The surge in the volume of enterprise data, rising automation of business processes, and growing digitization are the major growth drivers for the software industry. Moreover, rising network security and privacy concerns should also support the industry’s growth. The global software market is expected to grow at a CAGR of 8.7% from 2022 to 2028.
On top of it, despite macroeconomic headwinds, global software spending is expected to grow on the back of the widespread deployment of cloud and enterprise applications. Software spending is expected to grow at a 10.3% CAGR from 2021 to 2023, which is more than two times faster than the spending rate in other IT segments.
Given this backdrop, the fundamentally strong software stock Rimini Street, Inc. (RMNI) might be a solid buy now.
However, amid the rising interest rate environment, tech stocks have witnessed a massive sell-off as investors seem to have flocked to more defensive assets to prepare for a possible recession. Against this backdrop, we think fundamentally weak software stock Inpixon (INPX) is best avoided now.
Stock to Buy:
Rimini Street, Inc. (RMNI)
RMNI offers enterprise software products, services, and support for various industries. It provides software support services for Oracle and SAP enterprise software products. The company sells its solutions mainly through direct sales organizations.
On August 24, RMNI announced that the University of Technology Sydney (UTS) switched to RMNI for improved support and security of its Oracle database and technology platforms. This might bolster the company’s position in the education market.
On July 27, RMNI announced the launch of Rimini Protect™, a new suite of security solutions that provides better protection to organizations from continuously evolving cybersecurity threats. This innovative solution might add to the company’s revenue.
RMNI’s revenue came in at $101.20 million for the second quarter that ended June 30, representing a 10.5% year-over-year growth. Its non-GAAP operating income grew 21.3% from the prior-year quarter to $11.95 million, while adjusted EBITDA rose 10.8% year-over-year to $11.02 million.
Analysts expect RMNI’s revenue for the third quarter ending September 2022 to be $102.42 million, indicating a 7.1% year-over-year growth. The company’s EPS for the same quarter is expected to be $0.12. In addition, RMNI has beaten the consensus EPS estimates in each of the trailing four quarters, which is impressive.
RMNI has gained 6.9% over the past month to close the last trading session at $4.99.
RMNIs POWR Ratings reflect this promising outlook. The company's overall A rating translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
RMNI has an A grade for Quality and a B for Growth and Value. In the Software - Application industry, it is ranked #2 out of 146 stocks.
In addition to the POWR Ratings stated above, one can get RMNI ratings for Momentum, Stability, and Sentiment here.
Stock to Avoid:
Inpixon (INPX)
INPX is an indoor intelligence company that provides solutions and technologies worldwide. The company operates through its three segments: Indoor Intelligence; Saves; and Shoom.
On September 26, INPX announced that it had signed a definitive merger agreement with special purpose acquisition company KINS Technology Group, under which the SPAC would acquire INPX's enterprise apps business. The proposed business combination is expected to be completed in the fourth quarter of 2022.
In the second quarter that ended June 30, INPX’s total cost and expenses increased 46.5% year-over-year to $23.22 million. Its loss from operations rose 49.6% from the prior-year quarter to $19.89 million. The company’s pro-forma non-GAAP net loss came in at $10.08 million, widening 39% from its year-ago value.
The stock has declined 8% over the past month and 79.5% year-to-date to close its last trading session at $0.12.
INPX’s POWR Ratings exhibit its bleak prospects. The stock has an overall D rating, equating to a Sell in our proprietary rating system.
It is graded an F in Stability and Quality and a D in Growth. INPX is ranked #144 in the Software - Application industry.
Click here to see additional POWR Ratings for INPX for Value, Momentum, and Sentiment.
RMNI shares were unchanged in premarket trading Tuesday. Year-to-date, RMNI has declined -16.42%, versus a -21.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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