Analysts at Citigroup and Jeffries have indicated that the enterprise software sector is going to be affected by the novel coronavirus. However, for now, vendors are cautiously optimistic about how their sales will be hurt by the outbreak.
Adobe said on its earnings call that its seen "little to no impact" on demand for its Creative Cloud and Document Cloud content-creation suites. The company made a note that because of its subscription-based revenue model, there is a sense of predictability despite the pandemic. Though chief executive officer Santanu Narayen did share that Adobe could experience some enterprise clients to "delay deal bookings, postpone services implementations and otherwise cut expenses."
While rival company, DocuSign has indicated that as the COVID-19 outbreak moves more workers into remote positions, companies will also inevitably transition to digital document signings.
Despite the general optimism, Slack is feeling the heat. Its stock is down over 8%, just after beating its January quarter estimates. It issued its May quarter sales guidance that was just slightly below consensus. However, chief executive officer Stewart Butterfield said that Slack has experienced a "massive outpouring" of customer interest since the outbreak has forced office workers to work from home.
Analysts at Jeffries and Citigroup pointed to a number of vulnerabilities within these companies that will no doubt be affected by the current global health crisis.
“The global reaction to the outbreak will cause some short-term impact on the ability of software companies to close business,” said Citigroup analyst Walter Pritchard. He noted that companies like Adobe and Oracle could be affected as demand in Asia and travel is reduced while trade shows and meetings continue to be canceled.
Meanwhile, Jeffries analyst, Brent Thill sees high profitability for companies like Adobe, Microsoft, Intuit, and Ring Central.
Both analysts also estimated significant cuts across a number of companies. Thill cut estimates for 40 companies he covers for their current fiscal years by 1-3%. While Pritchard cut estimates for almost all the companies he covers, with most significant cuts to the likes of SAP, Open Text, Splunk, and Check Point Software Technologies.
