most 2023 guidance is still to come and customers’ 2023 IT budgets are biased to be revised lower,” Weiss said in a note.
Wood, however, notes that while his checks indicate demand for core products was “constructive,” those for products from acquisitions like Tableau, Slack and Mulesoft indicate demand was “weaker.”
Should next week turn sour, Klein sees Microsoft Corp.
MSFT
and Oracle Corp.
ORCL
as “potential defensives,” as he believes more money may migrate from software names into chipmakers’ stock, which would be an about face from his call from five months ago, speculating if investors were taking money out of chips and putting it into software.
So far in November, while the S&P 500 index
SPX
has gained 4.4%, the tech-heavy Nasdaq Composite Index
COMP
has advanced 3.1%, and the iShares Expanded Tech-Software Sector ETF
IGV
is up 0.9%, the Global X Cloud Computing ETF
CLOU
is down 1.3%, the First Trust Cloud Computing ETF
SKYY
is off 3.2%, and the WisdomTree Cloud Computing Fund
WCLD
is down 7.6%.
This week in earnings
Salesforce is the only Dow Jones Industrial Average
DJIA
component set to report this week, but nine S&P 500 companies are on the docket. In addition to Intuit on Tuesday, NetApp Inc.
NTAP
and Hewlett-Packard Enterprise Co.
HPE
are scheduled to report; Synopsys Inc.
SNPS
and Hormel Foods Corp.
HRL
will join Salesforce on Wednesday; and Kroger Co.
KR,
Dollar General Corp.
DG
and Ulta Beauty Inc.
ULTA
are scheduled for Thursday.
The numbers and calls to watch
The Black Friday wrapups: Early reports suggested not much growth from Black Friday sales a year ago, despite inflation pushing prices higher overall. Some retail companies will get the opportunity to discuss exactly how their early holiday sales went this week, with Ulta, Kroger and Dollar General being joined this week by the likes of Victoria’s Secret & Co.
VSCO,
Five Below Inc.
FIVE,
Big Lots Inc.
BIG
and Petco Health and Wellness Co.
WOOF
In addition, Costco Wholesale Corp.
COST
is expected to provide November sales data on Wednesday, ahead of full quarterly earnings a little more than a week later.
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