Popular cloud-based software company Salesforce.com, Inc. (CRM) has seen high demand for its solutions during the COVID-19 pandemic, due to widespread and ongoing digital transformation of businesses. however, business acquisition by Slack Technologies, Inc. (JOB), which was announced on December 1, 2020, recently caused some issues with the title. This is due to the fact WeissLaw LLP is currently investigating an alleged breach of fiduciary duty and other breaches by WORK’s board of directors in connection with the acquisition. Additionally, CRM is relatively overvalued relative to its industry peers, as evidenced by its non-GAAP forward P / E multiple of 64.50, which is 137.7% above the industry average of 27.13. . Thus, we believe that the current surveys coupled with its overvaluation make it better to avoid CRM now.
However, the software industry is poised to grow dramatically in the near term, supported by the increasing adoption of hybrid work structures and the ongoing digital transformation. The global enterprise software market is expected to grow at 4.1% CAGR to reach $ 46.72 billion by 2025.
Against this backdrop, we believe it is wise to invest in fundamentally sound software stocks from Oracle Corporation (ORCL), SAP SE (SAP) and Workday, Inc. (DAY). They have the potential to outperform CRM in the short term.
Click here to view our Software Industry Report for 2021
Oracle Corporation (ORCL)
ORCL provides products and services that address all aspects of corporate IT environments including applications, platform and infrastructure around the world. The company operates through four segments: cloud services and licensing support; cloud license and on-premises license; Equipment; And services. ORCL markets and sells its solutions directly to companies in various industries, government agencies and educational institutions, as well as through indirect channels.
In an announcement dated June 30, Medallia, Inc., a customer and employee experience management company, selected ORCL’s Oracle Cloud Infrastructure (OCI) to power its Medallia Experience Cloud SaaS platform as part of its multi-cloud strategy. OCI will address Medallia’s challenges of increasing data center costs, additional data residency requirements for international expansion, and the need for standard platforms for the deployment of new services. ORCL and Medallia will jointly market solutions that will accelerate Medallia’s global expansion and provide manageability and security at scale.
Also in June, ORCL obtained FedRAMP High Provisional Authority to Operate (P-ATO) and Impact Level 5 (IL5) accreditation for IaaS and PaaS, to improve the efficiency of cloud services for government customers. ORCL’s Oracle digital assistant and Oracle Cloud VMware solution will provide FedRAMP with high security, predictable costs and a single source of technical support, as well as clear authority over systems control.
ORCL’s total non-GAAP revenue for its first fiscal quarter, ended May 31, 2021, increased 7.5% year-on-year to $ 11.23 billion. The company’s non-GAAP operating income was $ 5.45 billion, up 6% from the prior year period. While its non-GAAP net income increased 19.7% year-on-year to $ 4.52 billion, its non-GAAP EPS increased 28.3% year-on-year to $ 1.54.
A consensus EPS estimate of $ 0.97 for the current quarter, ending August 31, 2021, represents a 4% year-over-year improvement. ORCL has exceeded consensus EPS estimates in each of the past four quarters. The consensus estimate of revenue of $ 9.77 billion for the current quarter represents a gain of 4.3% over the period of the previous year. Analysts expect the stock’s EPS to rise at a rate of 10.6% per year over the next five years. The stock has gained 26.5% over the past six months and closed Friday’s trading session at $ 81.82.
ORCL POWR odds reflect this promising outlook. The stock has an overall rating of B, which is equivalent to Buy in our proprietary rating system. POWR scores are calculated by considering 118 different factors, each factor being weighted to an optimal degree.
The stock has a B rating for value and quality. Click here to see the additional notes for ORCL (Growth, Stability, Sentiment and Momentum). ORCL is ranked n ° 10 out of 131 shares in the Software application industry.
SAP SE (SAP)
Based in Germany, SAP operates as an enterprise application software company worldwide. The company offers e-commerce and business management software, advises on the organizational use of its application software, and provides training services.
On June 29, SAP launched three new services for exploration, process optimization and innovation, as well as reconfiguration and extension development to help customers access the full potential of the cloud using of SAP Business Technology Platform (SAP BTP). These services provide greater scalability to meet growing business needs and enable customers to implement a hybrid cloud environment, enabling them to respond quickly to changing market conditions. SAP expects market reach to expand in the near term.
