3 Software Stocks With Massive Potential to Watch This Week

Amid growing digital transformation across multiple end-use sectors, worldwide spending on software is expected to grow significantly this year and beyond. Further, increasing demand for mobile applications, the growing complexity of software projects, and the need for data protection from cyber-attacks would create opportunities for software providers.

Given the industry’s bright prospects, it could be wise to consider watching fundamentally sound software stocks Akamai Technologies, Inc. (AKAM), SS&C Technologies Holdings, Inc. (SSNC), and Qualys, Inc. (QLYS) with massive growth potential.

The demand for business software and services is on the rise, driven by the rapid digitalization of business operations across sectors like retail, manufacturing, automotive, healthcare, and telecom. Also, the surging need to analyze vast amounts of enterprise data and enhanced deployment across IT infrastructure would boost the demand for software.

The business software market size is projected to reach $1.10 trillion by 2029, expanding at an impressive CAGR of 11.2% during the forecast period from 2024 to 2029. Increasing adoption of emerging technologies, like cloud, AI, machine learning, blockchain, IoT, and AR&VR, would boost the market’s expansion.

The rise in demand for customized apps and the surging adoption of smartphones are boosting the prospects of the application development software market. The low-code and no-code development platform, integration with DevOps practices, cloud-native application development, and emphasis on user experience are vital trends gaining popularity in the market.

As the threat of cyber threats and data breaches grows, so does the need for security software solutions. Factors like automatic updates feature of IT security software, layered approach to security, firewall protection from spyware and phishing attacks, and growing adoption of cloud security software solutions in organizations are shaping the security software market.

The security software market is estimated to total approximately $51.46 billion by 2029, growing at a CAGR of 13.9%.

Gartner reported that global spending on software would witness a double-digit growth in 2024. This year, worldwide software spending is expected to total $1.03 trillion in 2024, an increase of 12.7% from 2023.

Considering the industry’s optimistic outlook, investors could consider watching fundamentally sound software stocks AKAM, SSNC, and QLYS this week.

Let's discuss the fundamentals of these stocks in detail:

Akamai Technologies, Inc. (AKAM)

AKAM provides cloud services for securing, delivering, and computing content, applications, and software over the internet worldwide. It offers cloud solutions to keep infrastructure, websites, applications, application programming interfaces, and users safe from various cyberattacks and online threats. It also provides web and mobile performance solutions.

On November 16, AKAM made available TrafficPeak to its customers under the Akamai Qualified Computing Partner Program. Hydrolix offers TrafficPeak powered by Akamai, which is a managed observability platform that runs on Akamai Connected Cloud, the world's most distributed platform for cloud computing, security, and content delivery.

On November 10, AKAM and Deloitte, a leader in global security services, announced a strategic alliance to deliver Zero Trust microsegmentation and managed incident response services to Deloitte customers globally. The alliance combines Deloitte’s expertise in cybersecurity, network forensics, and security and Akamai’s Guardicore Segmentation solution.

The strategic alliance provides a unified product and services approach to prevent and mitigate ransomware attacks in an enterprise-ready solution.

Also, on October 25, AKAM launched its latest Akamai Prolexic scrubbing centers in Toronto and Montreal. The new centers offer service to regional and global organizations, government institutions, and critical public infrastructure of world-class distributed denial-of-service (DDoS) protection.

For the fiscal 2023 third quarter that ended September 30, 2023, AKAM’s revenue increased 9.5% year-over-year to $965.48 million. The company's non-GAAP income from operations grew 22% from the year-ago value to $295.97 million. Its non-GAAP net income of $251.07 million, or $1.63 per share,  up 25.5% and 29.4% from the previous year’s quarter, respectively.

Furthermore, the company’s adjusted EBITDA increased 13.3% year-over-year to $417.60 million. Its total assets were $9.58 billion as of September 30, 2023, compared to $8.30 billion as of December 31, 2022.

The company increased its full-year 2023 guidance for revenue and non-GAAP EPS. AKAM expects its revenue to range between $3.80 billion and $3.82 billion, and the company’s non-GAAP net income per share is expected to be $6.08 - $6.13.

Analysts expect AKAM’s revenue and EPS for the fourth quarter (ended December 2023) to increase 7.7% and 17.8% year-over-year to $999.71 million and $1.61, respectively. Further, the company has topped consensus EPS and revenue estimates in all four trailing quarters, which is impressive.

Shares of AKAM have surged 31.9% over the past six months and 38.5% over the past year to close the last trading session at $124.04.

AKAM’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

AKAM is ranked #15 out of 43 stocks in the B-rated Software - Business industry.

To check POWR Ratings of AKAM for Growth, Value, Momentum, Stability, Sentiment, and Quality, click here.

SS&C Technologies Holdings, Inc. (SSNC)

SSNC offers software products and software-enabled services to financial services and healthcare industries. It owns and operates a technology stack across securities accounting, front-office functions, middle-office functions, back-office functions, and healthcare solutions comprising claims adjudication, benefit management, care management, and business intelligence solutions.

On February 1, SSNC announced that Rhyze Solutions, a Credit Union Service Organization (CUSO), had chosen SSNC’s next-generation technology to assist in managing its growing commercial real estate loan servicing operation.

