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Cloud-software stocks suffer

By Lawrence Gash

Morgan Stanley concerns vindicated

American cloud-software stocks have suffered with concerns that the hot sector is eventually cooling.

Workday (WDAY) a cloud software provider, which develops on‑demand financial management and human capital management solutions, was one of the heaviest hit stocks on the NASDAQ on October 23. It dropped 11.33 per cent losing $20.50 to close the day at $160.46.

A day beforehand Workday CEO Aneel Bhusri had observed that his company was not seeing anything “drastically different” in the marketplace but admitted that “some delays” in the wider adoption of cloud-based software were affecting the company.

The firm is not the only cloud-software company to experience difficulty, it is still the third-largest by annual revenue. With this week’s stock plunge it returned to the same position it started 2019 from, indeed it is still up from this time last year when it stood at $137.25.

A group of 50 cloud stocks tracked by Keybanc Capital was down by an average of 3.6 per cent at the close of Wednesday trading, while the tech-dominated Nasdaq Composite Index was only down 0.5 per cent.

In a note on Wednesday morning analysts at Morgan Stanley analysts stated that they saw “unfavorable risk/rewards for a lot of the high fliers in software.”

Instead they recommended long-term investments in more traditional software companies, such as Adobe (ADBE) and Microsoft (MSFT). Both of which also suffered in trading this week but are on an altogether steadier footing.

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