The software industry is booming, fueled by rapid digitalization, growing enterprise needs, rising demand for cloud-based solutions, increasing data-driven analytics, and advancements in emerging technologies like Artificial Intelligence (AI), Machine Learning (ML), Internet of Things (IoT), blockchain, and 5G.
Given the industry tailwinds, fundamentally sound software stocks SS&C Technologies Holdings, Inc. (SSNC), Informatica Inc. (INFA), Verint Systems Inc. (VRNT), and Yext, Inc. (YEXT) could be ideal buys for potential gains this year.
According to Gartner, worldwide software spending is expected to grow 13.9% year-over-year to reach $1.04 trillion in 2024, and overall global IT spending is poised to reach $5.06 trillion, up 8% from 2023. The planning of genAI initiatives will likely drive tech spending this year and beyond.
In 2024, revenue in the software market is expected to reach $698.80 billion, and most revenue ($353.50 billion) will be generated in the U.S. Businesses heavily rely on software solutions to streamline operations, enhance customer satisfaction, gain data-driven insights, and ensure system security, enabling them to thrive in the evolving digital environment.
In addition, the software market is projected to grow at a CAGR of 5.3% from 2024 to 2028, resulting in a market volume of $858.10 billion by 2028.
Besides, the rising adoption of public & hybrid cloud-based solutions, integration with other tools, and centralized data-driven analytics fuel the expansion of the Software as a Service (SaaS) market. The global SaaS market is expected to total $1.23 trillion by 2032, exhibiting a CAGR of 18.4%. Integration of AI and ML with SaaS solutions will propel market growth.
Further, the enterprise application market offers efficient solutions for managing large amounts of data, leading to enhanced collaboration, high efficiency, lower risk, connected data, and real-time insights, contributing to building a smart business.
In light of these encouraging trends, let’s look at the fundamentals of the four best software stock picks.
SS&C Technologies Holdings, Inc. (SSNC)
SSNC provides software products and software-enabled services to financial services and healthcare industries. It owns and operates a technology stack across securities accounting, front-office functions, middle-office functions, back-office functions, and healthcare solutions.
On March 28, SSNC launched the first release of its new SS&C Blue Prism Next Generation intelligent automation platform. The platform is designed to deliver continuous new agile capabilities and represents a milestone in intelligent automation (IA), offering cloud adoption without compromising on security and compliance.
On March 27, SSNC expanded its global reach by opening a new office in Abu Dhabi, United Arab Emirates. The Financial Services Regulatory Authority (FSRA) granted SS&C full approval to deliver fund administration services within the prestigious Abu Dhabi Global Market (ADGM).
For the first quarter that ended on March 31, 2024, SSNC’s revenue increased 5.3% year-over-year to $1.43 billion, and its gross profit grew 11% from the year-ago value to $707.20 million. The company’s adjusted operating income of $541.10 million indicates a growth of 9.6% from the prior year’s quarter.
In addition, adjusted net income and EPS attributable to SS&C common stockholders came in at $323.60 million and $1.28, up 10.9% and 12.3% year-over-year, respectively. Adjusted consolidated EBITDA attributable to SS&C rose 9.4% from the year-ago value to $556.80 million.
Street expects SSNC’s revenue and EPS for the second quarter (ending June 2024) to increase 5% and 10.7% year-over-year to $1.43 billion and $1.20, respectively. Furthermore, the company surpassed the consensus revenue estimates in three of the trailing four quarters.
SSNC’s stock has gained 15.2% over the past six months and 15% over the past year to close the last trading session at $63.57.
SSNC’s solid outlook is reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong 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 a B grade for Growth, Sentiment, Value, and Stability. Within the Software - Application industry, SSNC is ranked #3 out of 135 stocks.
Click here to access additional ratings of SSNC (Quality and Momentum).
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 globally. The company’s platform includes a suite of interoperable data management products.
On April 10, INFA expanded its partnership with Google Cloud and launched the extension for trusted customer data analytics and enterprise-genAI applications. It launched its Master Data Management (MDM) extension for Google Cloud BigQuery, making it easier and faster to get trusted MDM data for analytics and generative AI applications.
On April 2, INFA launched Saudi Arabia’s first AI-powered intelligent data management cloud platform. The investment includes establishing a new Point of Delivery (PoD) in Riyadh, and it also reflects the commitment to support local, scalable, cloud-first data management services, strengthening INFA’s presence in the Middle East.
For the first quarter that ended March 31, 2024, INFA’s total revenue grew 6.3% year-over-year to $388.61 million. Its gross profit increased 8.2% year-over-year to $306.85 million. The company’s non-GAAP income from operations came in at $109.26 million, up 28.8% from the prior year’s quarter. Its adjusted EBITDA increased 25.2% year-over-year to $111.47 million.
In addition, the company’s non-GAAP net income of $69.22 million and $0.22 per share indicates growth of 55.1% and 46.7 year-over-year, respectively. Its adjusted free cash flow rose 63.4% from the prior year’s quarter to $145.20 million.
