The rally in software stocks – led by Palantir Technologies (PLTR) and Oracle (ORCL) — will continue in 2025 with improved earnings estimates and monetization of generative artificial intelligence two factors, a Jefferies analyst said. Palantir stock has gained 274% in 2024 while Oracle has advanced 82%
The iShares Expanded Tech-Software Sector ETF (IGV), an industry index that includes Microsoft (MSFT) and many big-cap software companies has climbed nearly 31% in 2024 and has shot up 19% since the start of October.
Jefferies analyst Brent Thill in a report published Monday said: “We view four key catalysts to drive higher growth and valuation in 2025: improving fundamentals; accelerating AI monetization; a more favorable M&A environment; and budgets unlocking following election overhang.”
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Also, for most big application software companies, how to charge for AI-related products has been an issue. Having struggled to generate new revenue from “copilots,” software companies are now turning to AI agents.
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Palantir stock ranks No. 5 in the IBD 50 roster of growth companies. At Wedbush, analyst Dan Ives on Monday hiked his price target on Palantir stock to 75 from 57.
“Outside positive macro tailwinds, there are signs of the sector fundamentals improving where the percent of software companies tracked by our trading desk seeing higher forward quarter revenue estimates has been rising,” Thill added. “A combination of more favorable macro conditions and improving business momentum leads us to stay bullish for next year.”
Aside from Palantir stock and Oracle, other top performers in 2025 include cybersecurity Fortinet (FTNT).
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“Within our coverage, the five highest-valued names on are Palantir, CrowdStrike Holdings (CRWD), Cloudflare (NET), Datadog (DDOG)and Snowflake (SNOW),” Thill said.
CrowdStrike and Workday (WDAY)report earnings on Tuesday. Salesforce (CRM)follows on Dec. 3. Salesforce stock has advanced 30% in 2024. CrowdStrike stock has been rebounding from a global IT outage in July.
Meanwhile, Larry Ellison’s Oracle stock has been partying like it’s 1999.
However, Microsoft stock has gained only 11% in 2024.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
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