Citi names Microsoft a top pick, says sell-off in software stocks is mostly done

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Citi thinks the worst of this year's sell-off in software names may be in the past, leading it to update its top picks.

The firm added Microsoft to the top of its list, noting that it's one of the stocks most exposed to "still resilient IT budgets" and has "defensive hybrid apps/infra characteristics." Analyst Tyler Radke also said the firm has high conviction in Microsoft's "sustained double digit growth," led by momentum in its commercial cloud business, and long-term pricing power.

"With valuation multiples near multi-year lows, we believe the sector de-rating is mostly done, especially with Citi's 10-year interest rate Dec-31 forecast for 2.75% ." He also said valuations are back to multiyear lows, which could lead to estimate cuts in the second half of the year. "Software valuation multiples relative to the S & P 500 and in hypergrowth have fallen to multi-year lows and have come as 10-year interest rates have risen dramatically.

 

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Every single time an article like this shows up , we take a leg lower on the market

software selloff is just getting started, and microsoft top pick is a bad idea

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