With the first-quarter earnings season off and running this week, many across Wall Street are expecting some incredible results, as well as forward guidance that points to continuing strength throughout the rest of 2021. The one rub for many investors is the stock market is as expensive as it has been in some time, with the S&P 500 price-to-earnings ratio at 34.24, up from 31.24 last quarter and from 22.40 a year ago.
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With a big melt-up rally last week taking both the Dow Jones industrials and the S&P 500 to all-time highs, caution is warranted, especially in sectors that have been on fire, like software. However, there could be some big-time opportunity as some software names are retracing and are at or below their three-year historical forward multiples, according to Jefferies analysts. They point out four specific companies that are rated Buy at the firm that look like very solid ideas now. It is important to remember, however, that no single analyst report should be used as a sole basis for any buying or selling decision.
Anaplan
This off-the-radar stock could offer aggressive investors some big upside from current trading levels. Anaplan Inc. (NYSE: PLAN) provides a cloud-based connected planning platform to connect organizations and people. Its platform in-memory data storage and calculation capabilities deliver calculations of data in real time and provide a single source of information for planning and ensuring the consistency, quality and integrity of the data that is used in various areas of an organization, such as finance, sales, supply chain, marketing, human resources and operations.
The company delivers its application over the internet as a subscription service using a software-as-a-service model, as well as offers professional services related to implementing and supporting its application. It has operations in the Americas, Europe, the Middle East, Africa and the Asia Pacific.
Jefferies recently raised the price target on the shares to $100 from $85. The much lower Wall Street consensus target is $83.17, and Monday’s last trade for Anaplan stock was at $60.45, which was up over 2% on the day.
Datadog
Investors may not be familiar with this name either, but it also holds tremendous upside potential. Datadog Inc. (NASDAQ: DDOG) engages in the development of monitoring and analytics platforms for developers, information technology operations teams and business users. The company’s platform integrates and automates infrastructure monitoring, application performance monitoring and log management to provide real-time observability of its customers’ entire technology stack.
Datadog recently announced the extension of Network Performance Monitoring (NPM) to Windows. Datadog NPM now monitors the performance of network communications between applications running on Windows Server and Linux, providing seamless network visibility across cloud environments, on-premises data centers and operating systems.
Jefferies has a huge $140 price target, while the consensus target is $122.88. Datadog stock rose almost 2% on Monday to close at $90.46 a share.
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