Zscaler, Datadog enter top picks at Piper Sandler as it shuffles picks
Marco VDM
Piper Sandler shuffled on security and infrastructure software stocks on Tuesday to switch priorities. 
The firm shifted its top picks to prioritize âgrowthyâ names versus those with growth at a reasonable price, or GARP. Following its recent upgrades of Zscaler (NASDAQ:ZS) and Datadog (NASDAQ:DDOG), the firmâs top five picks are: Cyberark (NASDAQ:CYBR), Palo Alto Networks (NASDAQ:PANW), Crowdstrike (NASDAQ:CRWD), Zscaler (ZS) and Datadog (DDOG). 
Zscaler (ZS) and Datadog (DDOG) replaced Okta (OKTA) and Tenable (TENB) among the firm's top five cybersecurity stocks.
Piper Sandlerâs security tracker, which follows 19 security and infrastructure stocks, has continued to outperform in September for a third consecutive month, analysts Rob Owens and Ethan Weeks wrote in an October 2 note. The tracker ended flat for the month, while the Nasdaq saw a 6% drop. 
âTrends coming out of 2Q earnings and our annual tech conference indicate continued signs of stabilization, fueling our optimism around a potential bottoming of headwinds over the coming quarters,â the analysts wrote.
Outperformance came from software-as-a-service, or SaaS, and subscription models, whereas small caps lagged other cohorts. 
âAs the narrative of stability becomes more prevalent in our data and in conversations with vendors and customers, we are confident in the fundamental performance of the security group and see opportunities for multiple expansion throughout the back half of 2023 and into 2024,â the firm explained. 
The firm expects third quarter earnings inline with the previous period amid consolidation and stabilization in macro headwinds. Management, however, is likely to remain tight-lipped around guidance with IT budgets still a question for customers. 
âOrganizations cannot take their feet off the cybersecurity pedal, but also look to lower costs,â the analysts said. That could lead to continued consolidation in the area.

More on Datadog, Zscaler, etc.

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