2024 Software Outlook: Buying Potential for 3 Stocks

The software industry, witnessing significant expansion, is driven by technological advancements, digital transformations across diverse sectors, and the mounting focus on data-oriented solutions. Given this backdrop, quality software stocks Semrush Holdings (SEMR), Dynatrace (DT), and Progress Software (PRGS) could be solid buys now. Read on….

Investments in digitalization are significantly increasing the demand for software applications. Furthermore, the incorporation of generative artificial intelligence within these applications is predicted to fuel the sector’s expansion further.

Therefore, it could be wise to buy software application stocks Semrush Holdings, Inc. (SEMR), Dynatrace, Inc. (DT), and Progress Software Corporation (PRGS), which possess solid upside potential.

The exponential impact of the software industry on global entities, whether individuals or institutions, is a testament to its influential dynamism. Predictions suggest that the industry’s contributions could significantly propel the U.S. economy. The global enterprise software market is poised to expand at a CAGR of 11.5%, reaching $517.26 billion by 2030.

A shift toward the improvement of essential applications is gaining momentum across organizations, potentially leading to a substantial increase in software expenses. According to Gartner, Inc. (IT), global IT spending is anticipated to reach $5.10 trillion in 2024, suggesting an 8% year-over-year rise.

The ushering in of avant-garde technologies like generative AI is posited to be a fundamental component in bolstering software application demand. Software application firms operating on subscription-based models are set to reap significant benefits due to the incorporation of generative AI into their suites. Goldman Sachs forecasts the total accessible market for generative AI software at an impressive $150 billion.

The market for application development software is expected to generate $167 billion in revenue in 2023. By 2028, this growth is anticipated to result in a market volume of $234.70 billion, expanding at a 7% CAGR.

In light of these encouraging trends, let’s look at the fundamentals of the three Software – Application stocks, beginning with number 3.

Stock #3: Semrush Holdings, Inc. (SEMR)

SEMR develops an online visibility management software-as-a-service platform in the U.S., the U.K., and internationally. The company enables companies to identify and reach the right audience for their content through the right channels. It serves small and midsize businesses, enterprises, and marketing agencies, encompassing consumer internet, education, financial services, healthcare, retail, software, and others.

On December 12, SEMR and UserWay, a full-service provider of digital accessibility technologies, announced their collaboration. UserWay’s web accessibility compliance technology is now available on the SEMR’s App Center, including the UserWay Accessibility Scanner and the UserWay Accessibility Widget.

The collaboration reflects a shared dedication to making the digital world more inclusive and accessible. Through this collaboration, UserWay’s AI-powered web accessibility technologies will enable SEMR’s users to create sites that are optimized for search engines and ADA compliance, facilitating a more accessible digital experience for people with disabilities.

SEMR’s trailing-12-month gross profit margin of 82.73% is 69.3% higher than the 48.88% industry average. Its asset turnover ratio of 0.98x is 59.2% higher than the industry average of 0.62x.

SEMR’s total revenues for the fiscal third quarter that ended September 30, 2023, increased 19.6% year-over-year to $78.72 million. Its non-GAAP income from operations stood at $6.95 million, compared to a non-GAAP loss from operations of $8.27 million in the year-ago quarter.

The company’s non-GAAP net income came at $8.42 million, compared to a non-GAAP net loss of $7.11 million in the year-ago quarter. In addition, its net income per share attributable to common stockholders amounted to $0.03, compared to a net loss per share attributable to common stockholders of $0.06 in the prior-year quarter.

Street expects SEMR’s revenue for the fiscal fourth quarter ending December 2023 to increase 20.9% year-over-year to $83.14 million. Its EPS for the same quarter is expected to be $0.03. It surpassed the consensus revenue and EPS estimates in three of the trailing four quarters, which is impressive.

Over the past year, the stock has gained 67.4% to close the last trading session at $13.39. It gained 59.8% over the past three months.

SEMR’s robust outlook is reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

SEMR has a B grade for Growth and Sentiment. Within the 131-stock Software – Application industry, it…