Analysts expect INFA’s revenue for the second quarter (ending June 2024) to increase 7.1% year-over-year to $402.54 million, and its EPS is expected to grow 28.5% year-over-year to $0.22. Moreover, the company has topped the consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
Shares of INFA have surged 24.3% over the past six months and 102.2% over the past year to close the last trading session at $30.37.
INFA’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.
INFA has a B grade for Quality and Growth. The stock is ranked #3 among 18 stocks in the A-rated Software - SAAS industry.
In addition to the POWR Ratings I’ve just highlighted, you can see INFA’s ratings for Stability, Sentiment, Value, and Momentum here.
Verint Systems Inc. (VRNT)
VRNT provides customer engagement solutions globally. It offers forecasting and scheduling, channels and routing, knowledge management, fraud, and security solutions. Its Verint Open platform helps brands increase CX automation between organizations and customers and serves the banking, insurance, public, retail, and telecommunication industries.
On May 15, VRNT received a $4 million contract from a leading bank in Australia to deploy the Verint Open Platform’s workforce management (WFM) and bot capabilities. The contract expands VRNT’s relationship with the bank, where VRNT will replace a WFM solution from another vendor and introduce an AI-powered Verint TimeFlex Bot for its 4,500 agents.
Verint TimeFlex Bot will offer flexibility to make unlimited schedule changes to reduce attrition and absenteeism while improving agent work/life balance. It also reflects the unique ability of the solution to deliver tangible AI business outcomes quickly.
On May 14, VRNT secured a $7 million three-year contract with a long-standing Fortune 100 insurance company to deploy the Verint Open Platform in a hybrid cloud mode to drive AI business outcomes. In the deal, VRNT will provide Verint Work Allocation Bot, part of a team of specialized AI-powered bots, to ensure suitable work assignments.
During the fourth quarter that ended January 31, 2024, VRNT’s total revenue increased 12.2% year-over-year to $265.11 million. Its non-GAAP gross profit grew 17.1% from the year-ago value to $198.20 million. The company’s non-GAAP operating income of $83.09 million indicates growth of 34.6% year-over-year.
Furthermore, non-GAAP net income attributable to VRNT common shares came in at $77.46 million and $1.07 per common share, increases of 36% and 42.7% from the prior year’s quarter, respectively. The company’s adjusted EBITDA increased 30.5% year-over-year to $88.70 million.
As per the fiscal year 2025 outlook, VRNT expects its revenue to be $930 million +/- 2%, representing 5% year-over-year growth, and its EPS is expected to be $2.89 at the midpoint of the revenue guidance, reflecting 6% year-over-year growth.
Street expects VRNT’s revenue for the second quarter (ending July 2024) to increase 1.5% year-over-year to $213.60 million. Its EPS for the current quarter is expected to grow 12.5% year-over-year to $0.54. Also, the company has topped the consensus revenue and EPS estimates in three of the trailing four quarters.
VRNT’s shares have gained 9.3% over the past month and 48.3% over the past six months to close the last trading session at $33.01.
VRNT’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 an A grade for Growth and a B for Value. Within the Software - Business industry, VRNT is ranked #11 out of 43 stocks.
In addition to the POWR Ratings highlighted above, you can check VRNT’s ratings for Sentiment, Quality, Stability, and Momentum here.
Yext, Inc. (YEXT)
YEXT organizes business facts to provide answers to consumer questions in North America and internationally. The company operates the Yext platform, a cloud-based platform that allows its customers to offer answers to consumer questions.
On March 19, YEXT launched a new customer success program to expand its service and support portfolio to accelerate customer results. With the new program, YEXT customers can accelerate business results by combining the platform's power, the most business location data in the industry, and the expertise to turn that data into actionable insights.
For the fiscal year that ended January 31, 2024, YEXT’s revenue increased marginally year-over-year to $404.32 million. Its gross profit rose 6.7% from the prior year to $316.85 million. Furthermore, the company’s cash and cash equivalents came in at $210.18 million as of January 31, 2024, compared to $190.21 million as of January 31, 2023.
Analysts expect YEXT’s revenue for the third quarter (ending October 2024) to increase marginally year-over-year to $101.32 million, while its EPS is expected to grow 5.6% year-over-year to $0.10 for the same period. Further, the company surpassed the consensus EPS estimates in all four trailing quarters.
Over the past month, the stock has soared 2% to close the last trading session at $5.67.
YEXT’s strong prospects are reflected in its POWR Ratings. The stock has an overall grade of A, translating to a Strong Buy in our proprietary rating system.
YEXT has an A grade for Quality. The stock also has a B grade for Value, Sentiment, and Growth. It has ranked #3 among the 43 stocks within the Software - Business industry.
To see the other ratings of YEXT for Stability and Momentum, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
SSNC shares were unchanged in premarket trading Thursday. Year-to-date, SSNC has gained 4.42%, versus a 11.85% 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.
4 Software Stocks Primed for Major Upside in 2024 StockNews.com
