Enterprises’ increasing reliance on software solutions has poised the industry for significant growth. Ongoing technological advancements are reinforcing the industry, fostering innovation, optimizing development procedures, and facilitating immersive, interconnected experiences.
In light of these dynamics, it could be wise to invest in robust software stocks AppLovin Corporation (APP), Yalla Group Limited (YALA), and Red Violet, Inc. (RDVT) for potential gains this month. Let us understand this in detail.
The software industry has witnessed transformative shifts in recent years, with emerging technology trends reshaping development, deployment, and utilization landscapes. Edge computing, low-code development, and cybersecurity are spearheading a revolution, reshaping the sector's dynamics and paving the way for a future marked by unprecedented technological advancements.
Artificial Intelligence (AI) and Machine Learning (ML) have transcended their status as mere buzzwords, evolving into indispensable components of software applications. These AI-driven algorithms play pivotal roles in predictive analytics, personalization, automation, and augmenting user experiences and decision-making processes across diverse sectors, underscoring their fundamental significance.
A standout trend is software development firms' widespread adoption of cloud-native solutions. These solutions empower application development, team management, and seamless communication, effortlessly integrating across diverse servers to facilitate streamlined operations for any organization.
In 2024, global business expenditures on cloud computing infrastructure are anticipated to surpass $1 trillion for the first time. Furthermore, the incidence of large organizations employing a multi-cloud strategy, in other words, procuring cloud services from various providers, is expected to rise from 76% to 85% by 2024.
Meanwhile, Gartner, Inc. (IT) projects that global end-user spending on public cloud services would climb by 21.7% in 2023 to $597.30 billion. Furthermore, it projects that 75% of businesses will choose a cloud-centric digital transformation plan as their central pillar by 2026.
According to Spherical Insights' projections, the global enterprise software market is expected to increase at a CAGR of 11% and reach $519.88 billion by 2030.
In light of these encouraging trends, let’s look at the fundamentals of the three best software stocks.
AppLovin Corporation (APP)
APP is a software-based platform that helps mobile app developers improve the marketing and monetization of their apps. The AppLovin Core Technologies and AppLovin Software Platform are the main components of the company's software solutions.
On August 7, APP unveiled AI enhancements to its mobile user acquisition (UA) platform, AppDiscovery. The upgraded AXON engine, powered by advanced models, empowers partners to attain campaign goals more accurately, with improved performance and speed, extending the impact on a larger global scale.
These advancements could fortify APP's commitment to providing cutting-edge solutions, fostering more robust partnerships, and fueling the platform's growth.
On May 30, APP's suite of solutions for OEMs and telecom carriers, Array, announced an expanded strategic partnership with OPPO, a top global smart device brand. The collaboration focuses on enhancing mobile app discoverability, providing OPPO device users seamless on-device experiences and hyper-relevant app recommendations during searches and downloads.
This alliance could significantly benefit APP's growth by tapping into OPPO's extensive user base. The collaboration could ensure increased visibility and accessibility for APP's solutions among OPPO device users, fostering a broader market reach and potential for greater user engagement.
For the fiscal third quarter that ended September 30, 2023, APP's revenue increased 21.2% year-over-year to $864.26 million. Its adjusted EBITDA grew 62.7% from the year-ago value to $419.29 million.
In addition, net income and net income per share attributable to APP common stockholders rose 356% and 400% from the prior year's period to $107.87 million and $0.30, respectively.
The consensus revenue estimate of $ 3.75 billion for the fiscal year ending December 2024 reflects a 15.2% year-over-year improvement. Likewise, the consensus EPS estimate of $1.50 for the next year reflects a 72.8% rise from the prior year. Also, the company surpassed the consensus revenue estimates in all four trailing quarters.
APP has gained 57.4% over the past six months and 197% over the past year, closing the last trading session at $39.40.
APP's strong fundamentals are evident in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
APP has an A grade for Growth and a B for Quality. It has ranked #12 out of 131 stocks within the Software - Application industry.
