Piper Sandler picks top five tech stocks; Qualys cut to Underweight
P_Wei
With the run in tech stocks over the past month, Piper Sandler reevaluated its top picks, price targets and preference rankings across its group.
Piper analysts downgraded Qualys (NASDAQ:QLYS) shares to Underweight from Neutral and cut the price target to $109 from $120, noting that the firm sees risk to back-half expectations and continued margin pressure.
The analysts see a potential for full year guidance to come down in Q2, with results showing the lowest level of upside to outlook since Q4'19 and the setup for the remaining of the year implying an acceleration in ST billings from 9% to 14% exiting the year, based on the firm's estimates (set to the low end of the guide).
If the company's story continues to revolve around mining the existing customer set (97% of revenue came from existing customers in '22) and NRR at 109% to end Q1, the firm view this outlook as challenging with the current state of the business and the broader macro environment.
The analysts added that the margin pressure from GTM investments also continues to weigh.
In addition, the firm noted that recent stock run of the company implies a rich valuation. The company's stock has risen +19% after Q1 results, implying a EV / CY'24 revenue multiple of 7.2x and EV / CY'24 FCF multiple of 21.4x based on the firm's estimates.
The analysts think the valuation and recent move in shares is not warranted due to â 1) the shakiness of ST billings deceleration and 0.1% upside to guidance midpoint in Q1; 2) a guidance which requires ST billing acceleration for the remaining of the year; 3) and pressured margins that the firm expect to result in flat FCF Y/Y. The analysts said that they expect all these factors to contribute to underperformance going forward.
Top 5 picks:
Piper Sandler added Tenable (TENB) to its top picks as the analysts think H2 to be de-risked.
Meanwhile, the firm removed ServiceNow (NOW) from its top picks given the strong run over the past month. However, the stock still remains Overweight rated.
CyberArk Software (CYBR) Overweight rating with price target of $180. The firm said the company is capitalizing on identity tailwinds and PAM prioritization.
Palo Alto Networks (PANW) Overweight rating with price target of $250 â broad consolidation play with strong cloud growth.
Okta (OKTA) Overweight rating with a price target of $100. The analysts see room for top-line upside with increased margins.
CrowdStrike (CRWD) Overweight rating with a price target of $180. The firm thinks there is strength in endpoint with growing platform opportunity.
Tenable (TENB) Overweight rating with a price target of $50. The firm sees a broader cyber-risk play with de-risked H2.
More on Qualys, Tenable, CyberArk Software and Palo Alto

Qualys: A Small-Cap, IT Stock Delivering Strong And Steady Growth
Tenable Holdings: Path To Profitability Is Clear But Remain Neutral On Stock
CyberArk Software: Promising Market Position But Valuation Remains High
Palo Alto Networks: Leading Cybersecurity Stock To Buy