Despite a not-so-impressive stock market debut last September, the ‘secretive’ data company Palantir Technologies Inc. (PLTR) has attracted investors’ interest by entering several strategic alliances, accepting bitcoin as payment and being popular on social media, such as Reddit. However, the stock has lost 11.7% in price over the past three months and 9% over the past month to close yesterday’s trading session at $22.45.
PLTR’s revenue increased 49% year-over-year to $341 million for its fiscal first quarter ended March 31, 2021. However, the company’s net loss increased 127.5% year-over-year to $123.47 million in the quarter. And its loss per share for the quarter came in at $0.07 compared to $0.10 in the year-ago period.
Analysts expect the company’s EPS to decline 66.7% for the quarter ending September 30, 2021, and 30% in its fiscal year 2021. But, despite the company’s unimpressive financials and unfavorable analyst estimates, the stock is currently trading at an expensive valuation. In terms of forward P/CF and P/S, PLTR’s 258.78x and 29.55x, respectively, are higher than the 22.67x and 4.02x industry averages. So, it’s wise to avoid the stock now.
The software industry has been gaining the attention of investors owing to increasing adoption of advanced software in almost every industry as part of their digital transformation efforts. So, we think it’s wise to bet on fundamentally sound companies Microsoft Corporation (MSFT), Oracle Corporation (ORCL), and Synopsys, Inc. (SNPS) that could deliver solid returns in the coming months.
Microsoft Corporation (MSFT)
Tech giant MSFT develops, licenses, and supports software, services, devices, and solutions worldwide. Its offerings range from Microsoft Teams, Office 365 Security and Compliance to Xbox hardware and Xbox content and services in the gaming segment. It has strategic collaborations with several companies, including DXC Technology (DXC), Dynatrace, Inc. (DT), Morgan Stanley (MS), and Micro Focus (MFGP).
MS and MSFT announced a strategic cloud partnership on June 2 aimed at accelerating MS’ digital transformation and shaping future innovation in the financial services industry. In addition to its cloud transformation, the partnership is expected to help MSFT broaden its product and services portfolio and create additional collaborative opportunities in the financial services industry focused on the modern workplace and broader developer experience.
MSFT’s revenue increased 19% year-over-year to $41.70 billion for its fiscal third quarter, ended March 31, 2021. Its operating income grew 31% year-over-year to $17 billion. Its non-GAAP net income came in at $14.80 billion, which represents a 38% year-over-year increase, while its non-GAAP EPS came in at $1.95, up 39% year-over-year.
For its fiscal year 2021, analysts expect MSFT’s EPS to be $7.77, which represents a 34.9% year-over-year increase. It surpassed the consensus EPS estimates in each of the trailing four quarters. The company’s revenue is expected to increase 19.1% year-over-year to $42.54 billion for the quarter ending September 30, 2021. The stock has gained 35.7% over the past year to close yesterday’s trading session at $280.98.
MSFT’s POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting. It has a B grade for Stability, Sentiment, and Quality.
Oracle Corporation (ORCL)
ORCL provides products and services that address enterprise information technology environments worldwide. Its Oracle cloud software-as-a-service offering includes various cloud software applications, such as Oracle Fusion cloud enterprise resource planning (ERP), Oracle Fusion cloud enterprise performance management, and Oracle Fusion cloud supply chain and manufacturing management.
On July 13, 2021, TTX Company replaced SAP with ORCL’s Oracle Fusion Cloud Applications Suite to support its mission to improve regional transportation efficiency. In addition, TTX has selected Oracle Analytics Cloud and Oracle Autonomous Data Warehouse to improve decision making. These sales could have a positive effect on ORCL’s revenue.
ORCL’s revenues increased 8% year-over-year to $11.20 billion for its fiscal first quarter ended May 31, 2021. Its non-GAAP operating income grew 6% year-over-year to $5.40 billion. Its non-GAAP net income increased 20% year-over-year to $4.5 billion. Also, its non-GAAP EPS came in at $1.54, up 29% year-over-year.
The company’s EPS and revenue are expected to increase 11.1% and 4.4%, respectively, year-over-year to $5.12 and $44.1in 2023. It surpassed consensus EPS estimates in each of the trailing four quarters. The stock has gained 52.7% over the past year to close yesterday’s trading session at $87.07.
ORCL’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The stock has a B grade for Value and Quality. Within the Software – Application industry, ORCL is ranked #11.
To see the additional POWR Ratings for ORCL (Stability, Growth, Momentum, and Sentiment), click here.
Synopsys, Inc. (SNPS)
SNPS provides electronic design automation software products that are used to design and test integrated circuits (ICs). Its offerings include its Fusion Design Platform, which is a digital design implementation solution, its Verification Continuum Platform, and FPGA design products that are programmed to perform specific functions.
The company launched its new ZeBu EP1 emulation system on May 13. The system leverages SNPS’ proven direct-connect architecture to optimize design communication and deliver unprecedented emulation performance. With ZeBu EP1 as the industry’s first 10 MHz emulation system, SNPS should have an edge over its competitors which should help drive up its revenue.
SNPS’ revenue increased 18.9% year-over-year to $1.02 billion for its fiscal second quarter, ended April 30, 2021. Its operating income increased 54.3% year-over-year to $194.23 million. SNPS’ non-GAAP net income increased 41.9% year-over-year to $267.10 million, and its non-GAAP EPS grew 39.3% year-over-year to $1.70.
Analysts expect SNPS’ EPS and revenue to increase 16.8% and 10.6%, respectively, year-over-year to $6.48 and $4.08 million in its fiscal year 2021. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has soared 43.2% over the past year to close yesterday’s trading session at $278.09.
It’s no surprise that SNPS has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Sentiment and Quality.
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MSFT shares were trading at $282.62 per share on Wednesday afternoon, up $1.64 (+0.58%). Year-to-date, MSFT has gained 27.65%, versus a 17.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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