The surge in investment and widespread adoption of emerging technologies are boosting the software industry. With respect to that, quality software stocks OppFi Inc. (OPFI), Magic Software Enterprises Ltd. (MGIC), and Salesforce Inc.(CRM) could be wise buys.
The software application industry has seen substantial growth due to increased digitalization investments amid proliferation of mobile apps, the adoption of cloud-based solutions, and the integration of AI.
In addition, according to Precedence Research, software market revenue is expected to grow at an 11.7% CAGR to $1.79 trillion by 2032.
Additionally, there's a shift towards software-as-a-service (SaaS) models and a strong emphasis on enhancing user experiences with intuitive interfaces and customizable features. The market for application development software is expected to generate $85.66 billion in revenue in 2023. By 2028, this growth is anticipated to result in a market volume of $234.70 billion, expanding at a CAGR of 7%.
Globally speaking, the United States is expected to produce the most revenue, with an estimated $85.66 billion in 2023.
Furthermore, cloud computing is leading the way in the rapidly changing software industry, with global spending on public cloud services expected to surge by 21.7% year-over-year, reaching $597.3 billion this year, as per Gartner.
Considering these conducive trends, let’s look at the fundamentals of the three best Software - Application stocks, starting with number 3.
Stock #3: OppFi Inc. (OPFI)
OPFI runs a technology platform that helps banks provide different types of loans. The company’s products include OppLoans, which are installment loans, SalaryTap, which are loans deducted from paycheck, and the OppFi Card, a credit card.
On July 25, 2023, OPFI expanded its credit facility with Atalaya Capital Management's affiliates, allowing them to borrow from $200 million to $250 million to help finance their growing receivables.
Todd Schwartz, Chief Executive Officer and Executive Chairman of OPFI, stated, "We appreciate Atalaya’s confidence in OPFI and the strengthening of our business relationship. We expect the additional funding capacity under this facility to generate incremental profitable growth."
During the fiscal second quarter that ended June 30, 2023, OPFI's total revenue rose 13.5% year over year to $122.49 million. Its adjusted EBT rose 138.5% year-over-year to $21.44 million. Moreover, the company’s adjusted net income and EPS rose 138.4% and 137.5% year-over-year to $16.26 million and $0.19, respectively.
Street expects OPFI’s EPS for the fiscal third quarter that ended September 2023 to rise 600% year-over-year to $0.07. Its revenue is expected to grow 4.3% to $129.56 million in the same quarter. The company topped the consensus revenue estimates in each of the trailing four quarters, which is impressive.
The stock has soared 11.9% over the past three months and 9.8% year-to-date to close the last trading session at $2.25.
OPFI’s POWR Ratings reflect this promising 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 different factors, with each factor weighted to an optimal degree.
OPFI has an A grade for Sentiment and a B for Growth, Value, and Momentum. Within the Software - Application, it is ranked #19 among 132 stocks.
Click here to see OPFI’s additional POWR Ratings for Stability and Quality.
Stock #2: Magic Software Enterprises Ltd. (MGIC)
MGIC is an Israeli company that offers various IT services and software solutions internationally. It develops and provides application platforms, software applications, and integration solutions. Additionally, the company offers vertical software solutions for different industries. MGIC also offers maintenance, support, training, and consulting services.
On October 24, 2023, MGIC’s division, FactoryEye, joined CESMII, a U.S. nonprofit organization focused on boosting competitiveness in small and mid-sized manufacturing facilities. FactoryEye will collaborate with CESMII to offer cost-effective Smart Manufacturing solutions and help members address specific challenges one at a time, all while minimizing disruption and providing a quick return on investment.
During the second quarter ended June 30, 2023, MGIC's total revenue increased marginally year-over-year to $137.58 million. Its non-GAAP operating income increased 3.7% year-over-year to $18.45 million. The company’s non-GAAP EPS rose 16.7% year-over-year to $0.28.
MGIC’s EPS for the fiscal third quarter that ended September 2023 is expected to be $0.27. Its revenue is expected to grow 4.4% year-over-year to $150.30 million in the same quarter. The company topped the consensus revenue estimates in each of the trailing four quarters.
The stock declined 1.4% intraday to close the last trading session at $9.70.
MGIC’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
MGIC has an A grade for Value and Stability and a B for Sentiment. Within the same industry, it is ranked #15.
In addition to the POWR Ratings stated above, one can see MGIV’s additional POWR Ratings for Growth, Momentum, and Quality here.
Stock #1: Salesforce Inc. (CRM)
CRM is a global CRM technology provider that helps companies manage customer relationships and offer services for sales, data management, customer support, and more, along with a platform for building apps.
On September 12, 2023, CRM launched Einstein Copilot, a generative AI tool for its suite of apps, including Slack and Tableau. This virtual assistant can handle various tasks, from summarising video calls to generating marketing emails. It uses customer and enterprise data from Its Data Cloud to provide tailored responses and can be integrated into websites and messaging platforms. CRM joined other tech giants like Microsoft and Alphabet in embracing generative AI's growing popularity.
In the fiscal third quarter that ended July 31, 2023, CRM’s total revenue stood at $8.60 billion, up 11.4% year-over-year. The company’s non-GAAP net income rose 76% year-over-year to $2.09 billion and non-GAAP EPS came in at $2.12, representing an increase of 78.2% year-over-year.
Moreover, its free cash flow for the second quarter was $628 million, an increase of 379.4% year-over-year.
Analysts expect CRM’s revenue for the fiscal third quarter ending October 2023 to rise 11.24% year-over-year to $8.72 billion. Its EPS is expected to increase by 46.8% year-over-year to $2.06 in the same quarter. The company topped the consensus EPS and revenue estimates in the trailing three quarters.
The stock has soared 22.7% over the past year and 48% year to date to close the last trading session at $196.25.
CRM’s POWR Ratings reflect this sound outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
CRM has an A grade for Growth and a B for Sentiment and Quality. Within the same industry, it is ranked #9.
To see CRM’s additional POWR Ratings for Value, Sentiment and Momentum, click here.
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CRM shares were trading at $196.01 per share on Friday afternoon, down $0.24 (-0.12%). Year-to-date, CRM has gained 47.83%, versus a 8.59% 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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