“SS&C is committed to providing innovative software and value-added services to loan servicers and Credit Union Service Organizations,” said Kevin Tynan, Managing Director at SS&C Technologies.

On January 11, SSNC announced a new relationship with Schroders Personal Wealth (SPW), the financial planning joint venture between Schroders plc and Lloyds Banking Group. SSNC’s Global Investor and Distribution Solutions (GIDS) will be SPW’s transfer agent.

SSNC will offer fund registry, investor services and digital solutions for the full range of SPW’s funds, with GBP12.7 billion ($16.11 billion) in AUM.

On October 2, SSNC completed an acquisition of the managed funds administration (MFA) business from Iress Limited. With this acquisition, about 150 team members have joined SS&C Global Investor & Distribution Solutions, reporting to Euan McLeod, Head of Transfer Agency, APAC.

“We are pleased to welcome the MFA team's employees, customers and partners,” said Bill Stone, Chairman and CEO. “SS&C helps asset managers globally to streamline operations, reduce risk, strengthen compliance and serve clients more effectively. We look forward to working with the MFA team to enhance our services in Australia and deliver solutions to this growing market.”

SSNC’s revenue increased 3.4% year-over-year to $1.37 billion during the third quarter that ended September 30, 2023. Its gross profit rose 4.9% year-over-year to $654.40 million. The company’s adjusted operating income grew 6.4% from the year-ago value to $517.40 million.

In addition, adjusted consolidated EBITDA attributable to SS&C came in at $533.90 million, up 6.4% from the previous year’s quarter. The company’s cash and cash equivalents were $447.60 million as of September 30, 2023, compared to $440.10 million as of December 31, 2022.

As per business guidance for the fourth quarter of 2023, SSNC expects adjusted revenue to be between $1.37 billion and  $1.41 billion. The company’s adjusted net income is expected to be in the range of $305 million to $327 million, and adjusted EPS is in the range of $1.21 to $1.29.

Street expects SSNC’s revenue for the fourth quarter (ended December 2023) to increase 3.9% year-over-year to $1.39 billion. Its EPS for the same period is expected to increase 7.4% year-over-year to $1.25. Moreover, the company topped consensus revenue estimates in three of the four trailing quarters.

SSNC’s stock has gained 1.4% over the past month and 5.4% over the past six months to close the last trading session at $66.33.

SSNC’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

The stock has a B grade for Value, Momentum, and Stability. Within the Software - Application industry, SSNC is ranked #8 of 132 stocks.

Click here to access additional ratings of SSNC for Growth, Quality, and Sentiment.

Qualys, Inc. (QLYS)

QLYS offers cloud-based information technology (IT), security, and compliance solutions internationally. It provides Qualys Cloud Apps, which include Vulnerability Management, Threat Protection, Continuous Monitoring, Patch Management, and Multi-Vector Endpoint Detection and Response. It also offers asset tagging and management, reporting and dashboards.

On February 1, QLYS announced the expansion of Qualys CyberSecurity Asset Management (CSAM) to identify unmanaged and untrusted devices in real time.

Using the Qualys Cloud Agent to monitor the network continuously, this passive discovery method complements scans, agents, and API-based discovery to build a comprehensive asset inventory, calculate the TruRisk of every asset, and eliminate risk based on business impact.

On January 29, QLYS expanded its partnership with Orange Cyberdefense. The expanded collaboration will provide global businesses the ability to leverage Orange Cyberdefense’s managed service to optimize vulnerability management activities and lower cyber risk, allowing customers to focus on their core business.

This strategic expansion signifies that QLYS’ industry-leading capabilities, such as Vulnerability Management, Detection and Response (VMDR), will be included in Orange Cyberdefense’s managed Vulnerability Intelligence Service. It should bode well for both the companies.

During the fiscal 2023 third quarter that ended September 30, 2023, QLYS’ total revenues increased 13.1% year-over-year to $142 million. It reported a non-GAAP gross profit of $117.95 million, up 15.4% from the prior year’s quarter. The company’s non-GAAP net income came in at $56.68 million, or $1.51 per share, up 53.9% and 60.6% year-over-year, respectively.

Additionally, the company’s adjusted EBITDA rose 25.4% from the year-ago value to $68.81 million. Its operating cash flow was $92.40 million, an increase of 119% year-over-year.

Analysts expect QLYS’ revenue and EPS for the fourth quarter (ended December 2023) to increase 10.5% and 23.2% year-over-year to $144.60 million and $1.24, respectively. Also, the company surpassed the consensus revenue and EPS estimates in all four trailing quarters, which is remarkable.

Over the past six months, the stock has gained 36.5% and 59.9% over the past year to close the last trading session at $190.39.

QLYS’ POWR Ratings reflect its bright prospects. The stock has an overall B rating, translating to a Buy in our proprietary rating system.

QLYS has an A grade for Quality. It is ranked #6 among 23 stocks within the Software - Security industry.

To see the other ratings of QLYS for Sentiment, Growth, Value, Momentum, and Stability, click here.

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AKAM shares were unchanged in premarket trading Friday. Year-to-date, AKAM has gained 4.81%, versus a 3.06% rise in the benchmark S&P 500 index during the same period.

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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