Enterprise Software: Time to Take Profits?

by: Eric Savitz

Deutsche Bank analyst Tom Ernst Thursday morning cut his ratings for five enterprise software stocks, advising taking profits in each after substantial recent gains. Here’s a rundown on his moves:

  • Concur Technologies (NASDAQ:CNQR): Rating to Hold, from Buy. Target $32. “We see limited upside potential after recent market appreciation,” he writes. Ernst also writes that “checks continue to show pressure on corporate travel and some modest challenges associated with integrated travel bookings and expense implementations given change management and process requirements within larger enterprises.
  • Kenexa (KNXA): Rating to Sell, from Hold. Target $7. He notes that the stock trades at a premium to the rest of the software as a service group, but that that the company is suffering falling customer retention rates and is competitively weakened. A premium valuation, he contends, is not justified.
  • Neustar (NYSE:NSR): Rating to Hold, from Buy. Target $25. Recent appreciation in the stock, he writes, reflects a “relatively more balanced risk vs. reward.”
  • RightNow (NASDAQ:RNOW): Rating to Hold, from Buy. Target $14. The downgrade is largely valuation based, but he also says that competition is likely to get tougher as bigger players like Salesforce.com and Oracle complete more seriously in the call center knowledge management segment with software as a service offerings.
  • Ultimate Software (NASDAQ:ULTI): Rating to Sell from Hold. Target $18. He sees limited upside potential after recent appreciation in the stock.

In Thursday’s trading:

  • CNQR is down 32 cents, or 1.1%, to $29.93.
  • KNXA is down 37 cents, or 3.6%, to $9.90.
  • NSR is down $1.75, or 8.1%, to $19.76.
  • RNOW is down 21 cents, or 1.9%, to $10.59.
  • ULTI is down $1.06, or 4.8%, to $20.83.

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