The increasing use of data-oriented solutions and the increased automation of business processes across almost every industry is driving the software market’s growth. Furthermore, the COVID-19 pandemic and the institutionalization of hybrid working models have fostered growing demand for cloud-based software solutions to enhance flexibility and mobility, thus propelling the industry’s growth.
The industry is expected to benefit as businesses emphasize investing in innovative technologies like blockchain, artificial intelligence, and machine learning to bolster their market competitiveness. The global business software and services market was valued at $429.59 billion in 2021 and is expected to expand at an 11.7% CAGR from 2022 to 2030.
Given this industry’s promising prospects, Wall Street analysts expect software stocks Freshworks Inc. (FRSH), Samsara Inc. (IOT), and ironSource Ltd. (IS) to rally more than 70% in the near term.
Click here to check out our Software Industry Report for 2022
Freshworks Inc. (FRSH)
San Mateo, Calif.-based FRSH is a software development company that provides modern software-as-a-service (SaaS) products worldwide.
In April 2022, FRSH announced the expansion of its partnership with Device42, an asset management market leader, to provide enterprise-grade service management capabilities to FRSH’s customers. “Freshservice combined with Device42 means an ITSM solution to enable IT services and operations teams to keep business-critical services always on,” said Prakash Ramumurthy, Chief Product Officer at Freshworks.
In March, the company announced that its customer Collinson Group, a U.K. travel experiences and insurance company, will use FRSH’s services to modernize its customer experience to adapt to the fast-changing business and travel requirements post-pandemic. This move should prove to be strategically beneficial for the company.
FRSH’s revenue increased 44.5% from the prior-year quarter to $105.48 million in its fiscal fourth quarter, ended Dec. 31, 2021. Its gross profit for the quarter came in at $85.08 million, reflecting a 47.9% increase year-over-year, while its cash, cash equivalents, and restricted cash balance stood at $747.86 million, up 660.6% year-over-year.
Analysts expect FRSH’s revenue for its fiscal year ending Dec.31, 2022 to come in at $490.04 million, indicating a 32.1% increase year-over-year. The company’s EPS for the same period represents 0.5% year-over-year growth.
FRSH has gained 10.8% in price over the past month to close the last trading session at $19.07.
Among the 10 Wall Street analysts that have rated FRSH, eight rated it Buy, and two rated it Hold. The 12-month median price target of $33.00 indicates a 71.6% potential upside. The price targets range from a low of $24.00 to a high of $41.00.
Samsara Inc. (IOT)
IOT in San Francisco provides Connected Operations Cloud, an end-to-end solution that enables businesses to harness IoT (Internet of Things) data to develop actionable business insights and improve operations.
This month IOT announced the launch of its Tag Smart Collection to solve the pain point of lost luggage for travelers. Tag Smart combines with the Apple AirTag and helps people track their suitcase using the Find My app on their iPhone. This should reduce traveling setbacks and be a significant addition to the company’s offerings.
The company also announced the expansion of the JDLink integration with John Deere to digitize farming operations and provide enhanced features that help support vehicles enhance farming operations. This move demonstrates IOT’s advancement in the agriculture industry.
IOT’s revenue increased 65.6% year-over-year to $125.75 million in its fiscal fourth quarter, ended Jan. 29, 2022, while its gross profit grew 59.1% from its year-ago value to $87.05 million.
The Street expects IOT’s EPS for its fiscal year ending Jan. 31, 2023, to improve 32.7% year-over-year. The $575.62 million consensus revenue estimate for the same period represents 34.4% year-over-year growth.
IOT’s stock gained 6% in price intraday to close the last trading session at $14.34.
All the seven Wall Street analysts that have rated IOT rated it Buy. The 12-month median price target of $27.33 indicates a potential 91.4% upside. The price targets range from a low of $25.00 to a high of $30.00.
ironSource Ltd. (IS)
Headquartered in Tel Aviv-Yafo, Israel, IS operates as a business platform for app developers and telecom operators in Israel and internationally. The company provides the Sonic solution suite that helps developers to launch, monetize, and scale their apps and games.
On April 13, IS announced the expansion of its cross-channel marketing software with the help of Luna Ads, which would allow marketers to create, manage and optimize better campaigns on Apple Search Ads. The company expects this to support its global expansion.
Last month, IS announced its Marketability testing tool for mobile gaming apps, designed to give the developer clarity on in which titles to invest and launch. It is the first tool in the market to address the decision-making element and thus should be in demand.
For its fiscal fourth quarter, ended Dec. 31, 2021, IS’ revenue increased 46.1% year-over-year to $158.27 million. Its gross profit grew 46.9% from its year-ago value to $133.71 million, while the income from continuing operations stood at $20.81 million, reflecting a 20.1% increase year-over-year.
The $0.05 consensus EPS estimate for its fiscal second quarter, ending June 30, 2022, represents a 21.7% improvement year-over-year. And the $194.12 million consensus revenue estimate for the same quarter represents a 43.8% increase from the same period last year.
The stock has gained 1.1% in price intraday to close the last trading session at $4.74.
Among the nine Wall Street analysts that have rated IS, eight rated it Buy, and one rated it Hold. The 12-month median price target of $11.06 indicates a 132.4% potential upside. The price targets range from a low of $9.00 to a high of $14.00.
Click here to check out our Software Industry Report for 2022
FRSH shares were trading at $19.18 per share on Thursday morning, up $0.11 (+0.58%). Year-to-date, FRSH has declined -26.96%, versus a -6.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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