Over the past two years, the software industry has grown significantly, driven by accelerating digital transformation. The changing IT landscape demands a shift to services, such as software-as-a-service (SaaS). So, the tech sector is evolving, supported by innovation and technological advancements, including artificial intelligence (AI), 5G, cloud, machine learning, DevOps, software architecture and development.
Despite concerns about the Fed’s plan to increase interest rates to combat inflation, software companies are expected to sustain high growth rates for longer periods. Software companies are expanding and upgrading their business models and are accelerating their growth driven by innovation.
Given the backdrop, Wall Street analysts expect software stocks Payoneer Global Inc. (PAYO), Phunware, Inc. (PHUN), and Exela Technologies, Inc. (XELA) to rally in price in the coming months.
Click here to check out our Software Industry Report for 2022
Payoneer Global Inc. (PAYO)
PAYO is a cross-border payment and commerce-enabling platform. The New York City-based company offers a wide range of services, including cross-border payments, tax solutions, working capital, merchant services, and risk management. It caters to digital businesses, online sellers, and freelancers worldwide to manage their international payments.
On Dec. 15, 2021, PAYO expanded its partnership with the Awin Group, a global marketing technology company, to provide best-in-class payment services to Awin’s publisher base around the globe. The partnership is expected to expand PAYO’s customer reach and boost revenue streams.
On Dec. 7, 2021, PAYO offered working capital to Walmart Inc. (WMT) U.S. Marketplace sellers to support their growth by reinvesting in their business. The offering includes three flexible Capital Advance programs that allow sellers to choose the one that best fits their business needs. This offering might reach a new market and increase profitability for the company.
In its fiscal year 2021 third quarter, ended Sept. 30, PAYO’s revenues increased 35.5% year-over-year to $122.65 million. PAYO’s adjusted EBITDA increased 137.9% year-over-year to $6.13 million. The company’s cash and cash equivalents increased 18.9% over nine months ended Sept. 30, 2021, to come in at $4.25 billion. PAYO’s total assets have grown 18.8% over nine months to $4.36 billion.
The $559.75 million consensus revenue estimate for the fiscal year 2022, ending Dec. 31, 2022, represents a 21.6% year-over-year growth from the same period in 2021. The Street expects PAYO’s EPS to improve 68.2% year-over-year in the next fiscal year.
Over the past five days, PAYO has gained 5.2% in price. Of the two Wall Street analysts that rated PAYO, one rated it Buy, while one rated it hold. The 12-month median price target of $10.75 indicates a 104.4% potential upside from yesterday’s closing price of $5.26. The price targets range from a low of $8.50 to a high of $13.00.
Phunware, Inc. (PHUN)
PHUN is an Austin, Tex.-based integrated software platform provider that equips companies with the products, services, and solutions to engage, manage, and monetize their mobile application portfolios. The company’s products and services include cloud-based mobile software, content management, marketing automation, advertising, and location-based services.
This week, PHUN partnered with Campaign Nucleus to integrate the capabilities of Smart Advocacy Solution with politicians and advocacy groups to personalize their political content delivery and drive engagement. The partnership is expected to leverage PHUN’s Multiscreen-as-a-Service (MaaS) platform, expand its customer base and boost revenues.
Last month, PHUN announced two new strategic suppliers for optimized high-performance PC series by the LYTE business unit inspired by the Consumer Electronics Show (CES). “With these new strategic supplier relationships, we took the guesswork out of selecting the right personal computer systems for power users’ needs,” stated Caleb Borgstrom, Vice President and General Manager of LYTE by Phunware.
PHUN’s revenues from application transactions increased 44.1% year-over-year to $389,000 in its fiscal third quarter of 2021, ended Sept. 30, 2021. PHUN’s total other income rose 512.8% year-over-year to $4.41 million. And the company’s net income grew 104.3% year-over-year to $372,000.
Analysts expect PHUN’s revenue for the fiscal fourth quarter, ended Dec. 31, 2021, to come in at $5.03 million, representing a 149.4% rise year-over-year. The Street expects PHUN’s EPS to improve 66.7% year-over-year in the about-to-be-reported quarter. The company has an impressive earnings surprise history; It surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has increased 34.6% in price year-to-date and 16.5% over the past year, respectively. PHUN closed yesterday’s trading session at $3.54.
Each of the two Wall Street analysts that rated PHUN rated it Buy. The 12-month median price target of $4.75 indicates a 34.2% potential upside. The price targets range from a low of $4.00 to a high of $5.50.
Exela Technologies, Inc. (XELA)
XELA provides a wide range of services, including transaction processing, document management, enterprise information management, and digital business process services. The Irving, Tex.-based company operates in three segments: Information & Transaction Processing Solutions (ITPS); Healthcare Solutions (HS); and Legal & Loss Prevention Services (LLPS).
On Feb.8, 2022, XELA purchased a multilevel, 25,000 square foot headquarters in Dublin, Ireland. With this investment, XELA is expected to expand its services in the Irish payment space and grow its leadership position in Europe.
On Feb. 7, 2022, XELA amended its previously announced offer to exchange up to 100 million shares of its common stock for unsecured 6% senior notes due 2029, with an increase in the consideration offered for each share from $1.00 to $1.25 per share. As a result, an aggregate of up to $125 million of new notes might be issued.
On Feb.3, 2022, XELA enrolled more than 6,000 users on its Work-From-anywhere platform for Intelligent Document Processing, which leverages the gig economy for exception management and machine learning via a web app. With this user enrollment, XELA is expected to expand the company’s technology advantage.
XELA’s EBITDA increased 30.2% year-over-year to $49.10 million in its fiscal third quarter 2021, ended Sept. 30, 2021. XELA’s net loss decreased 53.4% year-over-year to $13.20 million in its third fiscal quarter. The company reported record-high liquidity of $227 million as of Nov. 2, 2021.
In its fiscal fourth quarter, ended Dec. 31, 2021, analysts expect XELA’s EPS to improve 82.4% year-over-year.
Over the past month, XELA’s shares have gained 13.1% in price. The 12-month price target of $5.00 indicates a 567.7% potential upside from yesterday’s closing price of $0.75.
Click here to check out our Software Industry Report for 2022
PAYO shares were trading at $4.96 per share on Friday afternoon, down $0.30 (-5.70%). Year-to-date, PAYO has declined -32.52%, versus a -6.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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