Canaccord upgrades Okta, sees AI-driven demand boosting software sector

Investing.com -- Canaccord Genuity said it is turning more positive on the outlook for software makers this quarter given steady demand trends and rising spending from AI-focused customers.

The brokerage highlighted a slate of earnings reports this week from Alarum, CrowdStrike, Elastic, MongoDB, Okta, SentinelOne, and Snowflake on strength seen in the second quarter extended into July.

Canaccord upgraded Okta to Buy from Hold and lifted its price target to $120 from $115, pointing to favorable risk-reward at current valuations.

The firm said enterprises are putting greater emphasis on identity security as AI-driven workloads expand, creating an opportunity for Okta to capture more share.

Among infrastructure software names, Canaccord said MongoDB and Snowflake should benefit most from increased consumption by AI-native customers, while Elastic is likely to show improving bookings trends. Alarum could also see gains from the same dynamic, the note said.

On the security side, Canaccord cited Palo Alto Networks’ recent results as a positive indicator, showing strength in product revenue and next-generation security subscriptions.

But it cautioned that optimism around leading security players such as CrowdStrike is already reflected in share prices, making them less attractive compared with infrastructure names that still face skepticism.

Overall, Canaccord said the adoption of AI across enterprises is becoming a key driver of growth, with software companies that can demonstrate durable demand and relevance in the new environment best positioned to benefit.

You May Also Be Interested In

• Equity returns likely to moderate, but dips remain buying opportunities: GS
• HSBC stays aggressive on stocks, asks what could turn it bearish
• Docusign beats estimates but shares slip on muted guidance