Software stocks have set themselves apart from the broader tech industry this year. Since the COVID-19 pandemic, many companies have ramped up their corporate spending on cloud computing and digital transformation in order to stay in business. This benefits many software-as-a-service (SaaS), providers. Top software stocks in the stock market have rallied sharply since the onset of the pandemic until recently. There’s no doubt cloud computing has become more sophisticated by the year. However, with the recent correction in many software stocks this month after big run-ups, would this provide a nice setup for potential investors in this industry?
When looking for best software stocks, Amazon (AMZN Stock Report) and Microsoft (MSFT Stock Report) remain the perennial favorites among investors. Microsoft Azure is a close contender to AWS as the former reported faster growth. Also, there’s a great chance that the cloud market will see their growth continue to climb in the foreseeable future. This is because we are witnessing the increasing importance of cloud computing technology. Now, applications are written for the cloud, live entirely in the cloud, and even serve the cloud. With this in mind, do you have a list of top software stocks to buy whenever there’s blood on the street?
- Beyond Meat vs Laird Superfood: Which Consumer Staples Stock Is A Better Buy?
- GoodRx IPO: What Investors Need To Know
First on the list is Salesforce.com (CRM Stock Report), one of the pioneers of SaaS. The cloud services provider reported over $5 billion in its latest quarterly revenue for the first time ever. Its billing growth accelerated. Also, their adjusted operating margin hit an all-time high. If that is not enough for investors, the company also raised guidance for the year.
Shares of Salesforce hit all-time highs following its second-quarter earnings report. But the company’s stock price has been severely under pressure following the broader tech sell-off. If you believe the recent correction presents a buying opportunity, CRM stock is a no brainer. After all, the tech stalwart has been rewarding for many shareholders. If on the other hand, you think the tech sell-off has yet to run its course, CRM stock would still be worth keeping an eye on.
As Salesforce’s services automate business processes, they reduce a company’s reliance on human employees. Going forward, this is a secular trend that seems unstoppable. Demand for these services will continue to climb as companies cut expenses. And Salesforce is at the top of the customer relationship management market. That makes it a top software stock to watch for long-term investors.Top Software Stocks To Buy [Or Sell]: Adobe
Adobe Inc. (ADBE Stock Report) is seeing renewed investors’ interest this year despite the global pandemic. It’s among the companies benefiting from increased demand for digital products and services created by the pandemic. One of the better performing products from the company this year would be the Adobe Sign e-signature products. The company saw its enterprise bookings grew by 200% year over year in its third fiscal quarter ended August 28.
Like Microsoft, Adobe owes its recent success by transforming its business model from selling software licenses to a SaaS subscription model. Instead of one-off sales, Adobe now collects recurring revenue. Despite having reported record-setting third-quarter earnings this year, ADBE stock has been under pressure.
That could simply be due to investors being concerned that Adobe could no longer sustain the growth post-pandemic, leading to considerable levels of profit-taking. But the truth is, Adobe was already a success even before the pandemic. The company’s revenue has been growing for years, with double-digit percentages growth year-over-year for the past two years.Top Software Stocks To Buy [Or Sell]: Unity Software
Shares of Unity Software (U Stock Report) have been on a consistent uptrend since its public debut last Friday. Just this week, the company’s stock price jumped by 20% to close at $81.85 per share on Wednesday. That’s after the stock rose more than 31% on its first official day of trading. Unlike most companies that require employees to hold onto the stock for a lockup period, employees of Unity are immediately allowed to sell 15% of the total vested shares they have been granted in their company.
Last year, it is reported that more than half of the top 1000 games in Apple’s App Store and Google’s Play Store were built using Unity’s software platform. Amongst the blockbuster games which rely on the company’s software are “Pokémon GO” and “Iron Man VR”, just to name a few.
The company’s customers range from small gaming publishers to large gaming giants like Electronic Arts (EA Stock Report) and Tencent (TCEHY Stock Report). The question is, do you believe the gaming industry will continue to increase shareholders’ value? If yes, then you might want to include Unity stock on your list of top software stocks to buy.