3 Software Stocks Set for November Gains

Surging enterprise data volumes amid digitization across industries fuel robust demand for the software industry. Hence, fundamentally strong software stocks Informatica (INFA), EverCommerce (EVCM), and Yext (YEXT), which look poised to soar, might be solid buys this month. Read more...

Over the years, the software industry has emerged as a cornerstone of the digital revolution. Moreover, the industry enjoys steady demand amid the widespread adoption of cloud solutions. So, investors could consider buying solid software stocks Informatica Inc. (INFA), EverCommerce Inc. (EVCM), and Yext, Inc. (YEXT), which are poised for gains this month.

The software industry is poised for growth, driven by the widespread adoption of IoT, 5G, AI, and VR technologies. This expansion is fueled by increased e-commerce and heightened automation in business operations.

Besides, amid heightened digitalization, rising enterprise data is boosting the industry. The global software market is expected to grow at a CAGR of 11.5% from 2023 to 2030.

Additionally, the growth of the cloud computing market is fueled by small and medium-sized organizations' broad adoption of cloud systems. Also, government investments in developing nations to streamline technological operations and enhance overall productivity are contributing to the expansion,

Consequently, the global cloud computing market is set to grow at a CAGR of 14.1% until 2030.

Furthermore, the Software as a Service (SaaS) model, favored for scalability and remote work capabilities, stands out as one of the fastest-growing software sectors. The global SaaS market’s revenue is anticipated to reach approximately $141.40 billion this year. The market is expected to expand at a CAGR of 5.6% until 2028, reaching $186 billion.

In light of these encouraging trends, let's look at the fundamentals of the three best software stocks.

Informatica Inc. (INFA)

INFA develops an artificial intelligence-powered platform, connecting, managing, and unifying data across multi-cloud, hybrid systems at an enterprise scale. The company also provides maintenance and professional services.

On September 19, 2023, INFA and Oracle Corporation (ORCL) announced that they had advanced their strategic partnership by introducing an Oracle Cloud Infrastructure (OCI) point of delivery to serve a large customer base in North America.

In the third quarter, the company also expanded its partnership with Alphabet Inc. (GOOGL) to launch a new solution combining SaaS Master Data Management on Google Cloud with Google Cloud's customer data platform based on Google BiqQuery.

It also recently launched CLAIRE GPT, a generative AI-powered capability that will deliver the advancements of a natural language-based interface to Informatica’s Intelligent Data Management Cloud (IDMC), which is available in private preview.

INFA’s total revenues for the fiscal third quarter ended September 30, 2023, increased 9.8% year-over-year to $408.56 million. Its software revenues grew 21.8% from the year-ago quarter to $262.03 million.

The company’s non-GAAP net income rose 53.2% from the same quarter last year to $80.62 million, and non-GAAP net income per share increased 50% year-over-year to $0.27.

For the full year ending December 31, 2023, INFA anticipates strong performance. Total revenues are projected to be between $1.57 billion and $1.59 billion, reflecting approximately 5% year-over-year growth at the midpoint. Cloud subscription ARR is poised for substantial expansion, ranging from $604 million to $614 million, representing around 35% year-over-year growth at the midpoint.

Also, adjusted Unlevered Free Cash Flow (after-tax) has been raised from $370 million to $390 million to a new range of $410 million to $430 million, indicating an impressive 46% year-over-year growth at the midpoint.

Analysts expect INFA’s EPS and revenue for the fiscal fourth quarter (ending December 2023) to increase 23.7% and 8.3% year-over-year to $0.30 and $431.89 million, respectively. In addition, the stock has exceeded the consensus EPS and revenue estimates in three of the trailing four quarters, which is remarkable.

The stock surged 52.9% year-to-date to close the last trading session at $24.91. It has gained 69.3% over the past six months.

INFA’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted optimally.

It has an A grade for Growth and a B for Stability, Quality, and Sentiment. It is ranked #2 among 23 stocks in the B-rated Software- SAAS industry.

In addition to the POWR Ratings stated above, one can access INFA’s additional Value and Momentum ratings here.

EverCommerce Inc. (EVCM)

EVCM provides integrated software-as-a-service solutions for service-based small and medium-sized businesses in the United States and internationally.

On November 5, EVCM approved a $50 million increase in the stock repurchase authorization, extending it through December 31, 2024. The total authorization is now $150 million.

In the third quarter, the company repurchased 160,000 shares for $1.60 million, leaving $16 million available under the Repurchase Program as of September 30, 2023.

In the fiscal third quarter that ended September 30, 2023, EVCM reported a 10.5% year-over-year surge in total revenues, reaching $174.74 million. This growth was mirrored in the subscription and transaction fees revenue, which also increased by 10.5% year-over-year, amounting to $132.64 million.

Its adjusted gross profit rose 12.7% year-over-year to $113.27 million. Additionally, its adjusted EBITDA grew 38.6% from the prior-year quarter to $41.80 million.

EVCM forecasts a strong financial performance for the fiscal year 2023, with its revenue projected to be in the range of $676 million to $680 million and an adjusted EBITDA ranging from $148 million to $152 million.

The consensus revenue estimate of $172.44 million for the fiscal fourth quarter ending December 2023 represents a 6.6% increase year-over-year. The consensus EPS estimate of $0.13 for the current quarter reflects a 16.3% rise from the same quarter the previous-year.

The stock has returned 13.9% over the past year and 10.2% year-to-date to close the last trading session at $8.20.

EVCM’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, translating to Buy in our proprietary rating system.

EVCM also has an A grade for Growth and Sentiment and a B for Stability and Value. It is ranked #6 in the B-rated Software – SAAS industry.

Click here for EVCM’s additional Momentum and Quality ratings.

Yext, Inc. (YEXT)

YEXT offers a cloud-based platform enabling businesses to control and update their information across various online platforms, helping them answer consumer questions and manage online reviews. The company primarily serves the healthcare, retail, and financial services industries.

In September, YEXT authorized an additional $50 million for the share repurchase program. As of July 31, 2023, about $11.6 million was still available for future purchases from the initial $100 million program.

During the fiscal 2024 second quarter that ended July 31, 2023, YEXT’s revenue increased 1.7% year-over-year to $102.60 million. Its non-GAAP gross profit grew 7.8% from the year-ago quarter to $80.97 million. Moreover, the company’s non-GAAP income from operations came in at $7.33 million, compared to a loss of $3.44 million in the prior year’s quarter.

Furthermore, YEXT’s non-GAAP net income attributable to common stockholders stood at $8.13 million and $0.06 per share, compared to a loss of $3.91 million and $0.03 per share in the previous year’s quarter.

For the fiscal year ending January 31, 2024, the company forecasts revenue between $405 million and $407 million, adjusted EBITDA in the range of $50 million to $52 million, and non-GAAP net income per share between $0.29 and $0.30.

Street expects YEXT’s EPS and revenue to increase 240% and 2.9% year-over-year to $0.07 and $102.17 million in the fiscal third quarter ended October 2023. Moreover, YEXT has surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.

The stock has gained 27.1% over the past year to close the last trading session at $6.61. It climbed 12.6% over the past month.

YEXT’s robust fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to Buy in our proprietary rating system.

The stock has an A grade for Growth and a B for Value and Quality. Within the B-rated Software - Business industry, it is ranked #8 out of 45 stocks.

To view YEXT’s additional Momentum, Stability, and Sentiment, click here.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >

INFA shares were trading at $25.08 per share on Wednesday morning, up $0.17 (+0.68%). Year-to-date, INFA has gained 53.96%, versus a 19.19% 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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