Piper Sandler says software faces pressure from Anthropic agents By Investing.com

Investing.com - Software stocks fell today following Anthropic's announcement of Claude Managed Agents, a pre-built, configurable agent harness for long-running tasks and asynchronous work, according to Piper Sandler analyst Billy Fitzsimmons.

The announcement intensifies concerns that Anthropic's agents will compete directly with those of incumbent software companies. Fitzsimmons said the firm expects continued software pessimism through at least year-end and has downgraded names in the sector. The analyst noted that if Anthropic lowers barriers to building agents on its platform, it contributes to seat deflation concerns and creates competition for incumbents' own AI agents.

Piper Sandler recommends hyperscalers monetizing AI compute, including Microsoft (NASDAQ:MSFT) and Oracle (NYSE:ORCL), which directly monetize frontier model growth through their Azure and OCI lines. The firm prefers MSFT, which trades at a CY27 P/E of 20x estimates, as its capex is funded with cash flow rather than debt or equity. The stock currently trades at a P/E of 23.24 with a moderate debt-to-equity ratio of 0.32, generating $77.4 billion in levered free cash flow over the last twelve months. Despite a 27% decline over the past six months, InvestingPro analysis suggests the stock is undervalued, with subscribers accessing detailed Fair Value calculations and 10 additional ProTips for the $2.78 trillion tech giant on the platform's comprehensive most undervalued stocks list.

The firm also favors Titan Machinery (NASDAQ:TTAN), citing Bureau of Labor Statistics estimates showing strong employment growth in the company's customer base, with electricians growing at a 15.4% CAGR and plumbing, heating, and AC contractors growing at a 10.1% CAGR from 2024-2034. TTAN trades at 43x CY27 EV/FCF.

Piper Sandler highlighted Global-e Online (NASDAQ:GLBE), which is tied to ecommerce GMV volumes rather than software seats and trades at FY27 14x EV/FCF ex-SBC while guiding to 29% revenue growth this year. The Middle East represents less than 5% of revenue, though the war with Iran has impacted GMV near-term, particularly in the UAE.

In other recent news, Microsoft Corp. achieved its ambitious sales targets for the Copilot AI tool in the fiscal third quarter by shifting its strategy to focus on paid subscriptions, according to company executives. The company is also working on developing advanced AI models by 2027, aiming to create in-house alternatives to tools from OpenAI and Anthropic. In a strategic partnership, Microsoft has teamed up with Chevron and Engine No. 1 to develop natural gas-powered plants in Texas, which will supply electricity directly to Microsoft's AI data centers.

Furthermore, UBS has reiterated a Buy rating on Chevron following this partnership with Microsoft, highlighting the potential benefits of the collaboration. Piper Sandler has also reiterated an Overweight stock rating on Microsoft, noting the expansion of its Researcher capabilities with new features like Critique and Council. These developments reflect Microsoft's ongoing efforts to enhance its AI capabilities and infrastructure.

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