The Fed’s aggressive rate hikes aimed to curb the sky-high inflation have resulted in a significant tech sell-off this year. The central bank’s consecutive rate hikes are being increasingly associated with recession risks.
However, technological advancements, digital transformation across industries, increased use of data-driven solutions, and investments in cloud-based technology should boost the software industry’s prospects.
According to Gartner Inc. (IT), a worldwide software and IT spending is projected to reach $4.60 trillion in 2023, reflecting an increase of 5.1% year-over-year. Among the total IT spending, software spending is expected to grow 11.3% year-over-year to almost $880 billion.
On top of it, the global business software and services market size is expected to expand at an 11.7% CAGR from 2022 to 2030.
Therefore, it might be wise to add fundamentally sound software stocks Oracle Corporation (ORCL), Salesforce, Inc. (CRM), Autodesk, Inc. (ADSK), Synopsys, Inc. (SNPS), and Commvault Systems, Inc. (CVLT) to one’s investment portfolio.
Oracle Corporation (ORCL)
ORCL offers products and services that address enterprise technology environments. The company offers Oracle cloud software, including Oracle Fusion cloud enterprise resource planning (ERP) and Oracle Fusion cloud enterprise performance management.
On October 19, ORCL introduced its new B2B Commerce, aiming to eliminate the disparate systems, processes, and data integration challenges that make B2B transactions so complex. The service expects to connect more than 40,000 buyers, sellers, and service providers directly via Oracle Cloud Enterprise Resource Planning (ERP).
On October 18, ORCL announced Oracle Alloy. This new cloud infrastructure platform enables service providers, integrators, independent software vendors (ISVs), and other organizations to become cloud providers and roll out new cloud services to their customers. This might be beneficial for the company.
For the fiscal first quarter ended August 31, 2022, ORCL’s total revenues increased 17.7% year-over-year to $11.45 billion. Its non-GAAP operating income increased 3.3% year-over-year to $4.48 billion. Net cash from operating activities grew 18.6% from its prior-year quarter to $6.39 billion. Its non-GAAP EPS came in at $1.03.
Analysts expect ORCL’s EPS and revenue to increase 1.5% and 16.5% year-over-year to $4.97 and $49.45 billion for the fiscal year ending May 2023. Moreover, ORCL has an impressive surprise revenue history, as it has topped consensus revenue estimates in all four trailing quarters.
The stock has gained 26.7% over the past month to close its last trading session at $77.36. It has gained 5.4% over the past six months.
ORCL’s POWR Ratings reflect a promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ORCL is also rated a B in Stability and Growth. Within the Software – Application industry, it is ranked #25 of 146 stocks.
To see additional POWR Ratings for Quality, Value, Sentiment, and Momentum for ORCL, click here.
Salesforce, Inc. (CRM)
CRM provides customer relationship management technology bringing companies and customers together worldwide. The company provides its service offering for customers in financial services, healthcare, life sciences, manufacturing, and other industries.
In September, CRM unveiled Salesforce Genie, a hyperscale real-time data platform that powers the entire Salesforce Customer 360 platform. The availability of this platform is expected to bolster the company’s revenue stream.
Earlier in the same month, CRM introduced new Customer 360 innovations that provide companies with automation and intelligence technologies to drive efficient growth and deliver personalized customer experiences at scale. This might improve customer satisfaction.
In the fiscal second quarter ended July 31, 2022, CRM’s total revenues increased 21.8% year-over-year to $7.72 billion. For the same period, gross profit rose 18.3% year-over-year to $5.59 billion. Non-GAAP income from operations increased 19% from the same period last year to $1.54 billion.
For the fiscal fourth quarter ending January 2023, analysts expect CRM’s revenue to be $8.03 billion, indicating a 9.6% year-over-year growth. Street EPS estimate for the same period of $1.35 reflects a rise of 60.4% from the prior-year period. In addition, CRM has topped consensus EPS and revenue estimates in all four trailing quarters.
The stock has gained 13.3% over the past month to close its last trading session at $163.02. It has gained 2.1% intraday.
It’s no surprise that CRM has an overall B rating, which translates to Buy in our POWR Ratings system.
CRM is rated a B in Sentiment. Within the Software – Application industry, it is ranked #30.
Click here to see additional POWR Ratings for CRM for Value, Stability, Quality, Growth, and Momentum.
Autodesk, Inc. (ADSK)
ADSK is a software and service company specializing in 3D design, engineering, and entertainment software and services worldwide. It sells its products and services directly to customers, as well as through a network of resellers and distributors.
On September 27, ADSK announced a suite of new capabilities across Autodesk Construction Cloud. The company also declared advancements to Schedule and Cost Management capabilities within Autodesk Build. These enhancements should help the company serve its customers better.
