The software industry has become increasingly important amid the growing spending on digitization and automation, cybersecurity, and cloud migration. The U.S. alone accounts for 42.6% of the global software market’s value.
Over the years, the software industry has become a stalwart of digital transformation. Revenue in the software market is projected to reach $593.40 billion in 2022. Revenue is expected to show an annual growth rate of 6.5% CAGR from 2022 to 2027, resulting in a market volume of $812.90 billion by 2027.
Given this backdrop, fundamentally strong software stock Commvault Systems, Inc. (CVLT) might be a safe buy now.
On the other hand, the stock market has remained under pressure lately on concerns surrounding the Fed’s hawkish stance and a possible recession. Moreover, as firms from small operations to multinational giants have laid off a significant number of employees, the second half of 2022 has been characterized by a series of tech layoffs.
Hence, fundamentally weak stock Robinhood Markets, Inc. (HOOD) might be best avoided amid the heightened volatility in the market.
Stock to Buy:
Commvault Systems, Inc. (CVLT)
CVLT provides data protection and information management software applications and related services globally. The company sells its products and services to large enterprises, small and medium-sized businesses, and government agencies.
On November 2, CVLT announced a new approach to data protection with the launch of Metallic File & Object Archive, a Data Management as a Service solution designed to lower storage costs while cost-effectively transforming how organizations navigate the world of Governance, Risk, and Compliance. The company aims to lower cost solution that helps reduce the risk of non-compliance.
On October 25, 2022, CVLT announced the expanded protection for Kubernetes workloads, including fully automated management, replication, migration, and security enhancements. The new features will offer customers simple management and enterprise-grade protection for hybrid, multi-cloud environments.
CVLT’s total revenues increased 5.7% year-over-year to $188.06 million for the second quarter that ended September 30, 2022. Its non-GAAP income from operations increased 14.1% year-over-year to $35.38 million. The company’s non-GAAP net income grew 14% year-over-year to $26.07 million, while its non-GAAP EPS rose 18.8% year-over-year to $0.57.
Street expects CVLT’s revenue to increase 3.6% year-over-year to $797.28 million in the current fiscal year ending March 2023. Its EPS is estimated to grow 6.1% year-over-year to $2.66 in the current year.
Over the past month, the stock has gained 23.1% to close the last trading session at $66.87. It has a 24-month beta of 0.87.
CVLT’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CVLT has an A grade for Growth and Quality and a B for Value. It is ranked first among 142 stocks in the Software – Application industry.
Click here to see the additional POWR Ratings for Momentum, Sentiment, and Stability for CVLT.
Stock to Avoid:
Robinhood Markets, Inc. (HOOD)
HOOD is a financial services platform that allows users to invest in stocks, exchange-traded funds (ETFs), options, and cryptocurrencies. The company also offers learning and education solutions, which include Robinhood Snacks, Robinhood Learn, Newsfeeds, Robinhood lists and alerts, and First trade recommendations.
In August, HOOD announced its second round of layoffs this year, slashing 23% of its headcount by letting go of 800 employees. The company had already slashed 9% of its workforce in April 2022.
HOOD also announced that its digital assets arm had been fined $30 million by the New York Department of Financial Services over allegedly violating anti-money laundering and cybersecurity regulations.
For the third quarter of fiscal 2022 ended September 30, HOOD’s net revenues declined 1.1% year-over-year to $361 million. The company reported a net loss of $175 million, translating to a loss per share of $0.20.
Analysts expect HOOD’s revenue for fiscal 2022 to decline 24.4% year-over-year to $1.37 billion, while its EPS is expected to remain negative $0.96 for the current year.
The stock has slumped 71% over the past year to close the last trading session at $10.15. It has declined 42.9% year-to-date. The stock has a 24-month beta of 1.41.
HOOD’s bleak outlook is reflected in its overall D rating, equating to Sell in our POWR Ratings system. It has also been graded F for Stability and D for Value and Quality. HOOD is ranked #115 in the same industry.
Click here to access additional ratings for HOOD’s Growth, Momentum, and Sentiment.
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HOOD shares were trading at $9.44 per share on Wednesday afternoon, down $0.71 (-7.00%). Year-to-date, HOOD has declined -46.85%, versus a -15.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...
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