Analysts at Goldman Sachs are "incrementally more bullish" on their conviction list tech stocks in the U.S. and picked several top ideas for the fall, as demand increases and performance improves. "We enter the Fall incrementally more positive on the Software industry given an increasingly strong demand environment and improving fundamentals," the analysts led by Kash Rangan stated in a Sep. 3 research note. Goldman noted an increase in new business due to demand from clients undertaking a digital transformation as well as higher margins as companies sell their products virtually. "We see a supportive set-up for software stocks in the near-term," the analysts stated, adding that stocks they cover are up 21% year-to-date on average versus the Nasdaq, which is up 18%. Conviction list stocks The bank is "incrementally more bullish" on three conviction list stocks, saying that Microsoft is "well-positioned" to double its $60 billion cloud business, which includes Office 365 and LinkedIn's commercial arm. The company said it would raise prices for some Office365 subscriptions last month. "Microsoft stands out uniquely in the technology world given its strong presence across all layers of the cloud stack," the bank stated. "We continue to foresee sustainable double-digit top line growth for Microsoft for several years to come alongside margin expansion," they added. Goldman estimated revenue would grow at a 14% compound annual growth rate and earnings at 17% from 2021 through 2024. Salesforce is also on Goldman's conviction list and is likely to benefit from a shift to digital customer experience that the pandemic sped up, the bank said. "The company's robust and strategically built product portfolio spanning sales, service, marketing, ecommerce, analytics, artificial intelligence, customer applications, integration and collaboration covers virtually all aspects of Digital Transformation," Goldman added. Last month, Salesforce raised full-year guidance after it bought messaging app Slack. IT support firm ServiceNow is the third software company on Goldman's conviction list, with the firm set to benefit from a "very large" total addressable market of an estimated $175 billion in 2024, the bank said. "We remain bullish and believe the risk/reward skews positive," the analysts said. Goldman's top picks Human resources software company Workday is set to benefit as companies move their legacy systems online, Goldman said, and it is bullish on the stock. "With vaccines beginning to be more broadly distributed, we believe that corporations are getting ready to revisit strategic investments pertinent to Workday's products," the analysts said, adding that this pent-up demand is likely to stimulate growth in 2022. Work management software company Monday is a "leader" in its market and is "well positioned to capitalize on the growing need to adopt workplace collaboration and productivity tools," according to Goldman, which remains buy-rated on the stock. Monday listed on the Nasdaq in June . Software firm Adobe is set to benefit from the trend for digital transformation, according to Goldman, which is buy-rated on the stock. The analysts like its retention and renewal rates ahead of pre-pandemic levels and growth in products such as Acrobat and Document Cloud. "The unprecedented pace of digital transformation underpinning the Digital Experience business, the durable shift from paper to digital document management, and the surge in content creation, give us incremental confidence in this potential," the analysts wrote. Data warehouse Snowflake is also a buy for the bank, due to its "strong competitive positioning," "best in class growth" and new customers — it now counts 42% of the Fortune 500 as clients. "We see a long runway for continued growth with new and existing customers as Snowflake's cloud-native data platform continues to replace incumbent data warehouse solutions," Goldman noted. Snowflake listed on the NYSE in September 2020 , the largest ever software initial public offering (IPO) at the time. ZoomInfo , a company that helps marketing teams reach customers (not to be confused with video chat company Zoom Video ) was the first IPO of the coronavirus pandemic . Goldman noted its operating margins of more than 40% and also liked its 57% year-over-year growth in the second quarter of the year, versus 46% for the first quarter. — CNBC's Ari Levy and Kevin Stankiewicz contributed to this report
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Analysts at Goldman Sachs are "incrementally more bullish" on their conviction list tech stocks in the U.S. and picked several top ideas for the fall, as demand increases and performance improves.