Goldman Sachs believes that some businesses with long-term solid fundamentals will see an increase in their market value. This has made it possible to buy opportunities in this year’s market pullback. As the Federal Reserve began its tightening cycle, high-growth software stocks were hard hit. Goldman’s entire software universe experienced a 40% drop in value this year due to investors moving out of companies with multiple high growth, while the Nasdaq Composite suffered an approximate 23% decline. According to Goldman, the decline in software valuations has made them attractive. Goldman’s strategists wrote that their analysis showed many companies trade at a significant discount to intrinsic value. We are now focusing on profit-oriented growth companies because of this conviction. Microsoft is a standout name for Goldman Sachs. Last month’s quarterly earnings were a success. The company also gave an optimistic outlook for this quarter. Goldman kept Microsoft’s buy rating, citing its confidence that the company can grow revenues by low double-digits over the next few decades and to double its per-share earnings. Salesforce was another name that the bank believes will outperform, as the market currently severely discounts the company’s organic growth. It is currently down 35% for 2022. Goldman indicated that Salesforce will release earnings on Tuesday at the bell. The firm is expected to discuss a range of topics including organic growth, possible margin improvement, and wider deal activity across front office applications. Goldman also liked Intuit, ServiceNow and Datadog as names within the industry. ServiceNow is down 27%, and Datadog by 46%. Intuit will be down 34% by 2022.
