Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the **Global Software** industry, particularly the performance and outlook of major software companies in 2024 and beyond [1][3][13]. Core Themes and Insights - **AI and Cloud Sentiment**: The enthusiasm for AI that peaked in late 2023 has shifted to skepticism in 2024, with concerns about the return on investment (ROI) and the sharp increase in capital expenditures (CAPEX) without clear revenue visibility [1][16]. - **Growth Deceleration**: Investors are analyzing the reasons behind growth deceleration in some software companies and questioning when generative AI (Gen AI) will become a significant revenue driver [1][3][16]. - **Oracle's Performance**: Oracle has emerged as a top pick due to its strong positioning in cloud services, particularly with its Oracle Cloud Infrastructure (OCI), cloud database, and Software as a Service (SaaS) offerings [2][19]. - **Microsoft's Visibility**: Microsoft remains a focal point for investors, with multiple earnings notes indicating its importance across various software sectors. The company is seen as a bellwether for the industry [3][19]. Key Companies Mentioned - **Oracle**: Recognized for its defensive growth and idiosyncratic growth drivers, becoming the 1 inbound name for investors in the second half of 2024 [2][19]. - **Microsoft**: Noted for its significant role in the software market, with multiple earnings notes highlighting its AI initiatives and cloud transition [3][19]. - **Salesforce, Adobe, and SAP**: These companies are also under scrutiny as investors seek to understand their growth trajectories and challenges [3][19]. Investment Ratings - The report rates several companies as follows: - **Outperform**: Adobe, Microsoft, MongoDB, Oracle, SAP, Workday - **Market-Perform**: Snowflake - **Underperform**: Salesforce.com [7][24]. Additional Insights - **CAPEX Concerns**: There is a significant focus on the CAPEX trends among major tech companies, with projections indicating over $1 trillion in spending over the next five years, primarily directed towards AI initiatives [22]. - **Cloud Transition**: The ERP market is highlighted as being early in its cloud transition, presenting opportunities for growth among major software vendors [23]. - **Macro Environment**: The uncertain macroeconomic landscape has led to increased interest in how macro factors impact software companies, with volatility creating both challenges and opportunities [24]. Conclusion - The conference call reflects a cautious yet strategic outlook for the software industry, emphasizing the need for investors to navigate the complexities of AI investments, cloud transitions, and macroeconomic influences while identifying potential winners and losers in the evolving landscape [1][3][16][19].

Industry Overview * **Software Industry Performance**: The software industry has largely underperformed in 2024, with a year-to-date return of 12% compared to the S&P 500's 25% and the NASDAQ's 31%. * **Valuation**: The software industry is currently trading at a significant discount to its historical averages. The EV/NTM FCF multiple for the software industry is 36.0x, which is 52% off the peak and 24% below the trailing average. The P/E multiple is 25.8x, which is 12% off the peak and in line with the trailing 5-year average. * **Growth**: Software trading is 4% above the trailing 5-year average on a growth-adjusted basis. * **High Growth Companies**: High-growth software companies are trading at an average of 80% of their 52-week high, with an average 2-year sales CAGR of 28% and an average EV/CY25 Sales multiple of 11.3x. * **Medium Growth Companies**: Medium-growth software companies are trading at an average of 79% of their 52-week high, with an average 2-year sales CAGR of 20% and an average EV/CY25 Sales multiple of 11.5x. * **Low Growth Companies**: Low-growth software companies are trading at an average of 74% below their 52-week high, with an average 2-year sales CAGR of 8% and an average EV/CY25 Sales multiple of 4.8x. Company Ratings and Updates * **Blackline Inc (BL.O)**: Rated Equal-weight as of September 29, 2024. * **E2open Parent Holdings Inc (ETWO.N)**: Rated Equal-weight as of January 17, 2024. * **OneStream Inc (OS.O)**: Rated Equal-weight as of August 19, 2024. * **Vertex Inc. (VERX.O)**: Rated Overweight as of January 17, 2024. * **Amplitude Inc. (AMPL.O)**: Rated Underweight as of February 1, 2024. * **Autodesk (ADSK.O)**: Rated Overweight as of August 23, 2024. * **Freshworks Inc (FRSH.O)**: Rated Equal-weight as of October 18, 2021. * **GoDaddy Inc (GDDY.N)**: Rated Equal-weight as of July 19, 2021. * **HubSpot, Inc. (HUBS.N)**: Rated Overweight as of March 21, 2023. * **Klaviyo, Inc (KVYO.N)**: Rated Equal-weight as of October 16, 2023. * **LegalZoom.com Inc (LZ.O)**: Rated Underweight