3 Game-Changing Software Stocks to Buy

As the demand for software-driven solutions and the rapid adoption of cloud and AI tools continue to gain momentum, the global software market is expected to be on the rise. So, it might be wise to buy fundamentally strong software stocks Blackbaud (BLKB), Pegasystems (PEGA), and GoDaddy (GDDY), which appear poised to capitalize on the industry’s transformative trends. Read on...

The software sector is booming, fueled by the growing appetite for digital solutions and the seamless integration of innovative technologies.

Therefore, I present game-changing software stocks Blackbaud, Inc. (BLKB), Pegasystems Inc. (PEGA), and GoDaddy Inc. (GDDY). These companies are well-poised to ride the tide of technological transformation and capitalize on the soaring demand for software-driven solutions.

The proliferation of enterprise data and the relentless march of automation across sectors like retail, manufacturing, healthcare, and transportation has sparked an insatiable appetite for cutting-edge software and services. This trend is also driven by the need for better decision-making, cost reduction, improved profitability, and market positioning.

The global business software and services market was valued at $474.61 billion last year and is expected to expand at a CAGR of 11.9% from 2023 to 2030.

Moreover, the integration of innovative technologies such as blockchain, AI, and machine learning is a significant catalyst for market growth. Growing investment in AI technology by enterprises of all sizes across industries is also expected to garner momentum in the years to come.

The AI market is expected to reach an astounding $1.38 trillion by 2029, growing a CAGR of 20.1%.

Additionally, rapid digitization is compelling organizations to revamp their application and infrastructure setups in pursuit of cost efficiency and enhanced business agility.

As a result, the cloud computing industry is experiencing vigorous expansion, propelled by its increasing adoption among small and medium-sized enterprises, alongside government investments in developing nations aimed at elevating operational efficiency and productivity.

Consequently, the global cloud computing market is expected to grow at a CAGR of 14.1% from 2023 to 2030.

Considering these dynamic industry trends, let's take a look at the fundamentals of the three best Software – Business stocks, starting with number 3.

Stock #3: Blackbaud, Inc. (BLKB)

BLKB operates as a cloud software solutions provider to non-profits, foundations, companies, education and healthcare institutions, and other social good entities internationally.

On July 26, 2023, BLKB announced its refreshed Blackbaud Partner Network, which is expected to deliver shared value for partners, customers, and the company. The revamped program simplifies partner onboarding and offers new resources to grow the network.

On June 5, BLKB announced the launch of a major new wave of its Intelligence for Good strategy, with an extensive agenda of initiatives and investments to be implemented on a rolling basis over upcoming quarters, targeted at making artificial intelligence (AI) more accessible, powerful and responsible across the social impact sector.

BLKB’s total revenue increased 2.3% year-over-year to $271.04 million in its fiscal second quarter that ended June 30, 2023. Its non-GAAP gross profit rose 7.1% from the prior-year quarter to $166.90 million. The company’s non-GAAP net income and EPS grew 35.2% and 30.7% year-over-year to $52.60 million and $0.98.

Analysts expect BLKB’s EPS and revenue to rise 40.1% and 5.6% year-over-year to $0.97 and $275.89 million in the fiscal third quarter ending September 2023. In addition, BLKB topped consensus EPS estimates in each of the trailing four quarters, which is impressive.

The stock has soared 45.7% over the past year to close the last trading session at $73.

BLKB’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

BLKB has a B grade for Growth, Stability, and Sentiment. It is ranked #12 in the 46-stock Software – Business industry.

In addition to the POWR Rating grades we’ve stated above, one can see BLKB ratings for Value, Momentum, and Quality here.

Stock #2: Pegasystems Inc. (PEGA)

PEGA develops, markets, licenses, hosts, and supports enterprise software applications. The company provides Pega Platform, an intelligent automation software for clients’ processes and workflows, and Pega Infinity, a software platform that unifies customer engagement and digital process automation.

On July 17, PEGA paid a quarterly cash dividend of $0.03 per share, maintaining the company's current dividend program. The company’s annual dividend of $0.12 translates to a 0.25% yield on the prevailing prices, while its four-year average dividend yield is 0.17%.

On June 12, PEGA unveiled its latest Pega Infinity™ software, packed with new features for faster low-code development, continuous process optimization, and seamless experiences for employees and customers.

These enhancements aim to help businesses achieve operational autonomy, boosting innovation, efficiency, and customer personalization while cutting costs and manual work.

In the second quarter, which ended on June 30, 2023, PEGA’s total revenue increased 8.7% year-over-year to $298.27 million. The company’s non-GAAP net income and non-GAAP EPS came in at $1.20 million and $0.01, compared to a non-GAAP net loss and non-GAAP loss per share of $31.41 million and $0.38 in the same quarter last year, respectively.

Street expects PEGA’s revenue for the third quarter (ending September 2023) to increase 9.6% year-over-year to $296.67 million.

The stock gained 34.2% year-to-date to close the last trading session at $45.96.

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

It also has a B grade for Growth and Value. Within the same industry, it is ranked #11.

Click here to see PEGA’s additional Momentum, Stability, Sentiment, and Quality ratings.

Stock #1: 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 August 15, GDDY introduced Instant Video, an AI-powered feature in its GoDaddy Studio app, to assist small business owners in creating video-based digital marketing and social commerce content effortlessly.

This tool, at no extra cost, complements the existing resources in GoDaddy Studio, offering thousands of templates for creating professional content across websites, social media, and email marketing.

GDDY’s total revenue increased 3.2% year-over-year to $1.05 billion in the second quarter that ended June 30, 2023. net income attributable to GDDY amounted to $83.10 million and $0.54 per share, respectively.

Also, its non-GAAP unlevered free cash flow increased 3.4% from the year-ago quarter to $283.60 million, and its non-GAAP normalized EBITDA grew 2.4% year-over-year to $264.60 million.

The consensus EPS estimate of $0.71 for the third quarter (ending September 30, 2023) represents a 13.3% improvement year-over-year. The consensus revenue estimate of $1.06 billion for the ongoing quarter represents a 3.1% increase from the same quarter last year.

The stock has gained 4.1% over the past month to close the previous trading session at $73.70.

It’s no surprise that GDDY has an overall rating of B, which equates to Buy in our proprietary rating system.

The stock also has a B grade for Quality. Within the same industry, it is ranked #10.

Beyond the POWR Ratings stated above, we also have GDDY’s ratings for Value, Growth, Momentum, Stability, and Sentiment. Get all GDDY ratings here.

What To Do Next?

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GDDY shares were trading at $76.51 per share on Tuesday morning, up $2.81 (+3.81%). Year-to-date, GDDY has gained 2.26%, versus a 17.88% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.


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