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| Image: AI |
The September jobs report brought welcome relief to investors, beating expectations by adding 336,000 jobs and showing minimal wage inflation. This ‘goldilocks’ economic data points to a soft landing for the US economy, great news for the battered tech sector. With Q3 earnings season kicking off, Wall Street is poised for positive surprises that could drive a massive year-end tech rally, according to top analyst Daniel Ives of Wedbush Securities.
Ives believes earnings will serve as an “eye-opener” on Wall Street, as AI growth and stabilizing IT spending propel tech stocks 12–15% higher by year-end. While bears may fret over rising rates, Ives urges ignoring the noise and focusing on the $1 trillion tech spending wave over the next decade, led by transformational AI adoption.
With seismic growth on tap, Ives spotlights Progress Software and Microsoft as top tech stocks to buy now before the imminent rally. Both earn Ives’ bullish ‘Outperform’ rating and offer upside potential of over 20%, with strong backing from the Street.
Progress Software Set To Capitalize on Growing Demand
Progress Software Corporation (NASDAQ: PRGS) provides critical infrastructure software tools to help businesses accelerate their digital transformations. Its diverse portfolio includes the Progress OpenEdge development platform, Progress Telerik developer tools, and solutions for cloud deployments, data integration, and machine learning.
Boasting clients like Meta, Microsoft, IBM and Barclays, Progress delivered standout fiscal Q3 results. Revenue climbed 15.7% year-over-year to beat estimates at $175M, while EPS surpassed consensus by $0.08 at $1.08.
Progress also touted a 100%+ net retention rate and its active M&A strategy, having recently closed the $355M acquisition of MarkLogic. Ives sees ample opportunity for further accretive deals, with $138M in cash to deploy and valuations diminished.
As demand grows for its offerings, Progress is poised to capitalize while improving its cost structure. Ives remains bullish on continued growth, upholding a bullish $65 price target that implies 23% upside for the next 12 months.
Microsoft Leading the AI Revolution
As one of the world’s most valuable companies, Microsoft Corporation (NASDAQ: MSFT) has been at the forefront of technological innovation for decades. Its ubiquitous Windows operating system, Office productivity suite, Azure cloud platform, and Xbox gaming ecosystem enjoy tremendous reach.
Microsoft is also aggressively positioning itself to dominate the AI revolution. It has invested heavily in ChatGPT developer OpenAI and plans to roll out Microsoft Copilot AI capabilities to enterprise customers in October.
The company’s AI focus has supported its outperformance this year, with shares up 38% amidst the 2022 tech wreck. However, its latest quarterly report failed to thoroughly impress investors.
While Microsoft beat on both the top and bottom lines in fiscal Q4, Azure cloud revenue growth decelerated. Management’s Q1 guidance also came in light versus expectations.
Yet Ives believes these concerns will prove transitory. He sees AI adoption ramping quicker than expected based on recent checks. Azure momentum also appears to be accelerating sequentially, giving Ives confidence in Microsoft exceeding its 25–26% Azure growth outlook.
Ives maintains his bullish ‘Outperform’ rating on MSFT shares, backed by a $400 price target. This implies robust upside potential of 21% over the next 12 months.
The Verdict
Wall Street overwhelmingly sides with Ives in backing both Progress Software and Microsoft as compelling tech buys. PRGS earns a Strong Buy consensus based on 3 Buys versus 1 Hold. Meanwhile, MSFT boasts a Strong Buy consensus on 30 Buys and just 4 Holds.
The average price targets closely align with Ives’ objectives, underscoring confidence in over 20% upside for each stock over the coming year. With transformational AI growth taking off, these tech leaders look poised to ride the wave higher.
As earnings season nears, Ives believes the stage is set for tech stocks to surprise to the upside. Investors would be wise to use any weakness as a buying opportunity. Progress Software and Microsoft represent attractive plays on the AI-fueled rally ahead.
Stay tuned for more stock insights and analysis.
