Jamie Murray ServicenowNOWBUY ON WEAKNESSFeb 16, 2024

It's tough being a software company these days. It became clear last year that the inference companies were going to be "the chosen ones" for the software AI stack. For the rest, it's not as though their product suites have become antiquated, they just haven't been quick enough to get in.

Thinks the software stocks will start to come back once they start to incorporate that inference AI. The moat around those inference AI companies may start to disappear once they go public.

It's expensive. Has mixed feelings about it, but it's better than most software-as-a-service stocks. Is bearish this space.

Tech hit a bottom last Monday with peak pessimism, and started to rebound last Monday. Earnings growth is 20% and revenues are growing--the fundamentals haven't changed and earnings have not revised. He just bought shares.

Trades at a cheap 26x for a great growth stock, but SAAS stocks are now bearish. More turbulence will come.

He'd never bet against the CEO, but at the current price offers value.

Makes business more efficient using AI. Lumped in with SaaS. Tremendous earnings last month, strong guidance going forward. Yet market's taken stock down ~20% this year. Buying opportunity. No dividend.

High-quality, internet-based companies that use AI will do very well. Leader in the space. Suspects it will come back, he just hasn't done enough work on it. He owns MSFT.

For the Canadian telcos, regulatory challenges won't go away. In response, the telcos pledged to invest in rural areas, but those areas now have Starlink. Also, Freedom Mobile and Quebecor have added a lot more competition. The telcos won't bounce back anytime soon.

He just added it. NOW is two standard deviations below its valuation. He sees AI adoption as a complement, not substitute to NOW. It's time to start picking at names that have been beaten. This will be a winner. It now trades around 25x PE, down from 50-60x a year ago. He will add more if this falls further.

There is tremendous opportunity in software, but it won't see a V-shaped recovery. The NOW CEO just bought many shares last week. NOW has a strong moat.

Is -34% this year. Earnings growth expected at 19% this year. Trades at only 24x PE, down from 70x at end-2024. They just announced a big share buyback. 

Software stocks have been hit hard, because the market believes that AI will replace their service. He didn't like NOW at $200 a year ago, but likes it lot more now at $118. Last year, he started writing puts on this.

Anything software has getting punished now over fears that AI will replace it. But NOW just reported a good quarter, beating on every key line. PE has fallen from 64x to 28x. Likes it, but he doesn't blame anyone avoiding software stocks.