Sherlund continues to watch discounts to predict how earnings season will play out. He explained that discounting can be viewed as robbing the next quarter. “You might have pulled out some of the stops to make this quarter,” Sherlund said. “But what about next quarter?”
Software Safe Havens
Despite recent weakness, there is still money to be made in the sector, he said.
Sherlund said that securities is a safe place in software. “In good times or bad you still need securities software,” he said.
Nomura is not cutting estimates on SAS companies such as Cornerstone On Demand and Salesforce.com. Sherlund explained that these companies have less fundamental risk because they do little European business. “They are in the sweet spot of the market, in the SAS space, which is growing very rapidly,” he added.
Sherlund’s top “buy” recommendations are Microsoft, Oracle, SAP, and Salesforce.com.
Palo AltoNetworks is another company to watch. The software security company is scheduled to make its public debut in July and is expected to be valued near $2 billion. Sherlund said Palo Alto will likely continue to be a strong competitor against Check Point.
—BY CNBC.com’s Madeline Laskoski
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Nomura Securities International makes a market in securities of the issuer.