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Software Continues to Drive Digital Transformation: 5 Picks

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Software has been an integral part of digitization. Even before the cloud, software would be sold on compact discs that had to be downloaded into the hard drive. With technological advancements, software is available on the Web, located on external servers and users can download and install them to their laptops, personal computers, smartphones, whenever required, sometimes on a subscription basis or one-time payment. Software helped drive the digital transformation smoothly in the past years but the abrupt need to embrace technology since the COVID-19 outbreak has impacted businesses deeply. This makes digital transformation a change likely to last even post-pandemic.

Software Framework Bridging Gaps

As said previously, software is integral to digital transformation and at this point, it runs every device that we use and the pandemic-led shift to digital mode has boosted this industry. However, this year hasn’t been as great for software stocks so far but they remain a solid bet for the long term. Software as a service (SaaS) models now put software on the cloud and help users access and upgrade it via the Internet, a time-saving and hassle-free option. This availability on the cloud not only reduces cost for customers but also provides a steady stream of subscription revenues for companies.

Software has helped companies communicate across a multitude of channels. Companies offered frameworks that developers could use to embed communications tools across the software and applications, enabling consumers to reach out to businesses. Some offered a range of electronic document technologies that helped in the transaction of important documents with security.

While several softwares facilitated in working from remote locations, many have helped combat the coronavirus pandemic, tracking and predicting its spread, and also protect medical facilities from cyberattacks. In South Korea, the administration was using contact tracing software in combating the outbreak, with the help of mobile technologies such as GPS, cellphone masts and artificial intelligence (AI)-powered big data analytics. An AI firm released free COVID-19 analysis software for early diagnosis and assessment of virus symptoms. This software can detect, segment and produce 3D models of lung damage caused by the virus based on analysis of CT images.

Enterprise Software Growth to Stay

Firstly, what is enterprise software? Enterprise software a.k.a. enterprise application software (EAS) is a bucket of applications and technologies that companies use in order to support operations. For instance, a human resource enterprise software has numerous HR features, enabling professionals to access one or more solutions and generate information simultaneously.

In short, enterprise software helps organizations shift their focus to providing a more innovative and productive environment for their workforce. Even with the pandemic rush, a Gartner report states that enterprise software spending came in at 466.6 billion (2.1% decline). However, the organization forecasts spending to rise 10.8% (to 516.8 billion) and this growth will be driven majorly by businesses completing their digital business plans that are aimed at enhancing, extending and transforming the company’s value proposition.

In fact, software firms are poised to benefit in the post-pandemic world, thanks to heightened demand among small and medium-sized businesses spending, rebound in demand from businesses impacted due to the pandemic and on-premise IT spending.

5 Top Choices

Despite chip and labor shortages, soaring commodities prices and inflation fears, the software sector has a lot to offer in the current environment. In fact, efforts to automate business workflows and digitize customer-facing functions will boost spending and push the industry higher. We have thus shortlisted five software stocks that hold a Zacks Rank #2 (Buy) and are poised to return well. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Adobe Inc. ADBE operates as a diversified software company. The company’s expected earnings growth rate for the current year is 17.6% compared with the Zacks Computer - Software industry’s projected earnings growth of 3.9%. The Zacks Consensus Estimate for this company’s current-year earnings has been revised 5.5% upward over the past 60 days.

PTC Inc. PTC operates as software and services company and offers ThingWorx, an Industrial Internet of Things (IIoT) platform, which enables customers to address digital transformation. This company that belongs to the Zacks Computer - Software industry has an expected earnings growth rate of 27.6% for the current year. The Zacks Consensus Estimate for this company’s current-year earnings has been revised 2.8% upward over the past 60 days.

SAP SE SAP operates as an enterprise application software company. This company that belongs to the Zacks Computer - Software industry has an expected earnings growth rate of 11.6% for the current quarter. The Zacks Consensus Estimate for this company’s current-year earnings has been revised 6.8% upward over the past 60 days.

Progress Software Corporation PRGS develops business applications, enabling systems with decision automation and change process. This company that belongs to the Zacks Computer - Software industry has an expected earnings growth rate of 10.4% for the current year. The Zacks Consensus Estimate for this company’s current-year earnings has been revised 5.2% upward over the past 60 days.

Cadence Design Systems, Inc. CDNS provides software, hardware, services, and reusable integrated circuit (IC) design blocks. This company that belongs to the Zacks Computer - Software industry has an expected earnings growth rate of 8.6% for the current year. The Zacks Consensus Estimate for this company’s current-year earnings has been revised 0.7% upward over the past 60 days.

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Adobe Inc. (ADBE) : Free Stock Analysis Report
 
SAP SE (SAP) : Free Stock Analysis Report
 
Cadence Design Systems, Inc. (CDNS) : Free Stock Analysis Report
 
Progress Software Corporation (PRGS) : Free Stock Analysis Report
 
PTC Inc. (PTC) : Free Stock Analysis Report
 
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