Enterprise-software giants ServiceNow and Salesforce are set to be beneficiaries of a recession in 2023, according to tech fund manager Jeremy Gleeson. The two Silicon Valley giants sell software services that aim to make businesses’ sales, customer service, and operational workflows more efficient. Gleeson, who manages the £1.1 billion ($1.5 billion) tech fund AXA Framlington Global Technology Fund, said both firms would benefit from companies looking to reduce costs during a recession by automating parts of their operations. “If we are going into a recession in 2023, then companies are going to need to do more with less,” Gleeson told CNBC’s Joumanna Bercetche during CNBC Pro Talks Wednesday. “One of the ways they could do that is by utilizing technology better to increase the productivity of their existing workforce.” Although shares of ServiceNow have declined by around 39% this year to $392, analysts expect the stock to rise by over 30% next year, according to FactSet’s median price targets of analysts. Salesforce, which acquired the workplace messaging app Slack in 2020 for $27 billion, has performed markedly worse. Shares in the company have nearly halved this year. However, analysts believe they will rebound by over 50% to $200 over the next 12 months, according to FactSet. Salesforce shares closed at $130 on Wednesday. “This is a company which is more mature than it was 10 years ago. Its growth rate is lower than it was 10 years ago, but they still continue to grow,” Gleeson said of Salesforce, which is 2.3% of the AXA Framlington Global Technology Fund. “If stocks are in [our] portfolio, it’s because we have a conviction on the ability for those management teams to be successful over the coming years,” he added. Salesforce reported a 14% year-on-year revenue growth as well as an increase in its operating margins to 5.9 % in its latest quarter. However, shares tumbled after the company announced the exit of its co-CEO Bret Taylor. JP Morgan analysts believe the company is set to outperform its peers despite the “worsening macro environment”. Salesforce operates a business model that is bending, but not breaking, even within a worsening macro that is affecting all software companies, and continues to see upside from current levels as the company pivots to a recession playbook and balances growth with profitability and [free cash flow] generation,” the analysts said in a note to clients on Dec. 1. They expect the stock to rise by 88% to $245 a share in 2023. —CNBC’s Michael Bloom contributed to this story.
Tech fund manager backs these 2 software stocks will outperform in a recession