as of July 28, 2022. * **Liveramp Holdings Inc (RAMP.N)**: Rated Overweight as of July 15, 2019. * **Matterport Inc (MTTR.O)**: Rated Equal-weight as of April 19, 2022. * **Semrush Holdings Inc -A (SEMR.N)**: Rated Equal-weight as of June 6, 2022. * **Sprinklr Inc (CXM.N)**: Rated Equal-weight as of July 19, 2021. * **Sprout Social Inc (SPT.O)**: Rated Equal-weight as of November 17, 2020. * **Wix.Com Ltd (WIX.O)**: Rated Equal-weight as of May 19, 2022. * **Zeta Global Holdings Corp (ZETA.N)**: Rated Equal-weight as of August 1, 2024. * **ZoomInfo Technologies Inc (ZI.O)**: Rated Equal-weight as of February 1, 2024. * **Check Point Software Technologies Ltd. (CHKP.O)**: Rated Equal-weight as of October 16, 2023. * **Cloudflare Inc (NET.N)**: Rated Overweight as of December 2, 2024. * **CrowdStrike Holdings Inc (CRWD.O)**: Rated Overweight as of January 9, 2024. * **CyberArk Software Ltd (CYBR.O)**: Rated Equal-weight as of January 9, 2024. * **Fortinet Inc. (FTNT.O)**: Rated Overweight as of October 7, 2022. * **Gen Digital Inc. (GEN.O)**: Rated Equal-weight as of June 7, 2024. * **Jamf Holding Corp (JAMF.O)**: Rated Equal-weight as of October 13, 2024. * **Okta, Inc. (OKTA.O)**: Rated Overweight as of December 2, 2024. * **Palo Alto Networks Inc (PANW.O)**: Rated Overweight as of October 10, 2017. * **Qualys Inc (QLYS.O)**: Rated Underweight as of February 9, 2021. * **Rapid7 Inc (RPD.O)**: Rated Equal-weight as of August 11, 2015. * **Secureworks Corp (SCWX.O)**: Rated Underweight as of December 2, 2024. * **SentinelOne, Inc. (S.N)**: Rated Equal-weight as of December 2, 2024. * **Tenable Holdings Inc (TENB.O)**: Rated Equal-weight as of December 2, 2024. * **Varonis Systems, Inc. (VRNS.O)**: Rated Overweight as of October 16, 2023. * **Zscaler Inc (ZS.O)**: Rated Equal-weight as of January 12, 2023. Other Key Points * **Morgan Stanley is acting as financial advisor to Secureworks in relation to the definitive agreement for Sophos to acquire Secureworks**. * **Stock ratings are subject to change**. * **Historical prices are not split adjusted**. * **Morgan Stanley uses a relative rating system using terms such as Overweight, Equal-weight, Not-Rated, or Underweight**. * **Investors should carefully read the definitions of all ratings used in Morgan Stanley Research**. * **Ratings (or research) should not be used or relied upon as investment advice**.

Investment Rating - The report does not explicitly provide an investment rating for the coffee industry Core Insights - The coffee sector is in a transitional phase, facing challenges related to sustainability, living incomes, and climate change impacts, with a focus on long-term viability and short-term economic gains [9][10] - The report emphasizes the need for a comprehensive approach to sustainability that includes human rights, ecological preservation, and economic stability [9][10] - The European Union is leading a global shift towards mandatory compliance regarding human rights and environmental impacts in coffee supply chains, which many companies are unprepared for [11] Summary by Sections 1. Introduction - The coffee sector has the potential to address pressing issues through knowledge and resources, but current sustainability efforts are insufficient [9] - The focus on sustainability should be integrated with human rights and ecological concerns rather than viewed as a final goal [9][10] 2. Coffee Trade - Global coffee consumption reached 168.5 million bags in 2021-2022, with Europe, Japan, and North America accounting for over half [21] - Coffee prices peaked at 244 cents/lb in February 2022 but fell to 145 cents/lb by January 2023, while production costs continue to rise due to inflation and increased input prices [22][23] - Brazil and Vietnam dominate global coffee production, contributing 40% and 20% respectively, with a significant concentration of production in a few countries [29][30] 3. Resilient Livelihoods - Coffee production is vital for millions, with 95% of farms being small-scale, yet low prices have severely impacted farmers [57][58] - The concept of living income is gaining traction, with various initiatives aiming to ensure farmers can achieve economic viability [59][64] - Climate change poses a significant threat to coffee production, with projections indicating a potential 45.2% decline in Arabica production by 2050 [67][70] 4. Coffee Brew Index - The coffee retail market is dominated by a few large roasters, with only four companies providing 68% of coffee in the US [87] - Many leading companies are positioning themselves as sustainability leaders, but their strategies often lack measurable goals and transparency [89][93] - The Coffee Brew Index evaluates the sustainability efforts of major coffee roasters, highlighting the need for comprehensive strategies and public reporting [92][101]