The software industry has benefited from the pandemic-led acceleration of digitization and remote lifestyles. While post-pandemic normalcy has reduced software companies' record-high business growth rates, the increasingly digitalized world brightens the industry’s long-term prospects.
This year's rising interest rate environment and the increasing odds of a recession have led to a massive tech sell-off. The tech-heavy Nasdaq has lost more than 30% year-to-date. Moreover, the market expects another rough tech earnings season, which further pressures software stocks.
Given this backdrop, it could be wise to avoid fundamentally weak software stocks Palantir Technologies Inc. (PLTR), VTEX (VTEX), and Latch, Inc. (LTCH), which have seen significant bearish actions lately and are trading below their moving averages.
Palantir Technologies Inc. (PLTR)
PLTR is a software developing company for the intelligence community in the United States to assist in counterterrorism investigations and operations. The company is known for its three projects: Palantir Gotham, Palantir Apollo, and Palantir Foundry.
For the second quarter ended June 30, PLTR’s adjusted net income attributable to common stockholders came in at a negative $21.12 million, down 121.6% from its year-ago value. Adjusted EBITDA decreased 7.2% year-over-year to $112.74 million. Its adjusted loss per share amounted to a negative $0.01 versus earnings per share of $0.04 a year ago.
For the fiscal third quarter (ended September 2022), analysts expect PLTR’s EPS to decline 57.4% year-over-year to $0.02. In addition, PLTR has missed the consensus EPS estimates in three of the trailing four quarters.
The stock has declined 54.5% year-to-date and 21% over the past three months to close the last trading session at $8.29. It is trading lower than its 200-Day moving average of $10.39.
PLTR’s POWR Ratings reflect a bleak outlook. The stock has an overall rating of D, which translates to Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
PLTR is also rated a D in Stability and an F for Value and Sentiment. Within the F-rated Software - SAAS industry, it is ranked #19 of 26 stocks.
To see additional POWR Ratings for Growth, Momentum, and Quality for PLTR, click here.
VTEX (VTEX)
Headquartered in London, the United Kingdom, VTEX offers a digital commerce platform for enterprise brands and retailers. Its platform allows customers to build online stores, integrate and manage orders across channels, and create marketplaces to sell products from third-party vendors.
For the fiscal second quarter ended June 30, non-GAAP loss from operations increased 68.3% year-over-year to $17.50 million. Net loss for the period increased 38.8% year-over-year to $21.47 million. Loss per share stood at $0.11 versus $0.09 a year ago.
For the fiscal third quarter (ended September 2022), analysts expect an EPS of negative $0.06. The company has missed consensus EPS estimates for three of the four trailing quarters.
The stock has declined 65.1% year-to-date and 9% over the past month to close the last trading session at $3.74. It is trading lower than its 50-day and 200-day moving average of $3.98 and $5.15, respectively.
VTEX POWR Ratings reflect its poor prospects. The stock has an overall rating of D, which translates to Sell in our proprietary rating system.
VTEX is also rated a D in Value, Momentum, and Quality. Within the F-rated Software - Application industry, it is ranked #107 of 147 stocks.
Click here to see the additional POWR Ratings for VTEX (Growth, Stability, and Sentiment).
Latch, Inc. (LTCH)
LTCH operates as an enterprise technology company in the United States and Canada. The company offers an operating system called LatchOS that extends smart access, delivery and guest management, smart home and sensors, connectivity, and personalization and services.
In August, LTCH received a letter from the Listing Qualifications Department of the Nasdaq Stock Market LLC notifying that it did not comply with one of the exchange’s rules for continued listing because it had not filed its quarterly report on Form 10-Q for the quarter-ended June 30 by the required due date.
For the fiscal first quarter ended March 31, loss from operations increased 62% year-over-year to $50.62 million. Net Loss and comprehensive loss rose 16.1% and 20.3% year-over-year to $44.23 million and $45.85 million.
The consensus EPS estimate of a negative $0.33 for the fiscal third quarter (ended September 2022) indicates a 33.1% year-over-year decrease. LTCH has missed Street EPS estimates for three of the four trailing quarters.
The stock has declined 87.5% year-to-date and 6% over the past month to close the last trading session at $0.95. It is trading below its 50-Day moving average of $1.04 and 200-Day moving average of $2.74.
It’s no surprise that LTCH has an overall F rating, which translates to a Strong Sell in our proprietary rating system.
LTCH is also rated a D for Stability and an F for Quality. It is ranked #138 in the Software - Application industry.
Click here to learn additional POWR Ratings for Value, Momentum, Growth, and Sentiment for LTCH.
PLTR shares were trading at $8.11 per share on Monday morning, down $0.18 (-2.17%). Year-to-date, PLTR has declined -55.46%, versus a -19.83% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
3 Software Stocks That Look Very Bearish StockNews.com
