Citi analysts said Buy-rated Workiva (NYSE:WK) is a new top pick for the firm in the US application software sector.
In addition, the firm raised its price targets on Appian Corporation (NASDAQ:APPN) ($40 to $57), Asana Inc (NYSE:ASAN) ($24 to $26), Dropbox (NASDAQ:DBX) ($24 to $27), monday.com Ltd. (NASDAQ:MNDY) ($167 to $224), Open Text (NASDAQ:OTEX) ($41 to $44), Paycor HCM Inc (NASDAQ:PYCR) ($26 to $28), Paylocity Holding (NASDAQ:PCTY) ($211 to $219), Pegasystems Inc (NASDAQ:PEGA) ($57 to $66), and WK ($110 to $128).
"Coming out of C1Q23 earnings, we have seen continued macro pressures, yet growth began to rally (optimal growth/margin mix to 70/30 from 60/40) driven by stabilizing rates and an emerging AI tailwind (~75% of back office software w/ announced initiative)," wrote the analysts.
"Despite the choppy macro, the Back Office has been somewhat resilient with strength from Growth/GARP-y names and HR/SMB surprisingly strong," they added.
The analysts explained that WK is their new top pick "with continued upside from ESG and potentially capital markets and a shift in valuation towards EV/FCF going into '25."
"Going into 2Q earnings, we'd expect more focus on AI proof-points, macro impacts on various end-markets (SMB vs. Enterprise, Bank risk spreading, US vs. Int’l), and estimate upside with the recent growth rally more multiple-driven," the analysts concluded.