Guggenheim Upgrades Salesforce and ServiceNow to Buy

Analyst John DiFucci of Guggenheim upgraded both Salesforce (CRM) and ServiceNow (NOW) to Buy, a surprising move from a previously skeptical analyst. DiFucci believes the AI disruption fear that battered the sector last year has driven valuations to attractive levels.

Rating Change

Before the upgrade, DiFucci had a Neutral or Sell rating on both stocks; now he rates them Buy. No new price target was disclosed.

Analyst Rationale

DiFucci called the upgrade a "valuation call" rather than an endorsement of AI's impact. He argued that fears of AI disrupting software business models were overblown, pushing stock prices below intrinsic value.

Context

Shares of software companies like Zscaler, Freshworks, and Sprinklr surged following the upgrade, indicating investor optimism for a sector re-rating. However, other analysts remain divided between caution and optimism.

What to Make of It

DiFucci's upgrade marks a shift in sentiment for the software sector, but it is based on valuation rather than strong growth expectations. Investors should monitor upcoming quarterly results to validate this view.