3 Upgraded Software Stocks to Consider Adding to Your Portfolio
Since the ongoing remote working trend and digital transformation are expected to continue driving the software industry’s growth, we think it could b...
Since the ongoing remote working trend and digital transformation are expected to continue driving the software industry’s growth, we think it could be wise to add software stocks UiPath (PATH), ZoomInfo (ZI), and Five9 (FIVN) to one’s watchlist. Analysts have recently upgraded their ratings on these stocks. So, let’s take a closer look at these names.
The software industry has grown significantly amid the COVID-19 pandemic. Even with considerable progress on the vaccination front this year, the need to work remotely and the ongoing digitalization of almost every industry have increased the demand for advanced software. Furthermore, consistent innovations by software companies are also increasing the industry’s relevance.
According to Statista, software market revenue is expected to reach $581.18 billion this year. The industry’s revenue is expected to grow at a 7.22% CAGR over the next five years to reach $823.71 billion by 2026. Also, investors’ interest in software stocks is evident in the SPDR S&P Software & Services ETF’s (XSW) 8.1% gains over the past six months.
UiPath Inc. (PATH)
Enterprise automation software company PATH, in New York City, offers an end-to-end automation platform that provides a range of robotic process automation (RPA) solutions. In addition, its products include UiPath Studio, UiPath Robots, UiPath Studio, and UiPath Orchestrator. Barclays recently upgraded the stock’s rating to ‘Overweight’ from ‘Equal-Weight.’
PATH announced on July 27 that dentsu, one of the world’s largest advertising agency networks, would migrate to the UiPath Automation Cloud to deliver automation and artificial intelligence (AI) capabilities at scale across its enterprise. This business success represents the increasing demand for PATH’s solutions.
For its fiscal second quarter, ended July 31, 2021, PATH’s net revenue increased 40.3% year-over-year to $195.52 million. The company’s gross profit came in at $159.93 million, up 28.3% year-over-year. Its total assets were $2.35 billion for the period ended July 31, 2021, compared to $866.46 million for the period ended January 31, 2021.
PATH’s revenue is expected to be $1.15 billion in its fiscal year 2023, representing a 32.9% year-over-year rise. It closed yesterday’s trading session at $51.89.
ZoomInfo Technologies Inc. (ZI)
ZI operates a cloud-based go-to-market intelligence platform for sales and marketing teams worldwide. Its portfolio of solutions combines B2B intelligence and company contact data with engagement software and dynamic workflows. ZI is headquartered in Vancouver, Wash. Barclays recently upgraded the stock’s rating to ‘Overweight’ from ‘Equal-Weight.’
On September 9, ZI acquired RingLead, a Data Orchestration Leader. ZI’s founder and CEO, Henry Schuck, said, “The acquisition of RingLead allows our customers to marry ZoomInfo intelligence with other data sources to create a unified view of their customers and shorten the path from data to engagement.”
ZI’s total revenue increased 56.9% year-over-year to $174 million for its fiscal second quarter, ended June 30, 2021. The company’s net income came in at $9.30 million, compared to a $34.4 million loss in the year-ago period. In addition, its cash flow from operations was $88.60 million, up 250.2% year-over-year. Its EPS was $0.05, compared to a $0.30 loss in the prior year quarter.
Analysts expect ZI’s revenue to be $705.91 million in its fiscal year 2021, representing a 48.2% year-over-year rise. In addition, the company’s EPS is expected to increase 50% year-over-year to $0.51 in the current year. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 104.6% in price to close yesterday’s trading session at $66.17.
Five9, Inc. (FIVN)
FIVN, together with its subsidiaries, provides cloud software for contact centers in the United States and internationally. In addition, the San Ramon, Calif.-based company’s purpose-built Virtual Contact Center (VCC) cloud platform delivers a suite of applications that enable the breadth of contact- center-related customer service, sales, and marketing functions. Piper Sandler has recently upgraded the stock’s rating to ‘Overweight.’
On July 14, 2021, FIVN extended its practical AI solutions for low-code development, voice biometrics, real-time analytics, and agent coaching. Callan Schebella, the company’s EVP, Product Management, said, “Our new capabilities make it easier for organizations to build and manage AI solutions that will enable human and digital teams to deliver next-generation customer care.”
FIVN’s total revenue increased 44.1% year-over-year to $143.78 million for its fiscal second quarter, ended June 30, 2021. The company’s gross profit came in at $79.39 million, representing a 38.5% year-over-year rise. Its adjusted EBITDA increased 31.6% year-over-year to $24.03 million.
For its fiscal year 2022, analysts expect FIVN’s revenue and EPS to increase 22.6% and 31.8%, respectively, year-over-year to $722.18 million and $1.41. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 40.6% in price to close yesterday’s trading session at $171.59.
PATH shares were trading at $52.10 per share on Tuesday morning, up $0.21 (+0.40%). Year-to-date, PATH has declined -24.49%, versus a 17.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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