Are These Software Stocks On Your List Of Best Stocks To Buy?
Software stocks have been a promising investment theme in recent years. When we have big names like Microsoft Corp (MSFT Stock Report) and Salesforce (CRM Stock Report) leading the industry, we can safely assume that we are looking at the industry of the future. These top software stocks could be an easy choice for investors who do not want to spend too much time understanding the software business.
As you may or may not know, there are a number of different areas within the broader cloud market. Amazon Web Services is the leader in the cloud infrastructure services, including what’s known as the infrastructure as a service (IaaS). This is one of the fastest growth drivers in the broader cloud market. On the other hand, Microsoft is the leader in enterprise software as a service (SaaS) with commercial products like Microsoft 365.
In fact, cloud computing has been on the rise for the past two decades. Wall Street is now betting that the pandemic will bring a step-change in the uptake of the technology. The technology has already accounted for 15% of the $1.56 trillion spent on IT last year. This is up from 7% in 2015 according to analysts at Morgan Stanley. For this reason, many believe that the increased reliance on cloud services during this trying time will only cause this shift in IT spending to accelerate. The BVP Nasdaq Emerging Cloud Index, which tracks a portfolio of cloud computing names, is up by over 70% this year. That is just a sign of the importance of cloud computing during the pandemic. With all that in mind, are these the top software stocks to buy this month?
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Top Software Stocks To Buy [Or Sell] Right Now: Alteryx Inc.
Data analytics specialist, Alteryx (AYX Stock Report) rallied in the extended sessions on Monday. This came after several announcements from the company which drove optimism. The company is replacing CEO Dean Stoecker with Mark Anderson, a seasoned tech company executive who spent more than six years at Palo Alto Networks. He was also the chief growth officer for the cloud-based planning platform Anaplan. Besides, he sits on the board of Cloudflare (NET Stock Report), the website security and content delivery network service provider.
In addition to the personnel change, the company announced its preliminary results. Alteryx said its revenue for the quarter ended September 30 would be in a range of $126 million and $128 million. That translates to a year-over-year growth between 22% and 24%. The updated results are considerably better than what the company announced previously. Recall that the company issued guidance of between $111 million and $115 million. At those numbers, growth would only be a tepid 7% to 11%, disappointing for a high profile cloud company. With this set of new numbers, investors are jumping back in, driving the pre-market share price up by over 20% this morning.
The company will be releasing its full quarterly results after the market closes on November 5. Prior to the announcement, consensus estimates expect revenue of $113.63 million, about 10% higher than the same period last year. With this revision, analysts are probably scrambling to update their price targets. Now that growth appears to be coming back on track, will you be adding AYX stock to your portfolio?
Top Software Stocks To Buy [Or Sell] Right Now: DocuSign
Shares of DocuSign (DOCU Stock Report) are up 5.2% during Monday intraday trading after Morgan Stanley analyst Stan Zlotsky upgraded the stock to overweight from equal weight. In his exact words; “Strong fundamentals coupled with more durable COVID-19 tailwinds make the DocuSign story more compelling than ever”.
He also expects “very healthy renewal rates” as customers are unlikely to go back to manual processes after having a taste of the company’s electronic-signature solutions. For those who have been following our feeds closely, you would know that we began discussing DocuSign in June, and DOCU stock has since climbed at least 50%.
During the quarter ended July 2020, DOCU saw a profit of $251.59 million. DocuSign also recorded revenues which rose to $342.21 million. Besides, the company has achieved a free cash flow of $132.53 million. Its EBITDA came in at -$9.92 million which is not too shabby for cloud software companies. As the last reported quarter was for the 3 months ending July 2020, the full impact of the pandemic has yet to be seen. DOCU stock has taken a breather along with the broader tech sell-off we saw in September. With that in mind, could the current valuation be enticing enough for you to add DOCU stock to your watchlist?
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Top Software Stocks To Buy [Or Sell] Right Now: Crowdstrike Holdings Inc
CrowdStrike (CRWD Stock Report) stock rose on Monday after the network-security provider got an upgrade to “Buy” from Goldman Sachs. Goldman analyst Brian Essex lifted his rating from neutral to buy. He increased the price target significantly from $122 to $176. According to Essex, the company had made a name for itself as a leader in the endpoint security market. Its “disruptive platform” helped it enter key markets successfully. The analyst believes there is room for upside. He pointed out that CrowdStrike is growing much faster than even its high-growth peers. His price target of $176 represents a 21% upside to the stock.
As the company expands into new markets, Crowdstrike could add new offerings to its platform, which could potentially drive the profit margins higher. CrowdStrike was already a top software stock to buy before the pandemic hit this year, but the coronavirus pandemic has proven itself to be more tailwinds rather than headwinds. In fact, the stock has almost tripled this year and is still at a level close to its all-time high.
Since most people were forced to stay and work from home, this has created a lot of opportunities for bad actors to attack. And that has brought the need for cybersecurity solutions front and center. Furthermore, the pandemic is an opportunity for enterprise users to revisit their use of legacy technology. This could potentially encourage at least some enterprise customers to drive through digital transformation. With all that in mind, would CRWD stock be an attractive buy today?