Piper Sandler downgrades software stocks on AI shift, macro strain By Investing.com

Piper Sandler downgraded SAP to neutral from overweight and cut its price target to €170 from €220, while trimming fiscal 2026 constant-currency cloud backlog growth to 23% from 24%. Asana and Monday.com were also downgraded to neutral, with Monday.com’s fiscal 2026 revenue growth guidance of 18.3% missing prior consensus of 20.5%. The note highlights slower cloud conversions, weaker seat expansion, and a longer timeline for AI monetization across enterprise software.

Analysis

The market is pricing a genuine slowdown in the enterprise software spend cycle, but the more important second-order effect is budget reallocation, not outright budget destruction. If CIOs are prioritizing AI over ERP conversions and collaboration-seat expansion, incumbents with core-system lock-in lose near-term conversion revenue while hyperscalers, data/compute vendors, and AI workflow layers gain share of wallet. That favors vendors monetizing inference, data pipelines, and model orchestration over “workflow-only” SaaS names whose growth depends on headcount expansion.

SAP looks comparatively resilient over a multi-year horizon because data gravity is a real moat, but the next 2-4 quarters are at risk if cloud backlog conversion slips and Europe slows further. The regional oil shock matters less through direct IT spending cuts than through a second-order inflation impulse: higher energy prices pressure European PMI, extend sales cycles, and push CFOs to delay discretionary transformation projects. That is a headwind for valuation multiples across the group because the market will not pay AI-optionality premiums without visible monetization.

ASAN and MNDY are the cleaner expressions of the “efficiency AI” problem: if large customers can automate work coordination and reduce seat growth, revenue can decelerate even if engagement remains stable. The consensus may be underestimating duration here — once procurement teams learn they can do more with fewer licenses, the reset can persist for several quarters and compress renewal pricing. The contrarian bull case is that these downgrades may already reflect a low bar; if AI spend remains mostly experimental rather than budget-funded, seat pressure could prove slower than feared and set up a tactical squeeze in high-short-interest names.

Key Decisions for Investors

• Short MNDY vs long SAP: express the view that core ERP/data gravity holds up better than collaboration-suite seat growth over the next 3-6 months. Use a 1:1 dollar-neutral structure; stop if SAP backlog commentary re-accelerates or Monday guides back above consensus.
• Sell ASAN downside via put spreads 2-4 months out: target a controlled-risk bearish expression on the most vulnerable seat-growth name. Favor strikes 10-15% below spot to capture continued multiple compression without paying for a full collapse.
• Reduce exposure to Europe-heavy enterprise software baskets for the next earnings season: the macro shock raises the odds of deferred projects and lower billings beats. Rotate toward U.S.-centric infrastructure/software names with clearer AI monetization within 6-12 months.
• If long SAP, hedge with a short basket of ASAN/MNDY into the next conference cycle: SAP is the relative winner in a slower IT-spend regime, but the pair isolates the differential between durable data moats and weaker collaboration monetization.
• Watch for a tactical long in high-quality AI enablement vendors on any post-downgrade selloff: the budget dollars displaced from ERP and collaboration likely migrate to compute, observability, and data tooling. Best risk/reward is to buy strength only after managements confirm AI spend is funded, not aspirational.