What Happened?
A number of stocks jumped in the afternoon session after Guggenheim's John DiFucci upgraded both Salesforce and ServiceNow to Buy, arguing the AI-disruption fear that gutted the software sector during the year had pushed valuations too low.
This was a valuation call from a skeptic, not an AI endorsement. DiFucci wrote he is "not upgrading because we see [ServiceNow] as an AI beneficiary," calling near-term AI monetization "unlikely to materialize" and AI risks "very real," while arguing the darkest scenario was already priced in (CRM at ~3.7x EV/recurring revenue; NOW's $125 target at 7.5x EV/NTM recurring revenue).
The read-through was what lifted the group. When a previously cautious, highly ranked analyst flips to Buy on the two enterprise-SaaS bellwethers purely on valuation, it signals the "SaaSpocalypse" repricing overshot, de-risking the whole complex and inviting bargain-hunting across peers. Oracle's ~2% bounce added an independent second leg, driven by inclusion on William Blair's July Analyst Conviction List, a new AI product, and oversold conditions after the previous disclosure of a $40 billion AI-infrastructure raise. Together they extended a multi-week recovery.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Marketing Software company Sprout Social NASDAQ:SPT jumped 5.2%. Is now the time to buy Sprout Social?
- Finance and Accounting Software company Workday NASDAQ:WDAY jumped 5.9%. Is now the time to buy Workday?
- Vertical Software company Manhattan Associates NASDAQ:MANH jumped 5.8%. Is now the time to buy Manhattan Associates?
Zooming In On Workday (WDAY)
Workday’s shares are very volatile and have had 24 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 5 days ago when the stock gained 6.1% on the news that Monness, Crespi, Hardt upgraded the stock to Buy from Neutral with a $150 price target.
The firm highlighted that Workday had been the worst-performing stock in its coverage universe in 2026, falling 45%. Despite concerns that AI could impact the software industry's growth, Monness cited the company's depressed valuation, attractive margin profile, and strong cash flow generation as key reasons for the upgrade, viewing the shares as compelling at their current levels.
Workday is down 36.9% since the beginning of the year, and at $129.91 per share, it is trading 47.5% below its 52-week high of $247.69 from September 2025. Investors who bought $1,000 worth of Workday’s shares 5 years ago would now be looking at only $551.74.
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