The technology industry is experiencing exponential growth and expansion with the rapid technological advancements. Moreover, recent surges in demand and advancements in emerging technologies like AI and ML are creating new avenues for growth in the market.
Given the industry tailwinds, fundamentally sound tech stocks Workday, Inc. (WDAY), Qorvo, Inc. (QRVO), and Informatica Inc. (INFA) could be ideal portfolio additions that analysts love right now.
The recent years have marked significant innovations and inventions in the tech field, like software applications and semiconductors, propelling the overall market's trajectory, and the recent Federal Reserve interest rate cuts will further attract higher prospects and shape the landscape.
It also has been observed that companies engaged in the segment are investing more and more funds in software to accelerate digitalization and advancements in operations.
With this background, revenue in the software market is expected to reach $702 billion this year, with enterprise software anticipated to dominate, reaching $294.30 billion. Also, the market is expected to continue to flourish at a steady CAGR of 5% during, resulting in a market volume of $896.20 billion by 2029.
Besides, the Software-as-a-Service (SaaS) market has shown no signs of slowing down. Even expenditure in SaaS is forecasted to surge by 17.7%, coming to a total of $232 billion this year. Trends like the integration of SaaS technology with Artificial intelligence (AI) and machine learning (ML) to improve operational efficiency and develop business intelligence have contributed vastly.
In light of these encouraging trends, let’s look at the fundamentals of the three best tech stock picks.
Workday, Inc. (WDAY)
WDAY offers enterprise cloud applications internationally. The company’s applications help its customers to plan, execute, analyze, and extend to other applications and environments to manage their business and operations.
On September 19, WDAY and The Josh Bersin Company announced a partnership aimed at integrating The Josh Bersin Company's market-leading AI-powered expert assistant, Galileo™, with Workday Human Capital Management (HCM). This integration will allow WDAY users to ask questions about current HR best practices and get advice and assistance.
On September 18, WDAY launched Workday Wellness, a new AI-powered solution that will provide companies with a real-time view into which benefits and wellness offerings their employees want and use. This will empower companies with AI-driven recommendations and deliver a more personalized wellness experience for their employees.
Also, on the same day, WDAY launched 12 new Industry Accelerators to help customers rapidly modernize their HR and finance operations through the combination of Workday and its partner ecosystem. These accelerators are available for domains like Banking, Healthcare, Higher Education, Professional Services, Retail and Hospitality, Technology and Media Sectors, and More.
For the second quarter that ended on July 31, 2024, WDAY’s total revenues increased 16.7% year-over-year to $2.09 billion. Its non-GAAP operating income grew 23% from the year-ago value to $518 million. The company’s net income came in at $132 million, up 67.1% from the prior year’s quarter, and its non-GAAP net income per share rose 22.4% year-over-year to $1.75.
Furthermore, the company's free cash flows of $516 million reflect a growth of 43.3% from the prior-year period.
The company updated its guidance for the fiscal 2025. WDAY expects Subscription revenue of $1.95 billion, representing growth of 16% during the third quarter.
Also, for the full year, the company expects Subscription revenue to range between $7.70 billion and $7.72 billion, reflecting growth of approximately 17%.
Street expects WDAY’s revenue and EPS for the third quarter (ending October 2024) to increase 14.2% and 14.9% year-over-year to $2.13 billion and $1.76, respectively. Moreover, the company surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
WDAY’s stock has gained 13.6% over the past year to close the last trading session at $244.83. Wall Street analysts expect the stock to hit $287.73 in the near term, indicating a potential upside of 18.78%.
WDAY’s solid outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Growth. It also has a B grade for Quality and Sentiment. Within the Software - Application industry, WDAY is ranked #22 out of 131 stocks.
Click here to access additional ratings of WDAY (Value, Stability, and Momentum).
Qorvo, Inc. (QRVO)
QRVO engages in the development and commercialization of technologies and products for wireless, wired, and power markets globally. The company operates through three segments: High Performance Analog (HPA); Connectivity and Sensors Group (CSG); and Advanced Cellular Group (ACG).
