Enterprises' increasing reliance on software solutions has poised the industry for significant growth. Technological advancements continue to fortify it by driving innovation, optimizing development procedures, and enabling the creation of immersive, interconnected experiences.

Considering these factors, it could be wise to invest in fundamentally robust software stocks Squarespace, Inc. (SQSP), SS&C Technologies Holdings, Inc. (SSNC), and Commvault Systems, Inc. (CVLT), as they exhibit indicators of potential returns. Let’s understand this in detail.

Over the past few years, significant technology trends have arisen, molding the software development, deployment, and utilization landscape. Edge computing, low-code development, and cybersecurity are driving a transformative wave in the software industry.

That said, Artificial Intelligence (AI) and Machine Learning (ML) have evolved from buzzwords into essential elements of software applications across diverse sectors. AI-driven algorithms now serve pivotal roles in predictive analytics, personalization, automation, and augmenting user experiences and decision-making processes.

The rapid adoption of cloud-native solutions by software development firms stands out as another prominent industry trend. These solutions empower application development, team management, and seamless communication, effortlessly integrating across diverse servers to facilitate streamlined operations for any organization.

Global business expenditures on cloud computing infrastructure are poised to surpass $1 trillion in 2024 for the first time. Additionally, the prevalence of large organizations implementing a multi-cloud strategy, sourcing cloud services from multiple providers, is projected to increase from 76% to 85% in 2024.

Meanwhile, Gartner, Inc. (IT) predicts a 21.7% surge in global end-user spending on public cloud services, expected to reach $597.30 billion in 2023, a rapid rise from the $490.98 billion in 2022. Furthermore, it envisions that by 2026, 75% of organizations will adopt a cloud-centric digital transformation strategy as their core foundational platform.

Other advanced technologies such as cybersecurity, blockchain, software outsourcing, and IoT continue to propel industry growth. They are driving innovation, enhancing security protocols, streamlining development processes, and unlocking the potential for immersive, interconnected experiences, further advancing the industry.

Looking ahead, the global enterprise software market is estimated to grow at a CAGR of 11% and reach $519.88 billion by 2030, as projected by Spherical Insights.

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

Stock #3: Squarespace, Inc. (SQSP)

SQSP offers businesses and creators a comprehensive platform for establishing and expanding their online presence. Its integrated suite of tools enables users to efficiently oversee projects, websites, domains, e-commerce, marketing, scheduling, and hospitality services, while also optimizing their social media management.

On October 4, SQSP launched Squarespace Refresh 2023, an extensive annual release. It introduced numerous products and features aimed at empowering entrepreneurs. A standout feature was the impending Squarespace Payments debut, addressing a crucial need for secure, unified online transactions.

The robust payment solution revolutionizes online transactions, allowing direct payment acceptance on SQSP, and eliminating third-party providers. The company could lead in e-commerce, enhancing user convenience, and solidifying its status as a pioneering platform for emerging entrepreneurs.

On September 7, SQSP completed the acquisition of Google Domains assets, following the transaction agreement revealed on June 15, 2023. This positions SQSP to initiate a meticulously planned transition phase, overseeing the migration of Google Domains accounts to its proprietary Squarespace Domains platform.

Throughout this transition, SQSP will leverage the robust infrastructure inherited from Google, ensuring a smooth and efficient transfer process. This should strengthen its standing as a leader in the domain market, signifying a major milestone in its expansion and dedication to improving user experiences.

For the second quarter that ended June 30, 2023, SQSP’s revenue increased 16.4% year-over-year to $247.53 million. Its gross profit grew 16.3% from the year-ago value to $204.36 million. Also, its adjusted EBITDA rose 68.2% from the prior year’s period to $73.38 million, while operating income increased 309.8% year-over-year to $36.67 million.

The consensus revenue estimate of $994.60 million for the fiscal year ending December 2023 reflects a 14.7% year-over-year improvement. Likewise, the consensus EPS estimate of $1.05 reflects a 92.2% rise from the prior year. Moreover, the company topped the consensus revenue estimates in all four trailing quarters.

SQSP’s shares have gained 40.2% over the past year to close the last trading session at $29.97.

SQSP’s strong fundamentals are apparent in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

SQSP has an A grade for Growth and Quality and a B for Sentiment. It has ranked #12 out of 134 stocks within the Software - Application industry.

In addition to the POWR Ratings I’ve just highlighted, you can see SQSP ratings for Value, Momentum, and Stability here.

Stock #2: SS&C Technologies Holdings, Inc. (SSNC)

SSNC delivers software products and services to streamline operations in finance and healthcare. Its solutions automate intricate business processes, aiding clients with information processing. The company controls a technology stack encompassing securities accounting, front-office and back-office functions.

