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J.P. Morgan cuts software technology companies after 'exceptional' performance

J.P. Morgan analyst Sterling Auty wrote in Dec. 12 research note that he is updating his ratings on software technology companies to rebalance his coverage of the sector after the "exceptional" performance in 2017, which is unlikely to be repeated in 2018.

Auty downgraded Adobe Systems Inc., Barracuda Networks, Inc., Check Point Software Technologies Ltd., Fortinet Inc., GoDaddy Inc., Mimecast Ltd., Model N, Inc., New Relic Inc., PTC Inc., Qualys Inc, Q2 Holdings Inc., RingCentral Inc., ServiceNow Inc., SS&C Technologies Holdings Inc. and Web.com Group Inc. to "neutral" from "overweight."

He also downgraded CoStar Group Inc. to "underweight" from "overweight" and cut Imperva Inc., Monotype Imaging Holdings Inc. and Synopsys Inc. to "underweight" from "neutral."

He wrote that a number of software technology companies such as Adobe Systems, ServiceNow, Qualys, SS&C Technologies and Web.com "significantly outperformed" the S&P 500. Those companies are now within 15% of his price targets, which is more in line with his expected performance of the sector in 2018.