ASAN - Mizuho boosts upside expectations for picks in off-cycle software earnings

Second-quarter earnings season for the broader market is over, but a number of large-cap software vendors report on a July quarter, and their earnings are still ahead - and in previewing those reports, Mizuho says the fundamentals are still looking strong. Leading the way on those strong fundamentals for the off-cycle companies are digital transformation, and/or security projects, the firm's Gregg Moskowitz and team note. In the meantime, the stocks have been outperforming: For May-July, the IGV Software Index (BATS:IGV) gained 12% with growth stocks particularly strong, the team notes - and even though the HACK cybersecurity and CLOU cloud computing indexes continue to lag, the gains put IGV at parity with the broader Nasdaq year-to-date. In broader enterprise software, valuations (on a next-12-months EV/sales multiple) are 15-20% below their peak levels, the firm says, and 50% above average. But software deserves a "healthy" premium, it says, due to "(1)

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Mizuho boosts upside expectations for picks in off-cycle software earnings