What software companies will be the most resistant to the coronavirus stock market correction? As the fast spreading coronavirus reduces business travel, some Wall Street analysts are focusing on software companies with "low touch" sales models that require less in-person contact.
XAtlassian stock is one of those software companies, according to analysts at Cowen and Morgan Stanley. At Jefferies, analyst Brent Thill says low-touch software companies include Dropbox (DBX), HubSpot (HUBS), and Bill.com Holdings[ticker symb=BILL]. He also cites Cloudflare (NET) and Solarwinds (SWI).
Meanwhile, Atlassian (TEAM) stock ranks No. 26 in the IBD 50 roster of fast-growing companies. The software maker markets products through paid search online.
"With the purest implementation of the product-led distribution model, Atlassian deals start small at the team level and grow virtually within an organization," Morgan Stanley analyst Keith Weiss said in a report to clients.
Atlassian also has hosted customer events that foster a strong user community. Weiss noted Atlassian has canceled its in-person Summit conference amid the novel Covid-19 coronavirus stock market correction. However, he added that Atlassian is less dependent on its annual user conference than other software companies.
Business Travel Down Amid Coronavirus Stock Market Correction
"Software vendors with long sales cycles requiring sales people and system engineers on site and lengthy implementation cycles carry significant risk into (first-quarter) earnings," Weiss added.
At Cowen, analyst J. Derrick Wood calls Atlassian one of the software companies that "enjoy favorable business models that can better withstand travel disruption as a result of their low-touch/self-service digital customer engagement models."
He also favors Twilio (TWLO). Twilio stock, though, has been one of the hardest hit software companies during the coronavirus stock market correction.
In his note to clients, Wood added: "Common sense would suggest that because larger software deals tend to be high-touch, in-person engagements, the rising level of travel restrictions/fears and customer conference cancellations could cause some disruption to sales cycles."
He says the larger software companies, highly reliant on high-touch engagements, include SAP (SAP), Workday (WDAY), ServiceNow (NOW), Oracle (ORCL), Salesforce.com (CRM), Splunk (SPLK) and Adobe Systems (ADBE).
Software Companies Cancel User Conferences
Adobe's outlook could be key for software companies when it reports fiscal first-quarter earnings on Thursday. Adobe has canceled its March conference.
ServiceNow, which holds a conference in May, still plans to hold the event.
Baird analyst Rob Oliver in a report said "travel restrictions pressuring large-deal close rates as well as (deal) pipeline damage incurred from cancellation of user conferences and events" will pose a problem for some software companies.
He expects the coronavirus stock market correction to linger. Zendesk (ZEN) also is among software companies that have canceled user conferences. Zendesk stock has been pummeled.
"Software companies typically only have one chance each year to get many of their largest customers gathered in one place, and that's their annual user conference," Oliver added. "Customers become 'captive' at these events. 'Virtual' events in the wake of Covid-19 can certainly help spread the word on product features and roadmap, but cannot match the in-person impact for driving incremental customer spend."
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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