While the popular cryptocurrencies have not been attracting significant investor attention lately, digital currency Dogecoin has stolen the show. However, after hitting an extraordinary high, it is losing value on investor concerns over the creation of an asset bubble. Factors such as slow adoption, limited real-world use and the absence of any tangible factors behind its skyrocketing rally, among others, make it a highly risky asset.
Conversely, software solutions have been playing an important role in the digital transformation of businesses worldwide. Even though investors’ rotation away from expensive tech stocks amid the economic recovery this year has led to a correction in software stocks also, the industry nonetheless holds immense growth potential.
Investors’ interest in the software stocks is evident in the SPDR S&P Software & Services ETF’s (XSW) 16.1% returns over the past six months. And, according to Grand View Research, the global business software and services market is expected to grow at an 11.3% CAGR over the next seven years. So, we think it could be wise to stay away from Dogecoin and bet on established players in the software space Microsoft Corporation (MSFT), Oracle Corporation (ORCL), SAP SE (SAP), and Dassault Systèmes SE (DASTY). They have immense growth potential.
Microsoft Corporation (MSFT)
MSFT is a company that develops and supports software, services, and devices. It operates through three segments—productivity and business processes; intelligent cloud; and more personal computing.
MSFT’s revenue increased 19.1% year-over-year to $41.71 billion for its fiscal year 2021 third quarter ended March 31, 2021. Its non-GAAP net income for the quarter came in at $14.80 billion, up 38% from the prior-year quarter. Its non-GAAP EPS was $1.95, which represents a 39.3% increase year-over-year.
Analysts expect MSFT’s EPS to increase 7.1% year-over-year to $1.95 for the next quarter, ending September 30, 2021. It surpassed consensus EPS estimates in each of the trailing four quarters. Its revenue is expected to increase 18.9% year-over-year to $42.46 billion for the next quarter.
MSFT and Morgan Stanley (MS) announced a strategic cloud partnership on June 2, 2021, to accelerate the firm’s digital transformation. Amid increasing cyberthreats in the financial services industry, both companies will focus on developing and co-designing new application infrastructure that will meet the industry’s key requirements. This partnership will also shape MSFT’s broader product offering and create additional collaboration opportunities in the financial services industry focused on the modern workplace and the broader developer experience. The stock has gained 38.5% over the past year to close Friday’s trading session at $257.89.
It’s no surprise that MSFT has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has a B grade for Sentiment, Stability and Quality. Click here to see MSFT’s rating for Growth, Value and Momentum as well.
MSFT is ranked #13 of 126 stocks in the Software-Application industry.
Oracle Corporation (ORCL)
ORCL provides integrated cloud applications and platform services. Its products and services include applications and infrastructure offerings that are delivered through a variety of IT deployment models.
For the third quarter, ended February 28, 2021, ORCL’s non-GAAP revenues came in at $10.09 billion, which represents a 2.9% year-over-year rise. The company’s non-GAAP net income came in at $3.49 billion, up 10.3% from the prior-year quarter. Its non-GAAP EPS increased 19.6% year-over-year to $1.16.
In its fiscal year 2022 ending May 31, analysts expect ORCL’s EPS to increase 7.6% year-over-year to $4.80. It surpassed the consensus EPS estimates in each of the trailing four quarters. The company’s annual revenue is expected to increase 2.7% from one year-ago to $41.4 billion in 2022.
On June 8, ORCL expanded its commitment to the U.K. Government with an update of an existing Memorandum of Understanding (MOU) between Crown Commercial Service (CCS) and itself, and a new commitment to enhance ORCL’s Government Centre of Excellence. The updated arrangement is expected to foster an even stronger working relationship between ORCL and the U.K. public sector, enabling better use of secure cloud technologies. The stock has rallied 61.6% over the past year to close Friday’s trading session at $82.90.
ORCL’s POWR Ratings reflects this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. It has a B grade for Stability, Quality and Value. Apart from these, one can see ORCL’s ratings for Sentiment, Growth and Momentum here.
ORCL is ranked #10 in the Software-Application industry.
SAP SE (SAP)
Based in Germany, SAP develops enterprise application software. It offers solutions covering various lines of businesses, including enterprise resource planning and finance, customer relationship management and customer experience.
The company’s non-IFRS gross profit came in at €4.60 billion ($5.60 billion) for the first quarter, ended March 31, 2021, which represents a marginal improvement from the prior-year quarter. The company’s non-IFRS net income for the quarter came in at €1.72 billion ($2.10 billion), up 69.7% during the same period last year. Its non-IFRS EPS was €1.40 , up 64.7% year-over-year.
Analysts expect SAP’s EPS to increase 8% year-over-year to $1.48 for the current quarter, ending June 30, 2021. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Its revenue for the next quarter, ending September 30, 2021, is expected to come in at $8.21 billion, up 5.3% from the prior-year quarter.
On June 2, 2021, SAP announced a bold vision to create the world’s largest business network with its product portfolio that will improve business outcomes, better navigate changing economic and geopolitical conditions and enhance sustainability contributions. Taking into consideration the benefits of this plan, SAP is likely to generate significant demand from various organizations. The stock has gained 10.8% over the past year to close Friday’s trading session at $143.51.
SAP’s strong fundamentals are reflected in its POWR Ratings. It has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock has an A grade for Sentiment, and a B grade for Value, Stability and Quality. Click here to see the additional POWR Ratings for SAP (Growth and Momentum).
SAP is ranked #3 in the Software-Application industry.
Dassault Systèmes SE (DASTY)
Headquartered in France, DASTY develops 3D design and engineering software. It offers 3DEXPERIENCE, a platform that provides a real-time view of business activity and ecosystem and delivers 3D modelling applications, simulation applications creating virtual twins of products or production systems, social and collaborative applications.
For the first quarter, ended March 31, 2021, DASTY’s non-IFRS revenues came in at €1.17 billion ($1.42 billion), which represents a 2.6% year-over-year rise. The company’s non-IFRS net income was €301.20 million ($364.50 million), up 20.5% from the prior-year quarter. Its non-IFRS EPS increased 20% year-over-year to €1.14 .
Analysts expect DASTY’s EPS to increase 50.3% year-over-year to $3.35 in 2021. Its revenue in 2021 is expected to come in at $5.84 billion, up 9.3% from the prior-year quarter.
On June 3, 2021, Alstom, a French multinational company that develops and markets systems, equipment and services for the railway sector, has chosen DASTY and Accenture (ACN) to develop a new cloud platform for product lifecycle management (PLM). The new platform is designed to increase the company’s competitiveness and support its growth. ACN will draw on its deep expertise in large PLM and cloud solution deployments and build on DASTY’s 3DEXPERIENCE platform to develop the new cloud platform, which will optimize collaboration among Alstom’s design offices, and better integrate and standardize the company’s engineering, manufacturing and maintenance processes. The stock has gained 39.9% over the past year to close Friday’s trading session at $233.36.
DASTY’s POWR Ratings reflects this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. It has an A grade for Stability, and a B grade for Growth and Quality. In addition to these ratings, one can see DASTY’s ratings for Value, Sentiment and Momentum here.
DASTY is ranked #15 in the Software-Application industry.
MSFT shares were trading at $257.68 per share on Monday morning, down $0.21 (-0.08%). Year-to-date, MSFT has gained 16.39%, versus a 13.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand.Drop Dogecoin and Buy These 4 Software Stocks Instead appeared first on StockNews.com