Software: Morgan Turns Cautious

Morgan Stanley software analyst Adam Holt today downgraded his view of the software sector to “In Line” from Attractive, “as we move into the growth phase of the economic recovery and beyond the early cycle phase” that has driven software stocks up 44% since last October. He notes that the sector’s outperformance has begun to abate in recent months, though, and contends “there may be more relative upside from here in mid-cycle groups like hardware.”

As part of the call, Holt and his colleague Keith Weiss cut ratings on both Autodesk (ADSK) and Citrix Systems (CTXS). Here are the details:

• Autodesk: Weiss cuts his rating to Underweight from Equal Weight.  He says the stock is pricing in a degree of earnings leverage and speed of recovery that is unlikely given the conditions in the company’s end markets.


• Citrix Systems: Holt cuts his rating to Underweight from Equal Weight. He says the company is a play on one of the better secular trends in desktop virtualization, and says he likes the story, but that “we simply believe CTXS is unlikely to outperform the group.” He notes that through Friday the stock was up 53% year to date.

In today’s trading:

• ADSK is down 23 cents, or 1%, to $22.89.


• CTXS is down 43 cents, or 1.2%, to $35.59.