At its global SAPPHIRE NOW conference on June 2, SAP unveiled the first step towards building the world’s largest business network with SAP Business Network, which will help companies modernize and digitize their business processes to improve business results. Bringing together Ariba Network, SAP Logistics Business Network and SAP Asset Intelligence Network, this network enables customers to benefit from a new portfolio of business applications specific to sustainable development that provide exceptional transparency and measurement capability throughout the chain. supply. SAP should secure extended access to various organizations.
For its first fiscal quarter, ended March 31, 2021, SAP revenue from its cloud revenue segment increased 6.7% year-on-year to € 2.15 billion (2 , $ 54 billion). The company’s non-IFRS operating profit was € 1.74 billion ($ 2.06 billion), up 17.5% from the same period a year earlier . Its non-IFRS net profit was reported at 1.72 billion euros ($ 2.04 billion), representing a 69.7% year-over-year improvement. SAP’s non-IFRS EPS increased 64.7% year-on-year to € 1.40.
SAP has beaten Street’s EPS estimates in each of the past four quarters. Revenue is estimated at $ 7.97 billion for the current quarter, an increase of 2.8% year-over-year. ANTM’s EPS is expected to grow at a rate of 8.1% per year over the next five years. The stock has gained 12.7% in the past six months and closed Friday’s trading session at $ 141.72.
It’s no surprise that SAP has an overall A rating, which equates to a strong buy in our POWR rating system.
The stock has an A rating for sentiment and a B rating for stability, value and quality. Click here to see the additional notes for SAP (Growth and Momentum). SAP is ranked # 3 in the Software application industry.
Workday, Inc. (DAY)
WDAY develops enterprise cloud applications that help customers manage critical business functions and optimize their financial and human resources. The company provides solutions for managing human capital, expense and finance, as well as payroll, initiatives and higher education for the finance, healthcare, manufacturing, education industries. and technology around the world.
Last month, WDAY announced plans to provide Workday Payroll for Australia and Germany. This move will leverage the company’s cloud-based payroll database to deliver a solution for managing human capital (HCM), time, absence and payroll in a single system. This enables businesses to make their payroll processes more efficient and accurate, and to better support their compliance with regulatory laws and standard business practices in these markets.
On March 9, WDAY completed the acquisition of Peakon ApS, an employee success platform that turns feedback into actionable insight. This acquisition gives organizations access to real-time visibility into employee experience, feelings and productivity, to drive engagement and improve organizational performance. These two developments are likely to generate growing demand from companies in these markets in the short term.
WDAY’s revenue for its fiscal first quarter, ended April 30, 2021, increased 15.4% year-over-year to $ 1.18 billion. The Company’s non-GAAP operating income was $ 288.51 million, up 121.1% from the prior year period. WDAY’s non-GAAP net income was reported at $ 226.36 million for the quarter, representing an increase of 108.1% from the prior year period. Its non-GAAP EPS increased 97.7% year-over-year to $ 0.87.
WDAY has beaten Street’s EPS estimates in three of the past four quarters. For the current quarter ending July 31, 2021, analysts expect WDAY’s revenue to rise to $ 1.24 billion, an increase of 16.8% from the period of the previous year. The stock’s EPS is expected to grow at a rate of 16.3% per year over the next five years. WDAY gained 5.1% over the past nine months to close Friday’s trading session at $ 238.30.
WDAY’s strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, which is equivalent to Buy in our proprietary rating system.
WDAY has an A rating for growth and a B rating for sentiment. We also rated WDAY for value, stability, quality and dynamics. Click here to access all of WDAY’s notes. WDAY is ranked # 26 in the same industry.
Click here to view our Software Industry Report for 2021
ORCL shares remained unchanged on Tuesday after trading hours. Year-to-date, ORCL has gained 29.48%, compared to a 16.55% increase in the benchmark S&P 500 over the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a particular interest in finding market inefficiencies. She is passionate about educating investors so that they can be successful on the stock market. After…