In terms of forward Price/Sales, QRVO is trading at 2.49x, 16% lower than the industry average of 2.96x. Likewise, the stock’s forward Price/Book multiple of 2.66 is 38.2% lower than the industry average of 4.31. Also, its forward EV/EBITDA of 14.03x is 6.3% lower than the industry average of 14.98x.
During the first quarter that ended June 29, 2024, QRVO's total revenue rose 36.2% year-over-year to $886.67 million. The company's non-GAAP gross profit grew 29.8% from the prior-year quarter to $362.66 million. Also, its non-GAAP operating income stood at $98.12, which indicates a 110% growth from the prior year's quarter.
In addition, the company’s non-GAAP net income increased 148.7% and 155.9% from the year-ago value to $83.52 million and $0.87 per share, respectively.
Analysts expect QRVO’s revenue for the fourth quarter (ending March 2025) to increase 2.8% year-over-year to $967.41 million and its EPS for the same period is projected to increase 7.3% year-over-year to $1.49. Further, QRVO topped the consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
Shares of QRVO have surged 2.6% over the past month and 12.3% over the past year to close the last trading session at $103.58. Wall Street analysts expect the stock to hit $127 in the near term, indicating a 21.37% potential upside.
QRVO’s POWR Ratings reflect its bright prospects. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
QRVO has a B grade for Value, Growth, and Quality. The stock is ranked #3 among 92 stocks in the Semiconductor & Wireless Chip industry.
In addition to the POWR Ratings I’ve just highlighted, you can see QRVO’s ratings for Stability, Sentiment, and Momentum here.
Informatica Inc. (INFA)
INFA develops an artificial intelligence-powered platform that connects, manages, and unifies data across multi-vendor, multi-cloud, and hybrid systems at enterprise scale internationally. Its platform includes a suite of interoperable data management products, API and application integration products.
On October 1, INFA was selected by leading New Zealand utility company Genesis Energy to provide sustainable and secure data-driven business practices. Genesis Energy will implement INFA’s Cloud Data Governance and Catalog, underpinned by Informatica’s AI-powered Intelligent Data Management Cloud™.
On September 12, INFA announced that Ricoh Company, Ltd., a leading provider of document management solutions, selected its Intelligent Data Management Cloud™ (IDMC) to accelerate Ricoh’s GLIDER data infrastructure project to support the overall business transformation of Ricoh becoming a digital services company.
For the second quarter that ended on June 30, 2024, INFA’s total revenues increased 6.5% year-over-year to $400.62 million. Its non-GAAP income from operations improved 31.2% from the year-ago value to $114.86 million. The company’s non-GAAP net income came in at $71.23 million and $0.23 per share, indicating growth of 48% and 35.3% year-over-year, respectively.
Furthermore, the company’s adjusted EBITDA increased 29.4% from the prior year’s quarter to $118.71 million.
The company provided its financial guidance for the third quarter of 2024. INFA projected its total revenues to range from $412 million to $428 million, representing growth of 2.8% year-over-year. Its non-GAAP operating income is expected to be between $139 million and $151 million, reflecting 13.2% year-over-year growth.
Also, for the full year 2024, INFA’s total revenue is set between $1.66 billion and $1.68 billion. It has raised its non-GAAP operating income to a range of $538 million to $558 million, up 18.5% year-over-year.
Street expects INFA’s EPS for the third quarter (ended September 2024) to increase 11.8% year-over-year to $0.30. Its revenue for the same quarter is expected to grow 3.2% year-over-year to $421.42 million. Also, the company has topped the consensus EPS estimates in all of the trailing four quarters.
INFA’s shares have gained 4.1% over the past month and 26.1% over the past year to close the last trading session at $26.78. Wall Street analysts expect the stock to reach $30.63 in the near term, indicating an upside of 14.72%.
INFA’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Quality. Within the A-rated Software - SAAS industry, INFA is ranked #11 out of 18 stocks.
In addition to the POWR Ratings highlighted above, you can check INFA's Growth, Sentiment, Value, Stability, and Momentum ratings here.
What To Do Next?
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WDAY shares were trading at $240.50 per share on Wednesday afternoon, down $4.33 (-1.77%). Year-to-date, WDAY has declined -12.88%, versus a 23.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
3 Tech Stocks Analysts Love for 2024 StockNews.com
