The Internet software industry is benefiting from continued demand for a global digital transformation. Growth prospects are alluring primarily due to the rapid adoption of Software as a Service (SaaS), which offers flexible and cost-effective delivery of applications.
SaaS attempts to deliver applications to any user, anywhere, anytime and on any device. It has been effective in addressing customer expectations of seamless communications across multiple channels, including voice, chat, email, web, social media and mobile.
The growing need to secure cloud platforms amid the growing incidences of cyber-attacks and hacking drives the demand for web-based cyber security software. As enterprises continue to move their on-premise workload to cloud environments, application and infrastructure monitoring is gaining importance. This is increasing the demand for web-based performance management monitoring tools.
Moreover, the pay-as-you-go model helps Internet software providers scale their offerings per the needs of different users. The subscription-based business model ensures recurring revenues for the industry participants.
At this stage, it will be prudent to invest in Internet software stocks with a favorable Zacks Rank to strengthen one’s portfolio.
Our Top Picks
We have narrowed our search to five Internet software stocks with strong potential for the rest of 2023. These stocks have seen positive earnings estimate revisions in the last 30 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five p;icks year to date.
Image Source: Zacks Investment Research
Meta Platforms Inc. META is benefiting from steady user growth across all regions, particularly Asia Pacific. Increased engagement for its products like Instagram, WhatsApp, Messenger and Facebook has been a major growth driver. META is considered to have pioneered the concept of social networking.
Meta Platform has an expected revenue and earnings growth rate of 9% and 22.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 15.2% over the last 30 days.
CrowdStrike Holdings Inc. CRWD is benefiting from the rising demand for cyber-security solutions owing to the slew of data breaches and the increasing necessity for security and networking products amid the growing hybrid working trend. Continued digital transformation and cloud-migration strategies adopted by organizations are the key growth drivers.
CRWD’s portfolio strength, mainly the Falcon platform’s 10 cloud modules, boosts its competitive edge and helps in adding users. Additionally, strategic acquisitions, like that of Humio and Preempt, are expected to drive growth for CRWD.
Zacks Rank #2 CrowdStrike has an expected revenue and earnings growth rate of 33.8% and 49.4%, respectively, for the current year (ending January 2024). The Zacks Consensus Estimate for current-year earnings has improved 1.8% over the last 30 days.
Unity Software Inc. U provides a platform for creating and operating interactive, real-time 3D content. U’s platform provides a set of software solutions to create, run and monetize interactive, real-time 2D and 3D content for mobile phones, tablets, PCs, consoles and augmented and virtual reality devices.
Unity Software enables content creators and developers, artists, designers, engineers, and architects to create interactive and real-time 2D and 3D content. U offers its solutions directly through its online store, field sales operations, independent distributors, and resellers in the United States and internationally.
Zacks Rank #2 Unity Software has expected revenue and earnings growth rates of 53.7% and 65.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.6% over the last 30 days.
BlackLine Inc. BL provides cloud-based solutions to automate and streamline accounting and finance operations worldwide. BL offers financial close management solutions, such as account reconciliations that provides a centralized workspace for users to collaborate on account reconciliations; transaction matching that analyzes and reconciles high volumes of individual transactions; and task management to create and manage processes and task lists.
BL’s financial close management solutions also include journal entry that allows users to generate, review, and post manual journal entries, variance analysis that monitors and identifies anomalous fluctuations in the balance sheet and income statement account balances, consolidation integrity manager that manages the automated system-to-system tie-out process that occurs during the consolidation phase of the financial close and compliance, an integrated solution that facilitates compliance-related initiatives, consolidates project management, and provides visibility over control self-assessments and testing.
Zacks Rank #1 BlackLine has expected revenue and earnings growth rates of 12.9% and 96.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 38.5% over the last 30 days.
Bentley Systems Inc. BSY provides infrastructure engineering software solutions in the Americas, Europe, the Middle East, Africa, and the Asia-Pacific. BSY offers open modeling and open simulation applications for infrastructure design integration, which include MicroStation, OpenRoads, OpenRail, OpenPlant, OpenBuildings, OpenBridge, OpenSite, OpenFlows, STAAD and RAM, SACS, MOSES, AutoPIPE, SITEOPS, CUBE, DYNAMEQ, EMME, and LEGION, and geoprofessional applications for modeling and simulation of near and deep subsurface conditions.
Zacks Rank #2 Bentley Systems has expected revenue and earnings growth rates of 11.7% and 1.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.6% over the last 30 days.
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