Jefferies prefers these 4 software stocks after apps reset

Investing.com -- Jefferies has taken a fresh look at the application software space after sharp underperformance across the group, with the broker favoring a select group of names based on their more durable business models and internal AI adoption.

Apps stocks have lagged broader software significantly, with many stocks down roughly 30–55% year to date versus the IGV ETF’s (NYSE: IGV) 24% decline. Against this backdrop, Jefferies analysts led by Brent Thill said they are “taking a fresh look at current levels considering both our new AI Risk Matrix and idiosyncratic fundamentals/catalysts.”

The team reassessed its coverage using multiple AI risk vectors, including customer mix, platform positioning, data advantages, and pricing models. Analysts warned that the market is seeing “further risk of AI disruption,” prompting a more selective stance across the sector.

As part of the reset, Jefferies moved several names -- Workday (NASDAQ: WDAY), DocuSign (NASDAQ: DOCU), Monday.com (NASDAQ: MNDY), and Freshworks (NASDAQ: FRSH) -- to Hold due to persistent risks and weaker sentiment, but stressed that software remains structurally resilient.

Software will survive – business IP is embedded inside,” the analysts said.

Within this reshaped framework, Jefferies identified four preferred stocks it believes are best positioned for the AI transition, including Intuit (NASDAQ: INTU), Procore Technologies (NYSE: PCOR), Atlassian (NASDAQ: TEAM), and Salesforce (NYSE: CRM).

The broker called Intuit its “top large-cap pick in apps,” citing the company’s use of 80 different AI model variations applied to more than 40 years of data across roughly 100 million customers. Analysts pointed to the company’s “large user base and data moat” within its AI risk framework, which supports confidence in its ability to navigate the AI transition.

Procore was highlighted as an “attractive mid-cap, vertical story with revenue reaccel on the horizon as macro eases.” Jefferies’ broader review emphasized the importance of vertical positioning and platform depth, factors the firm believes help differentiate Procore as the market reassesses AI disruption risks.

Atlassian was seen benefiting from the link between AI-generated code and rising demand for IT collaboration tools, with analysts noting that “more AI-generated code = more need for IT collab.” They also described it as the “fastest growing app name with catalysts for 20+% MT growth."

Lastly, Jefferies views Salesforce as “best-positioned among apps vendors to deliver on AI agents,” adding that “success will lead to overall acceleration.”

"We believe CRM’s highly customized workflows and large footprint within the enterprise as a system of record make it difficult to be displaced," the analysts added.

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