TLDR

  • Mizuho has identified Cloudflare, ServiceNow, and Atlassian as its top software selections ahead of Q1 earnings releases
  • Application software stocks under Mizuho’s coverage have declined by an average of 61% over the past 12 months
  • Next twelve-month EV/Sales multiples are 40% lower than their three-year average levels, a dynamic Mizuho describes as offering appealing risk/reward potential
  • Cloudflare’s recent 13% selloff following the Claude Managed Agents announcement is deemed excessive by the firm
  • Price targets have been lowered across a wide range of covered stocks, including Microsoft, Palantir, Check Point, and Datadog

(SeaPRwire) –   Analysts at Mizuho have selected Cloudflare, ServiceNow, and Atlassian as their leading software stocks to monitor as the first-quarter earnings season gets underway. The bank notes that its industry due diligence shows solid consumption and AI adoption trends, even as valuations across the broader software sector have fallen sharply.

The research report, helmed by analyst Gregg Moskowitz, was published on Tuesday. It arrives at a broadly challenging period for software stocks overall.

  • Application software stocks in Mizuho’s coverage universe have fallen an average of 61% over the past year. Infrastructure software posted a marginal average gain of just 1%, while cybersecurity stocks declined by 22% on average.

    Mizuho cited concerns over AI disruption as a key driver of the widespread selloff. The firm observed that SaaS stocks have underperformed infrastructure software by roughly 40 percentage points since February 2025.

    Valuations across the entire sector have undergone a reset. Mizuho stated that NTM EV/Sales multiples are now 40% below their three-year average. The firm called the current risk/reward profile “quite attractive” over the next 12 months, while also warning of a “rocky path” ahead for investors.

    Cloudflare

    Cloudflare was noted to have “favorable” due diligence results for the quarter. Mizuho anticipates the company will deliver another quarter of revenue growth that exceeds official guidance, marking its fourth consecutive quarter of accelerating revenue.

    Cloudflare, Inc. (ticker: NET)
    NET Stock Card

    The stock slid 13% following Anthropic’s Claude Managed Agents announcement last Tuesday. Mizuho described that decline as “overdone” and retained its Outperform rating on the stock, even as it lowered its price target to $235 from the prior $255.

    ServiceNow

    Per Mizuho’s findings, ServiceNow’s Q1 due diligence revealed stronger-than-expected large-deal activity. The firm said adoption of its Pro Plus offering is growing at a steady, solid rate.

    Agentic AI solutions offered via assist packs are gaining traction among channel partners, though Mizuho noted the trend is still in its early stages. The firm expects ServiceNow to outperform its guidance for 20% year-over-year constant currency cRPO growth.

    Mizuho maintained its Outperform rating on ServiceNow but trimmed its price target to $150 from the previous $190. The stock currently trades at roughly 12 times its estimated 2027 calendar year free cash flow.

    Atlassian also retained its Outperform rating from Mizuho. The firm lowered its price target for the stock to $145 from $185, but still expects notable subscription revenue acceleration for the second consecutive quarter.

    The firm noted that reduced partner margins implemented several months prior may have limited the metrics captured in channel checks. Despite that, due diligence results for Atlassian came in stronger than those posted by some of its competitors.

    Mizuho also cut price targets for several other stocks in its coverage universe. Check Point’s target was lowered to $165 from $205, Microsoft’s was reduced to $515 from $620, Palantir’s was trimmed to $185 from $195, and Datadog’s was cut to $145 from $170.

    The bank’s overall stance on the software sector was cautious but not bearish. It noted that public cloud and consumption trends were “generally good” and AI adoption was “very strong” based on its Q1 due diligence.

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