The software sector is predicted to keep growing as more people and businesses depend on it for everyday tasks, spurring innovation and economic expansion. Thus, it would be wise to buy three stocks that are currently dominating the market landscape: GoDaddy Inc. (GDDY), NICE Ltd. (NICE) and WM Technology, Inc. (MAPS).
But before we dive into the stock fundamentals, lets explore the industry prospects better.
The software industry has seen a remarkable rise in recent years, emerging as a dominant force in the global economy. Moreover, the increasing digitization of businesses has created a high demand for software solutions.
Enterprises are making substantial investments in their digital transformation, and this has directly increased the demand for cloud-based software services like Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS).
Moreover, cloud computing revolutionizes business operations, enabling adaptability and efficiency in changing market conditions. It empowers the consumerization of technology, enhancing customer experiences and driving a shift in how people and businesses operate.
The global cloud computing market is set to grow at a CAGR of 14.1% until 2030.
The global software market is expected to surge to $1.59 trillion by 2032, growing at a CAGR of 11.9%. Gartner expects software spending to surge 13.7% year-over-year to $922.75 billion this year.
Given the industry tailwinds, it’s time to examine the fundamentals of the top three stocks to buy in the Software industry, starting with the third in line.
GoDaddy Inc. (GDDY)
GDDY designs and develops cloud-based products and operates through two segments: Applications and Commerce and Core Platform. It offers applications products, including Websites + Marketing, a mobile-optimized online tool that enables customers to build websites and e-commerce-enabled online stores.
On November 8, GDDY launched the GoDaddy 2023 Gift Guide, a curated selection of unique products from small businesses across the United States. The guide’s goal is to make it easier for shoppers to support small businesses and find unique gifts. Each featured business has its own inspirational story, underlining that by picking up items from the list, shoppers not only support small enterprises but also contribute to the creation of lasting memories over the holiday season.
On October 18, GDDY partnered with Google to integrate Google’s Business Messages into GDDY Conversations, a unified inbox solution for small businesses. This integration allows entrepreneurs on GDDY’s Websites + Marketing plans to receive and respond to messages from consumers using Google Search and Maps, streamlining customer communications and enhancing GDDY’s service offerings.
In the same month, GDDY is partnering with Paze, an online payment solution by Early Warning Services, to integrate Paze into small businesses’ customer checkout experiences on GDDY’s platform. This collaboration aims to enhance online payment convenience, reduce abandoned shopping carts, and position GDDY’s Online Store users for growth by accepting Paze transactions, ultimately providing a streamlined checkout process for consumers and benefiting small businesses using GDDY Payments.
In terms of the trailing-12-month net income margin, GDDY’s 8.45% is 378% higher than the 1.77% industry average. Likewise, its 17.56% trailing-12-month EBITDA margin is 93.7% higher than the industry average of 9.07%. Furthermore, the stock’s 5.45% trailing-12-month return on total assets is significantly higher than the industry average of 0.07%.
For the fiscal third quarter ended September 30, 2023, GDDY’s total revenue amounted to $1.07 billion, up 3.5% year-over-year. Its net income and EPS rose 31% and 41.3% over the prior-year quarter to $130.70 million and $0.89, respectively.
Also, its non-GAAP unlevered free cash flow increased 7.9% from the year-ago quarter to $320.10 million, and its non-GAAP normalized grew 12.7% year-over-year to $296 million.
Analysts expect GDDY’s revenue to increase 5.8% year-over-year to $1.10 billion for the fiscal fourth quarter ending December 2023. Its EPS is expected to grow 73.4% year-over-year to $1.04 for the same period.
Over the past three months, the stock has gained 34.9% and 31.1% over the past six months to close the last trading session at $95.14.
GDDY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
GDDY also has a B grade for Growth, Sentiment and Quality. It is ranked #8 out of 45 stocks in the B-rated Software – Business industry. Click here for the additional POWR Ratings for Value, Momentum and Stability for GDDY.
NICE Ltd. (NICE)
Based in Ra’anana, Israel, NICE provides cloud platforms for AI-driven digital business solutions worldwide.
