The software industry has witnessed astounding growth and is expected to maintain its acceleration curve in 2020 and beyond.
Continued strong digital transformation environment is a major driver for the industry. Growing adoption of software among numerous industries including retail, manufacturing, banking, financial services and insurance, enterprises, academia, government organisations, healthcare, and telecommunication is a key catalyst.
The growing proliferation of cloud computing, predictive analysis, AI, self-driving vehicles, digital personal assistants and IoT coupled with strong enterprise spending set the stage for a solid uptrend in the software industry.
Moreover, a steady enterprise investment in Big Data and analytics along with the ongoing uptake of Software-as-a-Service (SaaS) evokes a significant growth opportunity.
Research firm Gartner predicts public cloud revenues to grow 17% in 2020, primarily driven by SaaS, which is likely to dominate as the largest market segment owing to the scalability of subscription-based software.
The growth prospects are also bright in the wake of an increased spending by enterprises on software procurement. Per Gartner, after a sluggish 2019, global IT expense is projected to rebound in 2020 with forecast growth of 3.7%, attributable to enterprise software spending, which is likely to hit a record high growth rate of 10.9%.
Furthermore, an intensifying focus on providing a better customer experience is boosting growth of customer relationship management (CRM) software. Additionally, the rising need for securing cloud platforms amid rampant incidents of cyber-attacks and hacking, drives demand for cyber security software.
Notably, Invesco Dynamic Software ETF (PSJ) has surged 34.3% in the past year. Additionally, SPDR S&P Software & Services ETF (XSW) and iShares North American Tech-Software ETF (IGV) have returned 34.6% and 34.8%, respectively.
4 Top-Performing Picks
Here we zeroed in on four software stocks with favorable combination of a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A or B.
Our research shows that stocks with an impressive VGM Score of A or B when combined with a top Zacks Rank offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.
Tinton Falls, NJ-based Commvault Systems (CVLT - Free Report) is a provider of Unified Data Management solutions for data protection, universal availability and simplified management of data in complex storage networks. The stock has a Zacks Rank of 1 and a VGM Score of B. The company delivered average four-quarter positive earnings surprise of 14.9%. The Zacks Consensus Estimate for fiscal 2020 earnings of $1.56 has been steady over the past 30 days.
Headquartered in Portland, ME, Covetrus (CVET - Free Report) is a provider of animal-health technology and services. The stock has a Zacks Rank #2 and a VGM Score of A. The company pulled off average four-quarter beat of 14.2%. The Zacks Consensus Estimate for fiscal 2020 earnings of 69 cents has been constant in the past 30 days.
Domiciled in Olathe, KS, NIC (EGOV - Free Report) provides digital government services that enable administrations to apply technology for providing various services to businesses. The stock is Zacks #2 Ranked and has a VGM Score of B. The company delivered average four-quarter positive surprise of 14.4%. The Zacks Consensus Estimate of 87 cents for fiscal 2020 earnings has been stable in the past 30 days.
Based in Holon, Israel, Sapiens International (SPNS - Free Report) is a provider of proven IT solutions that modernize business processes and enable insurance organizations plus other leading companies to adapt quickly to change. The stock is a #2 Ranked player and has a VGM Score of B. The company came up with average four-quarter beat of 12.5%. The Zacks Consensus Estimate of 89 cents for fiscal 2020 earnings has been intact in the past 30 days.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020?
These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Start Your Access to the New Zacks Top 10 Stocks >>