The escalating demand for software solutions stems from the ever-expanding digital landscape, where businesses across all sectors seek efficient tools to streamline operations, enhance productivity, safeguard digital assets, and stay competitive. Additionally, the increasing integration of a variety of technological tools within software applications is reshaping how businesses operate.
Against the backdrop, it could be an opportune time to scoop up the shares of three fundamentally solid software application companies, Semrush Holdings, Inc. (SEMR), Mitek Systems, Inc. (MITK), and Nutanix, Inc. (NTNX), which appear well-equipped to capitalize on the industry prospects.
The COVID-19 pandemic has acted as a catalyst for the widespread adoption of digital technologies, with a growing number of companies embracing remote work setups and online business models. Additionally, rising cases of cyberattacks and data breaches have led customers to increasingly prioritize software applications that aid in compliance with data privacy regulations and bolster cybersecurity measures.
Moreover, the extensive availability of smartphones and internet access has further bolstered the expansion of the software industry, stimulating innovation, improving accessibility, and increasing the worldwide demand for mobile applications.
Individuals are now increasingly relying on mobile software applications for diverse needs such as entertainment, gaming, social networking, and more. Given the solid demand, the global mobile application market is expected to grow at an impressive 14.3% CAGR from 2024 to 2030.
On top of it, the industry is witnessing rapid advancements in technology, such as the increasing adoption of Artificial Intelligence (AI) in developing software applications, the growing importance of blockchain for secure transactions, as well as the transformative potential of Virtual Reality (VR), Augmented Reality (AR), quantum computing, edge computing, and Internet of Things (IoT).
These trends signal a dynamic shift in the software development landscape toward more advanced and innovative applications. Driven by the integration of advanced technologies in the industry and widespread utilization of software applications in various facets of life, the revenue in the global software market is projected to hit a remarkable $698.80 billion this year and further escalate to $858.10 billion by 2028, demonstrating a 5.3% CAGR spanning 2024 to 2028.
In light of these encouraging trends and prospects, let us dig deeper into the fundamentals of the featured Software - Application stocks, beginning with number three.
Stock #3: Semrush Holdings, Inc. (SEMR)
SEMR develops an online visibility management software-as-a-service platform in the United States, the United Kingdom, and internationally. It enables companies to identify and reach the right audience for their content through the right channels.
SEMR’s trailing-12-month gross profit margin of 82.73% is 68.2% higher than the industry average of 49.18%. Furthermore, the stock’s trailing-12-month asset turnover ratio of 0.98x is 60.9% higher than the 0.61x industry average.
For the fiscal third quarter, which ended on September 30, 2023, SEMR’s revenue increased 19.6% year-over-year to $78.72 million, while its gross profits rose 23% from the prior-year quarter to $65.69 million.
During the same quarter, the company reported a net income of $4.22 million and $0.03 per share versus a net loss of $9.09 million and $0.06 per share in the year-ago quarter, respectively. Furthermore, its total current assets stood at $260.49 million, up 1.2% compared to $257.38 million as of December 31, 2022.
The consensus revenue estimate of $83.13 million for the fiscal fourth quarter (ended December 2023) represents a 20.9% improvement year-over-year. Meanwhile, the consensus EPS estimate for the same quarter stands at $0.03. Additionally, it topped its revenue and EPS estimates in three of the trailing four quarters, which is promising.
SEMR’s shares have surged 47.5% over the past nine months to close the last trading session on at $12.32.
SEMR’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Sentiment and a B grade for Growth. In the 132-stock Software - Application industry, it is ranked #27. Click here to see SEMR’s ratings for Value, Momentum, Stability, and Quality.
Stock #2: Mitek Systems, Inc. (MITK)
MITK provides mobile image capture and digital identity verification solutions worldwide. Its product portfolio includes Mobile Deposit, Mobile Verify, and Mobile Fill. The company also offers MiSnap, a mobile-capture software development kit and Check Fraud Defender, an AI-powered and cloud-hosted model for fighting check fraud.
On January 9, 2024, ID R&D, a subsidiary of MITK renowned for its voice biometrics and liveness technology, introduced voice clone detection within its IDLive® Voice liveness detection product.
