Enterprise software stocks have been beaten up badly over the last year. Fears of slowing growth, high valuations, and looming recession have all played a part. The takeaway is that these stocks are trading at rock-bottom prices, and some interesting details from the Q2 reporting season suggest the bottom is in. 

Among the details is the trend of beating consensus estimates and raising guidance. That alone is helping to put a bottom in the analysts' sentiment, and there is more. An increase in large clients underpins growth, clients that can sustain growth and are more likely to spend when economic times are troubled, and the penetration of services. The bottom line is that enterprise software is not dead, and the group is on the verge of a major reversal. 

ServiceNow: An Industry Leader In Business Automation 

ServiceNow (NYSE: NOW) provides a cloud-based platform to optimize and automate business workflows. Its Q2 report included top and bottom-line outperformance and raised guidance to include announcing new deals and products. The new deal is an expansion on a partnership with NVIDIA (NASDAQ: NVDA) and Accenture (NYSE: ACN) to provide AI services; the new products are a suite of AI services called Lighthouse aimed at helping businesses integrate AI into their operations. 

Analysts are praising the news and raising their estimates because of it. The consensus estimate for Q3 and next year have seen substantial increases, with 2024 expected to show high-double-digit gains in revenue and earnings. The analysts rate the stock a Moderate Buy, which has held steady over the last year; the price target is trending higher and leading the market by 20%. ServiceNow will report Q3 results in late October. 

Monday.com: A Diversified Solution to Business Solutions

Monday.com (NASDAQ: MNDY) offers a range of cloud-based products, including workflow management, CRM, and app development tools. Its Q2 results included beating consensus estimates and raising guidance above consensus targets. The report highlights the 63% increase in large clients underpinning the company's success, although revenue growth is slowing. Revenue growth is slowing, but to 42% in Q2 and the high 20% range next year, but is expected to continue for the next several years. The company tends to outperform 100% of the time, so these estimates are cautious. The analysts rate this stock a Moderate Buy with a price target of $197, which is about 15% above the current action and is trending higher. 

Snowflake Deepens Penetration of Existing Clients

Snowflake (NASDAQ: SNOW) is a cloud data management and analytics firm with a net retention rate of 142%. This is a clear sign that businesses that use Snowflake stay with it and are using its products and services more over time. What this means for the outlook is that analysts expect sequential and YOY growth in Q3 and for YOY growth to top 30% (revenue) and 50% (earnings) in 2024. Analysts rate this stock a Moderate Buy with a firm price target 25% above the current price action. 

Asana: Helping Productivity in the Workplace 

Asana (NYSE: ASAN) runs a work management platform gaining client traction. Its Q2 is highlighted by top and bottom-line outperformance driven by a 19% increase in large clients. Revenue from large clients grew by 32%, evidence of deepening penetration that is expected to continue next year. The outlook for next year is also good, with profitability coming closer. Analysts expect double-digit revenue growth and for the loss per share to halve. They rate the stock a Hold with a price target about 5% above the current action. The rating and the price are firm; most of the freshest targets are well above the consensus figure. 

Zoom Video Communications: The Best Value In Enterprise Software 

Zoom Video Communications (NASDAQ: ZM) offers the best and most reasonable value in enterprise software trading at only 15X earnings, less than half the next cheapest stock in the group. It also delivered a beat and raise quarter that spurred the analyst to action. They see the company slowly turning a corner as it laps tough pandemic comps and leans into enterprise markets. It is expected to post a YOY gain in Q3, but analysts are underestimating the recent strength. Until then, they rate the stock at Hold with a firm price target that is 20% above recent action.