Last year, the Fed’s aggressive monetary policy to curb sky-high inflation hampered the software industry’s growth to some extent. However, the industry is poised to remain buoyed in the foreseeable future due to increased investments in cloud-based technology, the digital transformation of companies, and growing digitization.
The global enterprise software market is expected to reach $404 billion by 2028, rising at a market growth of 11.1% CAGR between 2022 and 2028. As per Gartner Inc. (IT), global IT spending is projected to hit $4.60 trillion in 2023, reflecting a 5.1% increase year-over-year. Amid that, software spending is expected to grow 11.3% year-over-year to almost $880 billion.
Furthermore, John-David Lovelock, distinguished VP analyst at Gartner, said, “Enterprise IT spending is recession-proof as CEOs and CFOs, rather than cutting IT budgets, are increasing spending on digital business initiatives.”
Against this backdrop, fundamentally sound software stock Progress Software Corporation (PRGS) and Autodesk, Inc. (ADSK) might be solid portfolio additions in 2023.
Progress Software Corporation (PRGS)
PRGS develops, deploys, and manages business applications. The company offers OpenEdge, Sitefinity, and Corticon.
On January 3, 2023, PRGS announced it had entered into a definitive agreement to acquire MarkLogic, a leader in managing complex data and metadata, and a Vector Capital portfolio company. MarkLogic is expected to enhance PRGS’ customer servicing ability.
On September 23, PRGS declared a quarterly dividend of $0.18 per share of common stock, which was payable to shareholders on December 15, 2022. This reflects the company’s ability to pay its shareholders.
PRGS’ revenue rose 2.6% year-over-year to $151.22 million in the fiscal third quarter that ended August 31, 2022. Its maintenance and services revenue came in at $103.60 million, up 8.5% year-over-year.
Moreover, its cash and cash equivalents came in at $224.86 million for the period that ended August 31, 2022, compared to $157.37 million for the period that ended November 30, 2021.
Its revenue is expected to increase 2.7% year-over-year to $151.48 million in the fiscal first quarter ending February 2023. Its EPS is expected to increase 7.1% year-over-year to $1.04 for the same quarter. It surpassed EPS and revenue estimates in all four trailing quarters, which is impressive.
The stock has gained 16% over the past three months to close the last trading session at $52.06. It has gained 3.3% over the past five days.
PRGS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It also has an A grade for Quality and a B for Value. PRGS is ranked #2 among the 138 stocks in the Software – Application industry
Click here for the additional POWR Ratings for PRGS for Growth, Momentum, Stability, and Sentiment.
Autodesk, Inc. (ADSK)
ADSK is a software and service company specializing in 3D design, engineering, and entertainment software and services worldwide. It sells its products and services directly to customers and through a network of resellers and distributors.
On September 27, ADSK announced a suite of new capabilities across Autodesk Construction Cloud. The company also declared advancements to Schedule and Cost Management capabilities within Autodesk Build. These enhancements should help the company serve its customers better.
On the same day, ADSK announced a strategic collaboration with Epic Games to accelerate immersive real-time (RT) experiences across industries. As part of the company's goal of connecting the physical and digital worlds, the first integrated offering is expected to be Epic Games' Twinmotion for Autodesk Revit, which should benefit the company.
For the fiscal third quarter that ended October 31, 2022, ADSK’s total net revenue increased 13.7% year-over-year to $1.28 billion. The non-GAAP income from operations increased 27.4% from the same period the prior year to $465 million, while non-GAAP net income per share came in at $1.70, representing a 26.9% year-over-year growth.
For the fiscal fourth quarter ending January 2023, the consensus revenue of $1.31 billion indicates an 8.5% year-over-year growth. For the same quarter, Street expects EPS to increase 20.9% from the prior-year quarter to $1.81. In addition, ADSK topped consensus EPS and revenue estimates in three of the four trailing quarters.
The stock has gained 4.1% over the past six months and marginally over the past five days to close its last trading session at $187.19.
ADSK’s promising prospects are reflected in its POWR Ratings. The stock has an overall B rating, which translates to Buy in our proprietary rating system.
ADSK is also rated an A for Quality and a B for Growth. Within the same industry, it is ranked #11.
In addition to the above, to see the POWR Ratings for Momentum, Stability, Sentiment, and Value for ADSK, click here.
PRGS shares were trading at $52.55 per share on Monday morning, up $0.49 (+0.94%). Year-to-date, PRGS has gained 4.16%, versus a 2.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
2 Software Stocks to Add to Your Buy List in 2023 StockNews.com
