Yahoo Finance Invest in 5 Internet Software Stocks to Enhance Your Portfolio
The Internet Software and Services space is gathering momentum owing to robust IT spending on solutions that support hybrid operating environments. The level of technology adoption by businesses and the proliferation of connected consumer devices, which might help people connect and do business online, is also accelerating the industry’s growth. Outstanding penetration of mobile devices among users, makes sense for businesses to invest heavily in web-based infrastructure, applications, and security software.
Within the technology sector, the Zacks Defined Internet-Software Industry is currently placed in the top 26% of all industries with a year-to-date return of 9.5%. In the past year, the industry has returned a massive 54%.
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 rampant incidences of cyber-attacks and hacking is driving demand for web-based cybersecurity software. As enterprises continue to move their on-premise workload to cloud environments, application and infrastructure monitoring is gaining importance. This is increasing 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 2024. These stocks have seen positive earnings estimate revisions in the last 60 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 picks in the past month.
Image Source: Zacks Investment Research
Pinterest Inc. PINS is taking various initiatives to bring more actionable content on the platform from a wide range of sources such as users, creators, publishers and retailers. This has resulted in a solid improvement in engagement metrics like sessions, impressions and saves across all regions.
A strong liquidity position will enable PINS to make further investments in product development and acquisitions in the future. PINS’ collaboration with Amazon will increase shoppability on the platform. Healthy traction in emerging verticals like men’s fashion, health and travel are tailwinds. Rising engagement among Gen Z users is a positive for PINS.
Zacks Rank #1 Pinterest has an expected revenue and earnings growth rate of 17.4% and 22.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the last 60 days.
Veeva Systems Inc.’s VEEV continued focus on research and development and a strong product portfolio buoy optimism. VEEV has also been witnessing robust customer adoption of its products, which is encouraging.
VEEV has inked a few strategic alliances over the past few months. A strong liquidity position is an added plus. We expect total revenues and adjusted earnings per share are likely to witness a CAGR of 12.8% and 11.7% between fiscal 2023 and fiscal 2026, respectively.
Zacks Rank #1 Veeva Systems has an expected revenue and earnings growth rate of 15.6% and 26.9%, respectively, for the current year (ending January 2025). The Zacks Consensus Estimate for current-year earnings has improved 11% over the last 60 days.
Twilio Inc. TWLO is benefiting from accelerated digital transformations amid a growing hybrid working trend. TWLO’s selective acquisitions and strategic investments in businesses and technologies are enhancing its product portfolio and fortifying its global presence.
TWLO is not only gaining traction from a solid expansion of its existing clientele but also first-time deals with new customers due to its firm focus on introducing products and go-to-market sales strategy. TWLO’s ongoing cost-saving initiatives are driving profits and margins, which is praiseworthy.
Zacks Rank #2 Twilio has an expected revenue and earnings growth rate of 5.2% and 10.6%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 30 days.
Toast Inc. TOST operates a cloud-based digital technology platform for the restaurant industry in the United States and Ireland. TOST offers Toast POS, a software module that integrates payment processing with point-of-sale functionality, Toast Invoicing, which allows restaurants to send invoices and collect payment, Toast Mobile Order & Pay, Kitchen Display System software that connects the house with the kitchen staff, and Multi-Location Management.
TOST also provides Toast Flex, hardware for on-counter order and pay, Toast Go, an integrated handheld POS device, Toast Tap, a card reader for accepting EMV-contactless payments, Toast Online Ordering & Toast TakeOut, First-Party Delivery, POS integration for restaurants using third-party delivery services to order intake and eliminate the need for extra third-party tablets, and loyalty, email marketing, and Toast Gift Cards services.
Zacks Rank #2 Toast has an expected revenue and earnings growth rate of 24.6% and 53.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.3% over the last 60 days.
Snap Inc. SNAP reported strong first-quarter 2024 results. Both earnings and revenues increased year over year. Solid daily active user growth was attributed to the steady adoption of Augmented Reality Lenses, Spotlight and AI chatbot. SNAP is benefiting from improving user engagement, particularly in the 13–34-year-old demography.
The Snapchat+ subscription service reached more than nine million paying subscribers in the first quarter. SNAP made considerable progress in diversifying revenues with Snapchat+ through new artificial intelligence-enabled features. Moreover, an expanding partner base, with the likes of ITV in the U.K. and Spotify in the United States, is noteworthy.
Zacks Rank #2 Snap has an expected revenue and earnings growth rate of 13.7% and 77.8%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 6.7% over the last 60 days.
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Veeva Systems Inc. (VEEV) : Free Stock Analysis Report
Twilio Inc. (TWLO) : Free Stock Analysis Report
Snap Inc. (SNAP) : Free Stock Analysis Report
Pinterest, Inc. (PINS) : Free Stock Analysis Report
Toast, Inc. (TOST) : Free Stock Analysis Report
