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The remote working culture is expected to continue partly due to the rapid spread of the COVID-19 Delta variant, which is necessitating the re-introduction of pandemic restrictions in some countries and locales. This, coupled with the ongoing digital transformation in several industries, should drive the demand for software solutions. Therefore, we think prominent software stocks Adobe (ADBE), Constellation Software (CNSWF), NICE Ltd. (NICE), and PTC Inc. (PTC), which are rated A (Buy) in our proprietary rating system, could continue climbing in price. So, let’s take a closer look at these names. Read on.
The software industry has been one of the biggest beneficiaries of the COVID-19 pandemic, given the surge in demand for digital solutions by virtually every industry. The artificial intelligence (AI) market is also booming, given its broad applications in core industries. According to the International Data Corp. (IDC), AI spending is on track to increase 15.2% year-over-year in 2021. IDC analysts also expect growth to remain robust in the subsequent years.
Because COVID-19 cases are rising again, several countries are reintroducing social distancing and travel restrictions. Given this backdrop, remote working should continue for the next few months at least. Also, the ongoing digital transformation in almost every sector is expected to accelerate the software industry’s growth.
Therefore, we believe that fundamentally sound stocks Adobe Inc. (ADBE), Constellation Software Inc. (CNSWF), NICE Ltd. ADR (NICE), and PTC Inc. (PTC), which have overall A (Buy) ratings in our proprietary POWR Ratings system, could continue advancing.
Adobe Inc. (ADBE)
ADBE is a well-known San Jose, Calif.-based software company that operates through three segments: Digital Media; Digital Experience, and Publishing. The company offers products and services for creating, managing, measuring, optimizing, and engaging with compelling content and experiences.
On April 27, ADBE announced the next generation of its Real-time Customer Data Platform (CDP), which is the only enterprise application architecture built from the ground up for first-party data-driven customer acquisition and engagement. The company expects to partner with brands to deliver relevant, responsive, and respectful experiences through first-party data.
ADBE’s revenue increased 22.6% year-over-year to $3.84 billion in its fiscal second quarter, ended June 4. Its gross profit stood at $3.39 billion, up 25% from the same period last year. And its operating profit grew 38.4% from its year-ago value to $1.41 billion. Its cash and cash equivalents balance rose 39.6% from the prior-year quarter to $4.25 billion over this period.
A $4.04 billion consensus revenue estimate for its fiscal third quarter (ending November 2021) indicates an 18.1% increase year-over-year. The Street expects the company’s EPS to rise 9.6% from the prior-year quarter to $3.08 in the next quarter. ADBE has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters.
ADBE gained 27.8% over the past six months to close yesterday’s trading session at $636.94. The stock has gained 41.6% over the past year.
ADBE’s strong fundamentals are reflected in its POWR Ratings. ADBE has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
ADBE has an A grade for Quality, and a B for Stability and Sentiment. Among the 145 stocks in the Software – Application industry, ADBE is ranked #20.
Click here to view additional ADBE ratings for Growth, Value, and Momentum.
Constellation Software Inc. (CNSWF)
CNSWF, together with its subsidiaries, acquires, builds, and manages vertical market software businesses in the United States, Canada, Italy, Germany, India, United Kingdom, Brazil, Switzerland, Austria, Israel, and internationally. The company is headquartered in Toronto, Canada.
On June 7, CNSWF announced the completion of an agreement with Fair Isaac Corporation (FICO), a leading predictive analytics and decision management software company, to purchase its collection and recovery business. This agreement should enhance its portfolio and allow the company to grow, leveraging FICO’s expertise.
CNSWF’s revenues increased 35.5% year-over-year to $1.25 billion in its fiscal second quarter, ended June 30. Its EPS grew 6.7% from its year-ago value to $4.16. The company’s cash and cash equivalents balance rose 45.5% from the prior-year quarter to $851 million over this period.