The same day, ADSK announced a strategic collaboration with Epic Games to accelerate immersive real-time (RT) experiences across industries. As part of the company’s goal of connecting the physical and digital worlds, the first integrated offering is expected to be Epic Games’ Twinmotion for Autodesk Revit, which should benefit the company.
For the fiscal second quarter ended July 31, 2022, ADSK’s total net revenue increased 16.7% year-over-year to $1.24 billion. The non-GAAP income from operations increased 34.1% from the same period last year to $444 million, while non-GAAP net income per share came in at $1.65, representing 36.4% year-over-year growth.
For the fiscal third quarter ending October 2022, the consensus revenue of $1.28 billion indicates a 13.9% year-over-year growth. For the same period, Street expects EPS to increase 28.2% from the prior-year quarter to $1.70. In addition, ADSK has topped consensus EPS and revenue estimates in all four trailing quarters.
The stock has gained 14.3% over the past six months and 15.8% over the past month to close its last trading session at $216.39.
ADSK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which translates to Buy in our proprietary rating system.
ADSK is also rated an A for Quality and a B for Sentiment and Growth. In the Software – Application industry, it is ranked #18.
Click here to see the POWR Ratings for Momentum, Stability, and Value for ADSK.
Synopsys, Inc. (SNPS)
SNPS provides electronic design automation software products used to design and test integrated circuits. The company offers the Fusion Design Platform, Verification Continuum Platform, and FPGA design products.
On October 26, SNPS, ANSYS, Inc. (ANSS), and Keysight Technologies, Inc. (KEYS) announced the availability of their new millimeter wave (mmWave) radio frequency (RF) design flow for TSMC’s 16nm FinFET Compact (16FFC) technology. This product release should benefit the company.
In September, SNPS declared the replenishment of its stock repurchase program with an increased authorization to purchase up to $1.50 billion of common stock. This is expected to generate sustainable, long-term shareholder value.
SNPS’ total revenues increased 18% year-over-year to $1.25 billion for the third quarter ended July 31, 2022. Non-GAAP net income and non-GAAP net income per share came in at $327.41 million and $2.10, up 15.1% and 16% from the prior-year period, respectively.
For the fiscal fourth quarter ending October 2022, analysts expect SNPS’ EPS to be $1.84, indicating a 1% year-over-year growth. Revenue is expected to increase 11.1% from the prior-year period to $1.28 billion. In addition, SNPS has topped consensus EPS estimates in all four trailing quarters.
The stock has gained 3.2% over the past six months and 2.3% intraday to close its last trading session at $295.84.
SNPS has an overall B rating, translating to Buy in our proprietary POWR Ratings system.
Moreover, the stock is rated an A for Quality and a B for Sentiment. In the Software – Application industry, it is ranked #15.
Click here to see the additional POWR Ratings for SNPS (Growth, Value, Momentum, and Stability).
Commvault Systems, Inc. (CVLT)
CVLT provides data protection and information management software applications and related services globally. The company sells its products and services to large enterprises, small and medium-sized businesses, and government agencies.
On October 25, CVLT announced expanded protection for Kubernetes workloads. Through this integration of Kubernetes protection into its portfolio, CVLT is expected to enable enterprise innovation.
In September, CVLT announced the general availability of Metallic ThreatWise, an early warning system that proactively surfaces unknown and zero-day threats to minimize compromised data and business impact. The new system might boost the company’s topline.
CVLT’s total revenues increased 7.9% year-over-year to $197.98 million for the first quarter ended June 30, 2022. Gross margin increased 3.8% year-over-year to $164.22 million. Also, its non-GAAP EPS came in at $0.64, representing an increase of 3.2% year-over-year.
For the fiscal third quarter ending December 2022, analysts expect CVLT’s EPS to be $0.70, indicating a 4.9% year-over-year growth. Its revenue is estimated to increase 2.2% year-over-year to $206.78 million. In addition, CVLT has topped consensus EPS estimates in three of the four trailing quarters.
The stock has gained 16.3% over the past month to close its last trading session at $61.67. It is up 9.9% over the past three months.
CVLT has an overall A rating, which equates to a Strong Buy in our POWR Ratings system.
It also rated an A for Quality and a B for Growth, Sentiment, and Value. It is ranked #1 in the same industry.
Click here to see additional POWR Ratings of CVLT for Stability and Momentum.
ORCL shares were trading at $78.06 per share on Monday afternoon, up $0.70 (+0.90%). Year-to-date, ORCL has declined -8.94%, versus a -17.74% 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.
The 5 Best Software Stocks to Buy This Week StockNews.com