On October 1, SSNC announced the successful acquisition of the Managed Funds Administration (MFA) business from Iress Limited. Around 150 skilled team members have joined SS&C's Global Investor & Distribution Solutions division, led by Euan McLeod, Head of Transfer Agency for the Asia-Pacific region.

SSNC’s global mission is to aid asset managers in enhancing operations, mitigating risk, ensuring compliance, and elevating client service. The acquisition represents a strategic step, as SSNC seeks to collaborate with the integrated MFA team to improve and expand services in the Australian market, meeting the evolving demands of this growing sector.

On August 15, SSNC announced that Riyad Bank, a prominent financial institution in Saudi Arabia and the Middle East, had successfully migrated its automation program to SS&C Blue Prism.

In a remarkably short time, Riyad Bank achieved significant operational transformation, largely owing to SSNC’s Blue Prism's exceptional support. This strategic transition reaffirms SSNC’s dedication to enhancing efficiency and innovation in the banking sector, strengthening its role as a trusted partner in financial automation.

During the second quarter that ended June 30, 2023, SSNC’s adjusted revenue increased 2.5% year-over-year to $1.36 billion. Its adjusted consolidated EBITDA grew 6.7% from the year-ago value to $503 million. In addition, adjusted operating income attributable to SSNC came in at $485.80 million, up 6.7% year-over-year improvement. 

As of June 30, 2023, the company’s cash and cash equivalents amounted to $439.70 million, compared to 440.10 million as of December 31, 2022.

The consensus revenue estimate of $5.74 billion for the fiscal year ending December 2024 reflects a 4.1% year-over-year improvement. Likewise, the consensus EPS estimate of $5.18 reflects a 12% rise from the previous year. Also, the company surpassed the consensus revenue estimates in three of the four trailing quarters.

SSNC gained 1.4% intraday, closing the last trading session at $51.85.

SSNC’s solid outlook is apparent in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

SSNC has a B grade for Growth, Value, Momentum, and Stability. It has ranked #11 out of 134 stocks within the Software - Application industry.

Click here to access additional SSNC ratings for Sentiment and Quality.

Stock #1: Commvault Systems, Inc. (CVLT)

CVLT provides a data protection platform, offering Commvault Backup and Recovery, Commvault Disaster Recovery, Commvault Complete Data Protection, and Metallic Data Protection as as-a-service. These solutions empower customers to secure and recover their data, with advanced security controls on a cloud-based platform for data protection.

On October 11, CVLT unveiled its collaboration with Lenovo technology, introducing dependable backup and recovery solutions for organizations. Leveraging Lenovo's renowned hardware systems, CVLT could gain a competitive advantage, delivering streamlined data protection and management to IT teams through a unified interface.

Simultaneously, this partnership grants Chief Information Officers (CIOs) elevated flexibility, unparalleled reliability, and exceptional scalability, leading to improved Total Cost of Ownership (TCO) and faster time-to-value. The alliance could solidify CVLT's market standing and also underscore its dedication to delivering innovative solutions.

On August 22, CVLT announced the global availability of Commvault Platform Release 2023E, a significant advancement in secure data protection for hybrid multi-cloud environments. With the increasing threat of ransomware attacks in the digital landscape, protecting backup infrastructure is of utmost importance.

CVLT tackles this challenge by enabling IT and security professionals to proactively detect threats to their backups, reducing potential damage and expediting recovery after a security breach. This strategic step underscores CVLT's dedication to enhancing data security in a hazardous cyber landscape, positioning it as a proactive leader in the data protection industry.

For the fiscal 2024 first quarter that ended June 30, 2023, CVLT’s total revenues marginally increased year-over-year to $198.15 million. Its non-GAAP income from operations rose 7.2% from the year-ago value to $43.53 million.

Moreover, the company’s non-GAAP net income and non-GAAP EPS grew 10.3% and 12.5% from the prior year’s period to $32.53 million and $0.72, respectively.

Analysts expect CVLT’s revenue to grow 3.3% year-over-year to $810.34 million for the fiscal year ending March 2024. Similarly, the company’s EPS for the current period is estimated to come in at $2.83, indicating a 10.6% year-over-year improvement. Moreover, the company surpassed the consensus revenue and EPS estimates in three of the four trailing quarters.

The stock has gained 10.6% over the past six months and 20.1% over the past year, closing the last trading session at $67.49.

CVLT’s robust prospects are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

CVLT has an A grade for Growth and Quality and a B for Value and Sentiment. It is ranked #2 out of 134 stocks within the same industry.

Click here to access the additional CVLT ratings (Momentum and Stability). 

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook > 

SSNC shares were trading at $52.43 per share on Tuesday afternoon, up $0.58 (+1.12%). Year-to-date, SSNC has gained 1.84%, versus a 15.50% rise in the benchmark S&P 500 index during the same period.

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.

More...