A $1.33 billion consensus revenue estimate for its fiscal third quarter, ending September 30, 2021, indicates a 32.5% improvement from the same period last year. Analysts also expect the company’s revenue to come in at $1.40 billion in the next quarter, indicating a 28.7% rise year-over-year.
Over the past year, CNSWF has gained 42.9% to close yesterday’s trading session at $1,640.37. The stock has gained 25.9% year-to-date.
The company has an overall B rating, which translates to Buy in our proprietary rating system. In addition, CNSWF has an A grade for Stability, and B for Quality. It is ranked #25 in the Software – Application industry.
Beyond what we’ve stated above, we have also rated CNSWF for Growth, Value, Sentiment, and Momentum. Click here to view all CNSWF ratings.
NICE Ltd. ADR (NICE)
NICE provides enterprise software solutions worldwide. The company also provides AI-driven smarter processes, agile workforce engagement, and customer experience management solutions. NICE, which is based in Ra’anana, Israel, operates in two segments: Customer Engagement and Financial Crime and Compliance.
On August 4, NICE launched its CXone SmartAssist, powered by Amelia, the industry’s leading conversational AI solution for customer service, to improve conversations across the customer experience (CX) journey. The industry’s first and only purpose-built AI trained to understand the intricacies of customer engagement demonstrates the company’s technological prowess.
NICE’s total revenue increased 16% year-over-year to $456.03 million in its fiscal second quarter, ended June 30. Its gross profit grew 18.7% from the year-ago value to $305.52 million. NICE’s operating income came in at $63.98 million, indicating a 14% rise year-over-year. The company’s non-GAAP EPS increased 14.6% year-over-year to $1.57.
The Street expects NICE’s revenues to rise 13% year-over-year to $465.86 million in the current quarter, ending September 2021. The $1.58 consensus EPS estimate for the current quarter indicates a 12.3% improvement year-over-year. Shares of NICE have gained 21.2% over the past year and 4.6% over the past month.
It’s no surprise that NICE has an overall B rating, which equates to Buy in our POWR Ratings system. NICE also has a B grade for Stability and Quality. In addition, it is ranked #16 in the Software – Application industry.
To see additional POWR Ratings for Growth, Value, Momentum, and Sentiment, click here.
PTC Inc. (PTC)
PTC is a global computer software and services company. It offers a portfolio of computer-aided design (CAD) modeling, product lifecycle management (PLM), and service lifecycle management (SLM) solutions for manufacturers to create, operate, and service products. PTC is based in Needham, Mass.
On May 27, PTC released its new Vuforia Instruct™ offering, which is designed to streamline the creation of 3D CAD-based work instructions. This enhancement should enable industrial organizations to increase productivity, improve quality, and reduce unplanned downtime. Thus, PTC’s offering from the Vuforia Enterprise Augmented Reality (AR) Suite is expected to be in wide demand.
PTC’s total revenues increased 23.9% year-over-year to $435.67 million in its fiscal third quarter, ended June 30. Its operating income grew 16.1% from its year-ago value to $73.58 million, while its net income improved 47.7% year-over-year to $51.20 million. The company’s EPS increased 43.3% year-over-year to $0.43.
Analysts expect PTC’s revenues to increase 20.4% year-over-year to $1.76 billion in the current year. A $3.53 consensus EPS estimate for the current year indicates a 37.4% rise from the last year. Also, PTC surpassed the Street’s EPS estimates in each of the trailing four quarters. Shares of PTC have gained 49.9% over the past year and 10.4% year-to-date.
It is no surprise that PTC has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The stock also has a B grade for Sentiment and Quality. It is ranked #24 in the Software – Application industry.
To see additional PTC ratings for Growth, Value, Stability, and Momentum, click here.
ADBE shares were trading at $635.01 per share on Tuesday afternoon, down $1.93 (-0.30%). Year-to-date, ADBE has gained 26.97%, versus a 19.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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