The shares of Palo Alto, Calif.-based software platform developer Palantir Technologies Inc. (PLTR) have plunged 60.8% in price over the past year and 31.6% year-to-date. The recent tech-sell-off combined with the company’s negative profit margins has driven the price retreat by its stock. In November, PLTR released its financial results for the third quarter, ended Sept.30, 2021. The company incurred a $102.14 million net loss, translating to a $0.05 loss per share, in the third quarter. PLTR’s commercial business picked up in the recent quarter as U.S. commercial revenue grew 103% year-over-year. However, PLTR’s primary government business segment witnessed slower growth, with sales rising some 34% year-over-year in the third quarter, compared to 71% over the first two quarters. It is also concerning that its commercial revenue comes primarily from the United States, while the international commercial business is sluggish.
The software industry is projected to grow rapidly in the coming months as IT spending increases amid the unabated adoption of hybrid work models. Research firm Gartner expects global IT spending to rise 5.1% year-over-year to $4.50 trillion in 2022.
Given the backdrop, we think it advisable to invest in these fundamentally strong and better performing software companies: VMware, Inc. (VMW), F5, Inc. (FFIV), and Amdocs Limited (DOX).
Click here to check out our Software Industry Report for 2022
VMware, Inc. (VMW)
VMW is an American information technology (IT) company. The Palo Alto, Calif., company provides software for modern applications, network security, digital workplaces, and various products for multi-device, private clouds, and multi-cloud environments. The company offers a wide range of products and solutions, including VMware multi-cloud solutions, networking solutions, vSAN, VxRail, and vRealize cloud management solutions. VMW was spun off from Dell Technologies, Inc. (DELL) on Oct.29, 2021.
Last January, VMW’s VMware Secure Access Service Edge (SASE) was launched by BT, a leading global communications services provider. Under the agreement, BT will offer its customers VMware SASE as a managed service to help them accelerate their digital transformation. With this launch by BT, VMW is expected to widen its customer reach and boost revenue streams.
In the third quarter of its fiscal year 2022, ended Oct. 29, 2021, VMW’s total revenues increased 11.3% year-over-year to $3.19 billion. Its operating income increased 21.3% year-over-year to $519 million. The company’s cash and cash equivalents increased 166.4% over the nine months ended Oct. 29, 2021, to $12.50 billion. VMW’s total assets grew 23.1% over the nine months to $35.71 billion.
The $3.52 billion consensus revenue estimate for its fiscal fourth quarter ending Jan. 31, 2022, represents 7% year-over-year growth. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past month, the stock gained 10% in price to close yesterday’s trading session at $129.97.
VMW’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
VMW has a B grade for Value, Quality, and Sentiment. Within the Software - Business industry, it is ranked #4 of 59 stocks. To see additional POWR Ratings (Momentum, Growth, and Stability) for VMW, click here.
F5, Inc. (FFIV)
FFIV in Seattle, Wash., provides multi-cloud security and application delivery solutions for network applications, servers, and storage systems. FFIV’s customers include public sector institutions, large enterprise businesses, value-added resellers, governments, and service providers.
Last December, FFIV announced multiple security offerings, including new solutions such as FFIV’s shape security portfolio of SaaS and managed services to safeguard digital experiences by protecting customers, applications, and APIs against account takeover (ATO). These solutions provide leading security, authentication, and fraud protection solutions.
In its fiscal first quarter, ended Dec. 31, 2021, FFIV’s net revenues increased 9.8% year-over-year to $687.10 million. Its net income increased 10.9% year-over-year to $ 179.03 million. The company’s net income per share grew 11.6% from the year-ago value to $2.89.
Analysts expect FFIV’s revenue for its fiscal year 2022, ending September 2022, to be t $2.76 billion, representing a 6% rise year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the four trailing quarters.
Shares of FFIV have increased 4.8% in price over the past year and closed yesterday’s trading session at $204.24.
FFIV has an overall A rating, which translates to Strong Buy in our POWR Ratings system. It has an A grade for Quality, and B for Growth and Value. It is ranked #1 of 59 stocks in the Software - Business industry. Click here to see FFIV ratings for Momentum, Sentiment, and Stability.
Amdocs Limited (DOX)
DOX provides software products and services worldwide for communications, cable and satellite, entertainment, media industry, mobile virtual network operators, and other service providers. The company designs, develops, and markets an open and modular cloud portfolio. It provides a line of services that include system integration, mobile network services, IT and infrastructure services, and professional services. DOX is headquartered in Saint Peter Port, the Channel Islands.
On February 1, DOX announced a multi-year agreement with XL Axiata, Indonesia’s leading communications service provider, to provide end-to-end media solutions. DOX’s Vindicia also extended its long-standing engagement with Vimeo to provide the latter a complete subscription management and retention solution for customers. With these agreements, DOX is expected to build customer loyalty and boost revenue by delivering a seamless customer experience worldwide.
Also, earlier this week, DOX partnered with Vodacom Group, an African connectivity, digital and financial services company, to create an African Center of Excellence (COE). Under this multi-country deal, COE will soon be launched and will enable Vodacom to adopt unified, 5G-ready architecture. This is expected to leverage DOX’s Openet platforms and increase the company’s customer reach and revenue streams.
In the first quarter of its fiscal year 2022, ended December 31, 2021, DOX’s revenue increased 1.7% year-over-year marginally to $1.10 billion. DOX’s operating income grew 3% year-over-year to $193.61 million. In addition, the company’s earnings per share increased 3.4% from their year-ago value to $1.20.
DOX’s revenues are expected to improve 7.6% year-over-year to $1.13 billion for the fiscal second quarter, ending March 31, 2022. DOX’s earnings per share are expected to increase 10.9% year-over-year to $1.25 for the to-be-reported quarter.
Over the past year, DOX stock has gained 3% in price to close yesterday’s trading session at $77.08.
The company has an overall B rating, which translates to Buy in our proprietary rating system. DOX has a B grade for Value, Quality, and Stability. Among the 59 stocks in the Software - Business industry, it is ranked #5. Click here to see the additional POWR Ratings for Sentiment, Momentum, and Growth for DOX.
Click here to check out our Software Industry Report for 2022
VMW shares were trading at $130.44 per share on Friday morning, up $0.47 (+0.36%). Year-to-date, VMW has gained 12.56%, versus a -6.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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