Back to top

Image: Bigstock

While Hardware Has Been Getting the Attention, These Software Stocks are on the Rise

Read MoreHide Full Article

In the high-tech space, hardware manufacturers have enjoyed the lion’s share of the news and commentary recently.  Semiconductor stocks in particular have had a wild ride in 2018, with the Philadelphia Semiconductor Index rising 19% between February 8th and March 12th, only to retrace the rally as it sank 14% by April 25th.

Concerns about a global demand slowdown, reduced cryptocurrency mining and tightening margins due to commoditization - especially in DRAM and flash memory - spooked investors.    A number of positive earnings reports alleviated the fears and semiconductor stocks have staged a partial comeback, led by Micron Technologies (MU - Free Report) , which is up 28% in the past month.

With action like that, it’s no wonder hardware has dominated the financial news cycle.

Quietly, several major producers of software have posted strong earnings and guidance and had estimates revised upward.  Investors are taking notice as shares of these three strong performers are starting to rise.

Citrix Systems provides business virtualization solutions to business through three major product lines, XenApp, NetScaler and Citrix Workspace.  Partners with Microsoft (MSFT), Alphabet (GOOG - Free Report) and twelve other large technology companies, Citrix allows users to transform the traditional workspace by providing secure access to applications, desktops and data on any device.

In Q1, Citrix delivered earnings of $1.29/share, beating the Zacks Consensus Estimate of $1.05/share, its fourth consecutive earning surprise in a row.  The company also raised full year earnings guidance  to a range of $5.20 – $5.30/share.  12 analyst upward revisions followed and the 2018 consensus estimate now stands at $5.27/share.  Citrix is a Zacks Rank #1 (Strong Buy).

Cadence Design Systems Inc (CDNS - Free Report) provides design technologies to the producers of high tech equipment, including the semiconductor industry.  

While announcing strong Q1 results in which Cadence beat the Zacks Consensus Earnings Estimate of $0.38/share by $0.02, CFO John Wall stated “We are pleased with results of all of our key operating metrics including revenue, operating margin, EPS and operating cash flow.  On the strength of our first quarter business and continuing momentum, we are raising our outlook for the year.”

The company now expects 2018 Revenue in the range of $2.05B - $2.1B and Earnings of $1.57 - $1.65/share.  The shares, which formerly closely tracked the Consumer Software Services market as a whole, are beginning to break out, up 5.6% this year versus an industry average of -3.1%.  Cadence is a Zacks Rank #1 (Strong Buy).

Famously founded in the San Francisco apartment of ex-Oracle executive Marc Benioff in 1999, (CRM - Free Report) is now the worlds leading provider of “Software as a Service”, allowing businesses of all sizes to build their own applications either on their own architecture or in Salesforce’s cloud environment.

Salesforce provides its CRM (customer resource management) software services to over 100,000 customers worldwide.  

Salesforce shares are up 24% in 2018.

After modest earnings beats in the past 14 quarters, Salesforce is expected to report revenues of $2.94B and earnings of $0.46/share when it releases fiscal Q4 results on May 29th.  The Zacks Consensus Estimate for full year earnings has risen almost 25% over the past 90 days to $2.13/share, earning Salesforce a Zacks rank #1 (Strong Buy).  

The Hottest Tech Mega-Trend of All Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early. See Zacks' 3 Best Stocks to Play This Trend >>