In addition to the POWR Ratings I've just highlighted, you can see APP ratings for Stability, Momentum, Sentiment, and Value here.
Yalla Group Limited (YALA)
Based in Dubai, United Arab Emirates, YALA is a social networking and entertainment platform. It offers mobile applications such as Yalla, a voice-centric group chat platform, and Yalla Ludo, a casual gaming app.
On June 29, YALA unveiled its latest hard-core game, Merge Kingdoms, at the Dubai Esports and Games Festival (DEF) 2023, MENA's premier esports and gaming event. The game received a warm reception at DEF 2023, marking a successful showcase for YALA.
Mr. Yang Tao, Founder, Chairman and CEO of YALA, said, "Its strong showing reflects our local expertise and strengthens our brand awareness across the region. With the fast development of MENA's gaming and esports industry, we view mid- and hard-core games as a crucial growth driver for our diversified product portfolio."
For the fiscal third quarter that ended September 30, 2023, YALA's revenue increased 6.4% year-over-year to $85.19 million. Its non-GAAP operating income rose 20.4% from the year-ago value to $35.45 million.
Furthermore, the company’s non-GAAP net income and non-GAAP earnings per ordinary share grew 30.3% and 23.5% from the prior year’s quarter to $38.28 million and $0.21, respectively.
The consensus revenue estimate of $317.80 million for the fiscal year ending December 2023 reflects a 4.7% year-over-year improvement. Similarly, the consensus EPS estimate of $0.74 for the ongoing year indicates a 23.3% rise from the previous year.
The stock has gained 72.3% year-to-date, closing the last trading session at $6.34.
YALA's solid outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
YALA has a B grade for Value and Sentiment. It has ranked #25 out of 131 stocks within the Software-Application industry.
Click here to access additional YALA ratings for Stability, Growth, Quality and Momentum.
Red Violet, Inc. (RDVT)
RDVT specializes in proprietary technologies and applies analytical capabilities to provide identity intelligence. It delivers idiCORE, an investigative solution addressing diverse organizational challenges, and offers FOREWARN, an app-based solution that equips users with instant knowledge before engaging face-to-face with consumers.
On October 27, FOREWARN, LLC, an RDVT company and a leading provider of real-time information solutions for real estate agents, disclosed a collaboration with the Georgia Multiple Listing Service (GAMLS). The partnership enables GAMLS to offer FOREWARN® services to its 52,000+ MLS subscribers across Georgia, enhancing proactive safety measures for real estate agents.
FOREWARN's integration into GAMLS services could strengthen RDVT's position as a leader in providing cutting-edge solutions for real-time information in the real estate sector. Also, the increased adoption of FOREWARN services by a substantial MLS subscriber base would contribute to RDVT's growth and market influence.
On September 26, FOREWARN disclosed a strategic collaboration with Florida Realtors®, making FOREWARN® services accessible to its 238,000 members across the State of Florida. This move emphasizes a commitment to proactive real estate agent safety and signals FOREWARN's expansion within a significant and influential market.
RDVT’s revenue increased 5.4% year-over-year to $15.84 million during the fiscal third quarter that ended September 30, 2023. Its adjusted EBITDA grew 3.4% from the prior year’s period to $5.36 million. Also, the company’s net income and EPS came in at $12.50 million and $0.87, up 453.4% and 443.8% year-over-year, respectively.
RDVT has gained 5.2% over the past month to close its last trading session at $20.21.
The promising prospects of RDVT are reflected in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system.
RDVT has a B grade for Quality and Stability. It is ranked #16 out of 45 in the Software - Business industry.
Click here to access the additional RDVT ratings (Growth, Value, Momentum and Sentiment).
What To Do Next?
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APP shares were trading at $39.09 per share on Tuesday morning, down $0.41 (-1.04%). Year-to-date, APP has gained 271.23%, versus a 19.66% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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