On Wednesday, Piper Sandler, a well-known investment firm, highlighted its top stock picks for the year 2025 in the Commerce & Industrial Software (ETR:SOWGn) sector. The firm's analyst, Clarke Jeffries, emphasized the importance of company-specific catalysts over broader economic conditions in driving market performance.
Despite acknowledging a challenging economic landscape with high yields and modest rate cut plans, Jeffries believes that certain stocks have strong growth prospects under various macro scenarios.
Autodesk, Inc. (NASDAQ:ADSK) was recognized for its potential efficiency narrative, which has been gaining traction since a significant investment by activist firm Starboard. The recent guidance for FY26 and the appointment of a new CFO have, according to Jeffries, created an attractive opportunity for investors.
Piper Sandler foresees a scenario where Autodesk could see rapid improvements in profitability if management undertakes cost reduction measures. Even without drastic changes, the firm sees a base case of mid-teens EBIT growth and mid-30s free cash flow margin as reason enough to invest.
Synopsys, Inc. (NASDAQ:SNPS) is also among the top picks, with the anticipated completion of its merger with ANSYS (NASDAQ:ANSS), Inc. potentially creating a combined entity valued at over $120 billion in the design automation and simulation market. Despite a challenging year due to various factors including trade tensions and post-COVID normalization, Jeffries sees the pending transaction as a compelling reason for ownership, with the potential to overcome organic growth hurdles.
Tyler Technologies, Inc. (NYSE:NYSE:TYL) rounds out the top ideas list, with its transition to a nearly 100% SaaS sales mix and the potential for an acceleration in 'flips'—the conversion from on-premise to cloud-based services. The company, currently valued at $24.1 billion, has demonstrated solid financial performance with revenue of $2.08 billion in the last twelve months and an impressive 8% revenue growth. According to InvestingPro data, Tyler Technologies had a strong performance in 2024, delivering a 36% return over the past year, and Piper Sandler anticipates further improvements in 2025.
The firm projects a faster decline in maintenance revenue, an upward trend in SaaS revenue growth, and the possibility of operating margins exceeding consensus expectations, noting the company already achieved 25% operating margins in the third quarter of 2024.
InvestingPro analysis indicates the stock is currently trading above its Fair Value, with analysts setting price targets ranging from $575 to $705.Want to dive deeper? InvestingPro subscribers have access to 12 additional ProTips and a comprehensive Pro Research Report that provides detailed insights into Tyler Technologies' financial health, which currently rates as "GOOD" based on multiple factors including profitability and growth metrics.
Piper Sandler's selection of ADSK, SNPS, and TYL as top picks is grounded in the belief that these companies possess unique drivers that can propel them ahead of the market, despite a potentially volatile macroeconomic environment. Tyler Technologies, in particular, maintains a strong financial position with moderate debt levels and sufficient cash flows to cover interest payments, according to InvestingPro analysis.
In other recent news, Tyler Technologies has reported notable financial performance, with total revenues in the third quarter reaching $543.3 million, a 9.8% increase year-over-year.
Subscription and Software as a Service (SaaS) revenues saw significant increases of 17.6% and 20.3% respectively. Additionally, new software bookings surged by 78% to $105.6 million. The company also secured a $35 million contract with the Kentucky Court of Justice and revised its 2024 guidance, projecting total revenues between $2.125 billion and $2.145 billion.
Furthermore, Tyler Technologies announced a reshuffling of its executive team, including the introduction of a chief administrative officer role and the appointment of new chief marketing and chief legal officers. Truist Securities and Loop Capital maintained their Buy ratings on Tyler Technologies, with Loop Capital raising its price target to $680. Piper Sandler and Baird also increased their price targets to $701 and $700 respectively.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.