On October 24, NICE announced that Hastings Direct, in collaboration with NICE and BSL Group, successfully migrated to the cloud with NICE CXone, consolidating their operations and gaining valuable insights into their contact centers. They replaced eight separate on-premise platforms with a unified platform for voice, live chat, and email interactions, leading to a 26% boost in productivity and improved agent experiences.
NICE CXone’s advanced analytics capabilities have enabled the company to gather essential insights and make data-driven decisions, which has contributed to their success.
In the same month, NICE entered a definitive agreement to acquire LiveVox Holding, Inc. (LVOX), a prominent AI-driven proactive outreach provider. This acquisition will combine NICE’s CXone platform with advanced digital engagement and AI (Enlighten) and LVOX’s proactive outreach solutions.
This collaboration aims to deliver proactive, personalized customer experiences across various channels, elevating CX in the era of digital and AI.
In terms of the trailing-12-month net income margin, NICE’s 14.11% is 698.1% higher than the 1.77% industry average. Likewise, its 10.69% trailing-12-month return on common equity is 981.1% higher than the industry average of 0.99%. Furthermore, the stock’s 6.70% trailing-12-month return on total assets is significantly higher than the industry average of 0.07%.
In the fiscal second quarter ended September 30, 2023, NICE’s total revenue rose 8.4% year-over-year to $601.34 million. Its non-GAAP gross profit came in at $434.38 million, up 6.5% year-over-year. The company’s non-GAAP net income increased 17.9% from the year-ago quarter to $150.63 million and non-GAAP EPS grew 18.2% from the prior-year quarter to $2.27.
Street expects NICE’s EPS and revenue to rise 10.6% and 8.5% year-over-year to $2.26 and $616.82 million in the fiscal fourth quarter that ended December 2023. It surpassed revenue estimates in all four trailing quarters, which is impressive.
NICE’s shares gained 24.4% in the past month to close the last trading session at $194.45.
NICE’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
It also has a B grade for Quality. It is ranked #17 in the 132-stock Software – Application industry.
Beyond what is stated above, we’ve also rated NICE for Growth, Value, Momentum, Stability and Sentiment. Get all NICE ratings here.
WM Technology, Inc. (MAPS)
MAPS offers e-commerce and compliance software solutions to retailers and brands in the cannabis market. It provides a Weedmaps marketplace that enables cannabis users to search for and browse cannabis products from retailers and brands. Also, it offers monthly subscription-based business software solutions, like WM Listings, WM Orders, WM Stores, WM Insights, and WM Connectors.
In terms of the trailing-12-month gross profit margin, MAPS’ 93.22% is 90.7% higher than the 48.88% industry average. Furthermore, the stock’s 6.02% trailing-12-month Capex/Sales is 157.5% higher than the industry average of 2.34%.
For the fiscal third quarter that ended September 30, 2023, MAPS’ average monthly paying clients was 5,414. Its total operating expenses declined 24.1% from the year-ago quarter to $53.27 million. The company reported an adjusted EBITDA of $10.67 million, compared to a loss of $9.63 million in the same quarter last year.
For the nine months ended September 30, the company reported net cash provided by operating activities of $12.41 million, compared to a loss of $10.47 million in the previous-year period.
For the fiscal fourth quarter ending December 2023, MAPS expects its revenue to be $47 million. Also, adjusted EBITDA is estimated to be approximately $5 million.
Analysts expect MAPS’ revenue for the fiscal year ending December 2024 to increase 3.2% year-over-year to $199.82 million. Its EPS is expected to come in at $0.02 for the same period. Moreover, MAPS has topped the consensus revenue estimates in three of the trailing four quarters.
Shares of MAPS has gained marginally intraday to close the last trading session at $0.82.
MAPS’ POWR Ratings reflect healthy fundamentals. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
MAPS has a B grade for Growth, Value, and Sentiment. It is ranked #5 out of 23 stocks in the A-rated Software – SAAS industry.
Click here to access additional ratings for MAPS’ Momentum, Stability and Quality.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
GDDY shares were trading at $95.14 per share on Thursday morning, up $2.28 (+2.46%). Year-to-date, GDDY has gained 27.16%, versus a 20.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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