By leveraging AI, the software analyzes speech recordings to distinguish between genuine and cloned voices, which is crucial for detecting criminal intent. This feature aims to identify voice clones and audio deepfakes, which are vital for preventing fraud and crime, deterring malicious actors, and upholding trust in digital audio authenticity.
In the same month, MITK unveiled MiControl, a robust fraud management platform designed to complement MITK’s Check Fraud Defender. MiControl enables swift detection of check fraud, minimizes losses, and enhances online security for consumers.
Utilizing advanced visualizations and overlays, combined with customizable business rules set by the financial institution, MiControl significantly reduces the time needed for a fraud analyst to evaluate and act on a potentially fraudulent check, cutting it from up to 10 minutes to approximately 90 seconds.
MITK’s trailing-12-month EBITDA margin of 27% is 192.8% higher than the industry average of 9.22%. Likewise, its trailing-12-month gross profit margin of 87.39% is 77.7% higher than the 49.18% industry average. Furthermore, the stock’s 5.27% trailing-12-month net income margin is 134.6% higher than the 2.25% industry average.
For the fiscal year, which ended on September 30, 2023, MITK’s total revenue increased 19% year-over-year to $171.90 million. Its non-GAAP net income amounted to $43.79 million, up 10.5% from the year-ago value. In addition, its non-GAAP net income per share rose 8% year-over-year to $0.94.
Analysts predict MITK’s revenue and EPS for the fiscal year ending September 2024 to increase 5.9% and 14.2% year-over-year to $181.97 million and $1.08, respectively. Moreover, the company has an excellent surprise history, surpassing the EPS and revenue estimates in each of the trailing four quarters.
The stock soared 30.8% over the past nine months to close the last trading session at $12.43.
MITK’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system.
It has a B grade for Value and Quality. Within the same industry, it is ranked #18. Click here to see the other ratings of MITK’s for Growth, Momentum, Stability, and Sentiment.
Stock #1: Nutanix, Inc. (NTNX)
NTNX provides an enterprise cloud platform. The company’s offerings include a hyper-converged infrastructure software stack, Acropolis Hypervisor, flow virtual networking and flow network security, cloud-native environments, and more. In addition, it provides product support and consulting and implementation services.
NTNX’s trailing-12-month gross profit margin of 82.94% is 68.6% higher than the industry average of 49.18%. Its trailing-12-month levered FCF margin of 15.59% is 75.3% higher than the 8.90% industry average. Furthermore, the stock’s trailing-12-month CAPEX/Sales of 3.03% is 26.7% higher than the 2.39% industry average.
For the fiscal 2024 first quarter, which ended on October 31, 2023, NTNX’s total revenue increased 17.9% year-over-year to $511.05 million, while its gross profit rose 22.2% from the prior-year quarter to $429.10 million.
During the same quarter, the company’s free cash flow came in at $132.45 million, up 189.1% year-over-year. Also, its cash and cash equivalents stood at $612.46 million, increasing 19.4% compared to $512.93 million as of July 31, 2023.
Street expects NTNX’s revenue for the fiscal second quarter (ended January 2024) to increase 13.1% year-over-year to $550.03 million, while its EPS for the same quarter is expected to come in at $0.29. Moreover, the company topped its revenue and EPS in each of the trailing four quarters, which is impressive.
NTNX’s shares have soared 131.7% over the past nine months and 97.3% over the past six months to close the last trading session at $59.14.
It’s no surprise that NTNX has an overall rating of B, which equates to Buy in our proprietary rating system. It has an A grade for Growth and a B for Sentiment and Quality. In the same 132-stock industry, it is ranked #17.
In addition to the POWR Ratings we’ve stated above, we also have NTNX ratings for Value, Momentum, and Stability. Get all NTNX ratings here.
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NTNX shares were trading at $59.71 per share on Friday afternoon, up $0.57 (+0.96%). Year-to-date, NTNX has gained 25.20%, versus a 5.64% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
Top 3 Software Application Stock Picks for 2024 StockNews.com
