Plug Nose and Buy Weakness in Enterprise Software Stocks, FBR Says; M&A Conditions 'Ripe' (SPLK) (CRM) (WDAY) (FEYE) (N) (PANW)

FBR Capial analyst Daniel H. Ives commented on the sharp sell-off in enterprise software stocks over the past few weeks, telling clients to plug their nose and buy the winners: Splunk (NASDAQ: SPLK), Salesforce.com, Inc. (NYSE: CRM), Workday (NYSE: WDAY), FireEye (NASDAQ: FEYE), NetSuite (NYSE: N), Palo Alto Networks (NYSE: PANW)

Ives comments, "There has been panic-like selling in these high-flyer names as they lack valuation support and catalysts until earnings season and have caused the "bears to come back from out of their caves" and scream fire in a crowded theater. We believe a confluence of factors is driving the recent sell-off including: (1) a rotation into larger, slower-growth names (e.g., MSFT, ORCL) with strong profitability metrics; (2) fears around worse-than-expected seasonal weakness in upcoming 1Q results given last year's tough 1Q13 among software companies; and (3) higher valuations/new paradigm around red-hot growth names. We recommend investors "buckle their seat belts" and take advantage of any weakness around who we view to be the "clear winners" in high-growth markets with rapidly increasing TAM expansion stories such as big data, cybersecurity, and cloud."

The analyst also notes with some names 30-40% off their highs, ripe M&A conditions within the software landscape are now more attractive, and the would surprised to see a major strategic player (e.g. Oracle, IBM, SAP, EMC, Microsoft) take advantage of the recent sell-off and acquire a big data/cloud/cybersecurity vendor caught in this downdraft.

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