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Sylogist Ltd. (SYZ $5.60)
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Microsoft Corporation (MSFT $483.16)
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Salesforce Inc. (CRM $260.57)
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Constellation Software Inc. (CSU $3,325.82)
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ServiceNow Inc. (NOW $854.36)
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Topicus.com Inc. (TOI $125.98)
Q: Hi, ServiceNow stock, a large US Enterprise Digital Solutions provider company, dropped 12%, Today, after CEO's comments, last evening on Mad Money, warning about the macro headwinds faced by a continuously extra strong US Dollar, by Technology companies, particularly those with large enterprise customers, around the world. Some of the comments are as below:
" You’re at 41-year high inflation. The dollar right now is the highest it’s been in over two decades. We have interest rates rising. People worried about security. You’ve got a war in Europe. So, the mood is not great,” McDermott said in an interview that aired on “Mad Money” after the closing bell on Monday.
“You’re going to see the headwind of the dollar right now against well-known technology brands,” the CEO added. “No one’s going to outrun the currency right now.”
Shares of ServiceNow, which helps companies and organizations digitize their workflows, fell 13% on Tuesday after McDermott’s comments, which were meant as an overall industry observation, not ServiceNow-specific news due to the company being in a quiet period ahead of reporting its latest quarterly earnings on July 27. "
“When you think about energy, and the dislocation caused by the war in Europe, and this reprioritization I’m talking about, you’re going to see longer cycles [to close deals] in Europe. We saw that,” McDermott said. “But this doesn’t fundamentally change the narrative that tech is the only way to cut through the crosswinds.”
The reprioritization he’s referring to is the increase in demand for a fast return-on-investment — another symptom of cautiousness in the current environment.
“There’s a new level or prioritization in the enterprise. And I have seen this, actually since we last met, Jim, hitting a new gear. Where companies are first saying ‘which platforms do we want to bet on,’” and then try to sort their priorities, McDermott said.
“There’s one filter on all of this now. And that is fast return on investment. And if you can’t put an architecture in there that gives the customer a fast ROI, chances are, you’re going to get postponed,” he added.
Stifel said in a note on Tuesday that it believes the company is “likely” to lower their expectations when it reports earnings, citing McDermott’s comments on reprioritization. The investment bank also expects other companies across the industry to follow suit in the coming weeks.
There was chatter that Today's 4.10% decline in MSFT and 4.61% in Sales Force, which was ugly, was not company specific but in reaction to this macro warning,
Most large Technology will start reporting in a few weeks time.
Some strategists were seen on CNBC talking about the" Generals" being the last to drop and MSFT's sharp drop today was noticed by many.
Do you agree with above comments/sentiments ?
We are trying to assess, if these companies, in your view, are likely to be faced with similar headwinds - CSU ( worldwide revenues), TOI ( Europe) and SYZ ( >55% US rev ), for all those reasons. And if you think, they are not immune to this, is there any caution warranted, or is it prudent to reduce our exposure to a more reasonable level, at this time.
Thank You
" You’re at 41-year high inflation. The dollar right now is the highest it’s been in over two decades. We have interest rates rising. People worried about security. You’ve got a war in Europe. So, the mood is not great,” McDermott said in an interview that aired on “Mad Money” after the closing bell on Monday.
“You’re going to see the headwind of the dollar right now against well-known technology brands,” the CEO added. “No one’s going to outrun the currency right now.”
Shares of ServiceNow, which helps companies and organizations digitize their workflows, fell 13% on Tuesday after McDermott’s comments, which were meant as an overall industry observation, not ServiceNow-specific news due to the company being in a quiet period ahead of reporting its latest quarterly earnings on July 27. "
“When you think about energy, and the dislocation caused by the war in Europe, and this reprioritization I’m talking about, you’re going to see longer cycles [to close deals] in Europe. We saw that,” McDermott said. “But this doesn’t fundamentally change the narrative that tech is the only way to cut through the crosswinds.”
The reprioritization he’s referring to is the increase in demand for a fast return-on-investment — another symptom of cautiousness in the current environment.
“There’s a new level or prioritization in the enterprise. And I have seen this, actually since we last met, Jim, hitting a new gear. Where companies are first saying ‘which platforms do we want to bet on,’” and then try to sort their priorities, McDermott said.
“There’s one filter on all of this now. And that is fast return on investment. And if you can’t put an architecture in there that gives the customer a fast ROI, chances are, you’re going to get postponed,” he added.
Stifel said in a note on Tuesday that it believes the company is “likely” to lower their expectations when it reports earnings, citing McDermott’s comments on reprioritization. The investment bank also expects other companies across the industry to follow suit in the coming weeks.
There was chatter that Today's 4.10% decline in MSFT and 4.61% in Sales Force, which was ugly, was not company specific but in reaction to this macro warning,
Most large Technology will start reporting in a few weeks time.
Some strategists were seen on CNBC talking about the" Generals" being the last to drop and MSFT's sharp drop today was noticed by many.
Do you agree with above comments/sentiments ?
We are trying to assess, if these companies, in your view, are likely to be faced with similar headwinds - CSU ( worldwide revenues), TOI ( Europe) and SYZ ( >55% US rev ), for all those reasons. And if you think, they are not immune to this, is there any caution warranted, or is it prudent to reduce our exposure to a more reasonable level, at this time.
Thank You
