The software industry is benefiting from a strong digital transformation environment. Growth in the enterprise software market continues to be incentivized by a shift in the enterprise IT spending from traditional offerings to cloud-based alternatives.
The growing proliferation of cloud computing, predictive analysis, AI, digital personal assistants and IoT set the stage for a solid uptick in the software industry.
Per Gartner, in 2019, enterprise software market is forecast to reach $427 billion, up 7.1% from 2018, attributable to application software.
Significantly, consistent enterprise investment in Big Data and analytics along with the ongoing adoption of Software-as-a-Service (SaaS) evokes a significant growth opportunity. Notably, SaaS offers a flexible and cost-effective delivery method of applications and also cuts down on the deployment time as compared to legacy systems.
Further, an intensifying focus on providing better customer experiences is boosting growth for the customer relationship management (CRM) software.
Notably, Invesco Dynamic Software ETF (PSJ) has surged 31.2% in the year-to-date period. Additionally, SPDR S&P Software & Services ETF (XSW) and iShares North American Tech-Software ETF (IGV) have returned 30.2% and 17%, respectively.
Cloud Software Market Enters $100-Billion League
Per a recent Synergy Research Group report, the enterprise SaaS revenues achieved a $100-billion annual rate in the second quarter from $23 billion during the first quarter of 2019 with growth trend maintained at almost 30% per year.
Microsoft led the market with 17% share. The company, driven by its strong product suite comprising Office 365, the Dynamics line and LinkedIn, delivered a growth rate of 34% over the last four quarters.
salesforce bagged the second spot with 12% share, benefiting from a solid stimulus in Service Cloud, which is one of its largest and the fastest-growing businesses.
Adobe on the back of its Creative Cloud and Document Cloud gained the third spot grabbing 10% of the market. The fourth and the fifth spots were held by SAP and Oracle ORCL, respectively. Notably, SAP attained the highest growth rate of 39% among the three.
However, the enterprise SaaS market is a small area in comparison to on-premise software, per Synergy. The firm finds SaaS revenues to account for just 20% of the overall enterprise software market and therefore, expects growth to remain “buoyant” in the coming years.
5 Bets With Best Bull Run
Here we have highlighted five software stocks that have outperformed the S&P 500 on a year-to-date basis. Further, they have a 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.
Year-to-Date Price Performance
Los Angeles-based j2 Global JCOM has a Zacks Rank of 1 and a VGM Score of B. Shares have risen 28.1% year to date.
The company pulled off average positive surprise of 4.41% for the preceding four quarters. The Zacks Consensus Estimate for 2019 earnings has been flat at $7.05 in the last 30 days.
Headquartered in Austin, TX, Digital Turbine APPS has a Zacks Rank #2 and a VGM Score of A. We note that in the year-to-date period, the stock has skyrocketed nearly 173.3%.
The company delivered average four-quarter positive surprise of 87.5%. The Zacks Consensus Estimate for fiscal 2020 earnings of 13 cents has been revised a penny upward in the past 30 days.
Redwood City, CA-based Oracle currently has a Zacks Rank of 2 and a VGM Score of B. Shares have rallied 25.9% on a year-to-date basis.
The company came up with average beat of 4.74% in the trailing four quarters. The Zacks Consensus Estimate for fiscal 2020 has moved 3% north to $3.91 over the past 30 days.
Irvine, CA-based Alteryx AYX currently is a Zacks #2 Ranked player and has a VGM Score of B. Shares have soared 83.8% on a year-to-date basis.
The company delivered average positive surprise of 119.55% in the last four quarters. The consensus estimate for 2019 stayed at 43 cents over the past 30 days.
Mountain View, CA-based Intuit INTU is a #2 Ranked player and has a VGM Score of B. Shares have jumped 32.7% year to date.
Intuit came up with average positive surprise of 55.51% over the previous four quarters. Moreover, the consensus mark for fiscal 2019 has been stable at $6.70 in 30 days’ time.
This Could Be the Fastest Way to Grow Wealth in 2019
Research indicates one sector is poised to deliver a crop of the best-performing stocks you'll find anywhere in the market. Breaking news in this space frequently creates quick double- and triple-digit profit opportunities.
These companies are changing the world – and owning their stocks could transform your portfolio in 2019 and beyond. Recent trades from this sector have generated +98%, +119% and +164% gains in as little as 1 month.
Click here to see these breakthrough stocks now >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
j2 Global, Inc. (JCOM) : Free Stock Analysis Report
Digital Turbine, Inc. (APPS) : Free Stock Analysis Report
Intuit Inc. (INTU) : Free Stock Analysis Report
Oracle Corporation (ORCL) : Free Stock Analysis Report
Alteryx, Inc. (AYX) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research