As digital transformation continues to reshape industries, tech companies are uniquely positioned to seize substantial growth opportunities. Thus, high-PE tech stocks ServiceNow (NOW), The Trade Desk (TTD), and Descartes Systems Group (DSGX) stand out and are strategically aligned to thrive in this evolving landscape.
Driven by substantial investments in technology, infrastructure development is gaining momentum as companies ramp up their AI initiatives. Gartner forecasts global IT spending to hit $5.74 trillion in 2025, marking a 9.3% increase over 2024. Software spending is projected to climb 14% to $1.23 trillion, while communication services are anticipated to grow 4.4% to $1.60 trillion.
Further, the software sector is rapidly evolving with emerging trends like AI and machine learning, which are being integrated into applications for automation and improved decision-making. In addition to that cloud-native development, DevOps, and containerization are gaining traction for enhancing scalability and flexibility. The global software market, valued at $659.17 billion in 2023, is expected to reach $2.2 trillion by 2034, growing at a CAGR of 11.8%.
Considering these positive developments, let's delve deeper into software technology stocks:
ServiceNow, Inc. (NOW)
NOW offers a wide range of workflow automation solutions through its Now Platform, integrating AI, ML, and RPA for digital transformation. Its products include IT service management, risk management, customer service, and cloud observability, serving industries like government, healthcare, finance, and manufacturing globally.
In terms of forward non-GAAP P/E, NOW is trading at 75.53x, 197.7% higher than the industry average of 25.37x.
On November 19, NOW expanded its strategic alliance with Microsoft Corporation (MSFT) to enhance front-office processes using AI-driven tools like Copilot and Now Assist. This integration streamlines workflows within Microsoft 365, enabling employees to access ServiceNow's knowledge base, request services, and escalate cases through Microsoft Teams, improving efficiency and self-service capabilities.
On November 13, 2024, NOW announced over 150 new generative AI innovations, enhancing autonomous and responsible AI on its Now Platform.
During the fiscal third quarter that ended September 30, 2024, NOW’s non-GAAP total revenues increased 22% year-over-year to $ 2.79 billion. Its non-GAAP income from operations grew 31% from the year-ago value to $ 872 million. In addition, the company’s non-GAAP net income and non-GAAP EPS came in at $ 775 million and $ 3.72.
Analysts expect NOW’s EPS and revenue for the fourth quarter ending December 31, 2024, to increase 17.5% and 21.5% year-over-year to $3.66 and $2.96 billion, respectively. It surpassed the Street EPS and revenue estimates in each of the trailing four quarters, which is promising.
Over the past year, the stock has gained 54.8% to close the last trading session at $1049.44. It soared 48.8% year-to-date.
NOW’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
NOW has a B in Growth, Sentiment, and Quality. It is ranked #13 out of 39 stocks in the B-rated Software - Business industry.
Beyond what we have stated above, we also have given NOW grades for Value, Momentum, and Stability. Get all the NOW’s ratings here.
The Trade Desk, Inc. (TTD)
TTD provides a cloud-based platform for managing and optimizing digital advertising campaigns across various formats and devices. It serves advertising agencies, brands, and service providers with data-driven solutions for enhanced campaign performance.
In terms of forward non-GAAP P/E, TTD is trading at 78.28x, 473.03% higher than the industry average of 13.66x.
On November 20, 2024, TTD announced Ventura, a new streaming TV operating system. The company plans to collaborate with smart TV OEMs and streaming TV aggregators to roll out this innovative OS.
In the fiscal third quarter ended September 30, 2024, TTD’s revenues increased 27.3% year-over-year to $628.02 million. Its income from operations was $108.48 million, up 187.9% from the year-ago value. Moreover, its non-GAAP net income and non-GAAP EPS stood at $207.23 million and $0.41, up 23.9% and 24.2% over the prior-year quarter, respectively.
Street expects TTD’s revenue and EPS for the fourth quarter ending December 31, 2024, to increase 25.4% and 38.6% year-over-year to $759.47 million and $0.57, respectively. It surpassed the consensus EPS and revenue estimates in three of the trailing four quarters.
The stock climbed 78.9% year-to-date and has returned 82.9% over the past year, to close the last trading session at $128.71.
TTD’s POWR Ratings reflect strong prospects.
It has an A grade in Growth and a B for Sentiment and Quality. It is ranked #44 out of 128 stocks in the Software - Application industry.
To access TTD’s Value, Momentum, and Stability ratings, click here.
The Descartes Systems Group Inc. (DSGX)
DSGX provides cloud-based logistics and supply chain solutions, including routing, transportation management, e-commerce fulfillment, and customs compliance. It serves transportation providers, logistics companies, and distribution-heavy industries through various licensing models and support services.
In terms of forward non-GAAP P/E, DSGX is trading at 62.50x, 146.32% higher than the industry average of 25.37x.
On October 14, 2024, DSGX acquired Sellercloud, a New Jersey-based provider of omnichannel e-commerce solutions, for approximately $110 million, with an additional performance-based earn-out of up to $20 million. This acquisition expands DSGX capabilities in inventory and order management, enhancing its offering for managing e-commerce shipments.
DSGX’s revenue increased 14% year-over-year to $163.43 million in the fiscal second quarter that ended on September 04, 2024. Its adjusted EBITDA was $70.60 million, up 16.5% from the year-ago value. Its income from operations came in at $45.85 million, up 24.5% year-over-year, while its net income stood at $34.68 million, representing an increase of 28.12% over the prior-year quarter. Its EPS grew 25% from the year-ago value to $0.40.
Street expects DSGX’s revenue for the fiscal third quarter (ending October 31, 2024) to increase 13.4% year-over-year to $164.12 million. Its EPS for the same quarter is expected to grow 7.2% from the prior year to $0.42. In addition, it surpassed the consensus revenue estimates in three of the trailing four quarters.
Shares of DSGX have gained 44.6% over the past year and 39% year-to-date to close the last trading session at $116.87.
DSGX’s bright prospects are apparent in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Stability, Sentiment, and Quality. Within the A-rated Software - SAAS industry, it is ranked #11 out of 18.
Click here to see DSGX’s ratings for Growth, Value, and Momentum.
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NOW shares rose $0.55 (+0.05%) in premarket trading Monday. Year-to-date, NOW has gained 48.54%, versus a 27.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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