ORCL: 3 Top-Notch Software Stocks to Scoop-Up in February

The remote working trend that emerged in the wake of the pandemic propelled the software industry to become one of the biggest gainers in 2020. While many people expect things to go back to normal once the virus spread is effectively curbed, the increased productivity of employees, as well as lower overhead costs for businesses, should keep the remote-working lifestyle alive even in the post-vaccine world.

According to freelance platform Upwork’s “Future of Workforce Pulse Report,” 1 in 4 Americans are expected to work from home this year. Approximately 36.2 million Americans are expected to work remotely by 2025, up 87.5% from the pre-pandemic levels.

Leading software companies such as Oracle Corporation (ORCL - Get Rating), ServiceNow, Inc. (NOW - Get Rating), and Intuit, Inc. (INTU - Get Rating) have been expanding their service portfolio to incorporate cloud computing and artificial intelligence, to keep up with the emerging market trends.

These well-established companies have partnered up with the central and state governments to help them develop comprehensive and secure cloud platforms, as well as provide logistics services designed to aid the global vaccination drive. This demonstrates the brand recognition and popularity of the stocks in the market, making them stable investment bets for the near future.

Oracle Corporation (ORCL - Get Rating)

ORCL designs products and services for corporate information technology requirements. The company’s product portfolio and software designs are developed to provide comprehensive coverage for all IT related requirements internationally. Its primary on-premise and cloud software business offerings can be categorized into four segments – Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS) and Software-as-a-Service (SaaS), and licensing support and product updates. Apart from this, ORCL also provides hardware products and technical support globally.

On January 27th, ORCL upgraded logistics capabilities within Oracle Fusion Cloud Supply Chain and Manufacturing, as well as updated Oracle Transportation Management and Global Trade Management. With companies increasingly integrating technology to streamline their global supply chain, ORCL’s efficient software services are expected to be a big hit in the markets.

On the same date, ORCL’s cloud marketplace was selected by the US government. Various federal agencies and US government customers can access the cloud marketplace to deploy new applications to improve operational efficiency. This comes in following the rising popularity of Oracle Cloud Infrastructure, which was chosen by companies such as Cybereason and NTT West in December last year as their preferred cloud platform.

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ORCL’s total revenues have increased 2% year-over-year to $9.80 billion in the fiscal second quarter ended November 30, 2020. This can be attributed to the 4% rise in cloud services and license support revenues, 33% rise in fusion cloud ERP revenues, and 21% rise in NetSuite Cloud ERP revenues. Operating income has risen 13% from the year-ago value to $3.58 billion, while net income has grown 6% from the same period last year to $2.44 billion. Non-GAAP EPS has increased 19% from the prior-year quarter to $1.06.

The consensus EPS estimate of $1.11 for the fiscal third quarter ending February 2021 indicates a 14.4% rise year-over-year. Moreover, ORCL has an impressive earnings surprise history, as it beat the Street EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $10.07 billion indicates a 2.8% rise from the same period last year.

ORCL gained 66.7% to hit its 52-week high of $66.20 in December last year, since hitting its 52-week low of $39.71 in March. Currently trading at $60.43, analysts expect ORCL to hit $65.34 shortly, indicating a 6.7% potential upside.

ORCL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to Strong Buy in our proprietary rating system. ORCL has a Value Grade of A, Momentum Grade and Quality Grade of B.

In total, we rate ORCL on 8 different levels. Beyond what we stated above, we also have given ORCL grades for Growth, Stability, Sentiment, and Industry. Get all of ORCL’s ratings here.

ServiceNow, Inc. (NOW - Get Rating)

NOW provides enterprise cloud computing services that define, structure, manages, consolidates, and automates services for various companies across the world. Its IT service management applications automate workflow within departments through NOW platform, IT service management product suite, IT operations management product, IT infrastructure, IT asset and business management products. NOW has been named a leader in IT risk management and Vendor risk management in the 2020 Gartner magic quadrant.

On January 25th, NOW partnered with NHS Scotland to provide logistical support and facilitate digital workflow for mass vaccination drives in the country. The company has similar agreements with the state of South Caroline and 100 private organizations. These developments show NOW’s commitment to the vaccination drive, as well as the company’s logistics strength making it one of the top picks for logistics support of governments worldwide.

NOW’s subscription revenues have increased 32% year-over-year to $1.18 billion in the fourth quarter ended December 31, 2020. Subscription billings have risen 41% from the same period last year to $1.83 billion, while the total number of customers has grown from the year-ago value to 1093.

The consensus EPS estimate of $1.34 for the current quarter ending March 2021 indicates a 27.6% improvement year-over-year. The company has an impressive earnings surprise history as well, as it beat the Street EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $1.33 billion for the ongoing quarter indicates a 27.5% rise from the prior-year quarter.

NOW has gained more than 125% since hitting its 52-week low of $238.93 in March last year. The stock is currently trading 4.2% below its 52-week high of $566.74, which it hit on December 18th, 2020.

It’s no surprise that NOW has an overall rating of B which equates to Buy in our POWR Ratings system. NOW has a grade of B for both Growth and Momentum. In the 60-stock Software- Business industry, it is currently ranked #18. The industry is rated B.

Click here to see the additional POWR Ratings for NOW (Value, Quality, Stability, and Sentiment).

Intuit, Inc. (INTU - Get Rating)

INTU provides business, financial management, and accounting services to companies and professional accountants based in the United States and Canada. It operates through three segments – Small Business, Consumer Tax, and ProConnect. The company’s proprietary services include QuickBooks financial and business management processing software, payroll solutions, and TurboTax products and services.

In December last year, INTU acquired the consumer technology platform Credit Karma to create a new consumer finance platform aiming to promote financial independence. This acquisition gives INTU direct access to Credit Karma’s 110 million customer base, allowing the former to increase its market reach seamlessly.

Earlier in January, INTU upgraded its Mint website as well as launched an iOS app, following the increasing popularity of the site. With several noteworthy features, INTU’s Mint is on track to become a leading financial website globally.

INTU’s revenues have increased 14% year-over-year to $1.32 billion in the fiscal first quarter ended October 31, 2020. Non-GAAP operating income has risen 159% from the year-ago value to $334 million, while net income grew 247.4% from the prior-year quarter to $198 million. EPS rose 241% from the same period last year to $0.75.

The consensus EPS estimate of $1.28 for the fiscal second quarter ended January 2021 indicates a 10.3% rise year-over-year. Moreover, INTU surpassed the Street EPS estimates in three out of the trailing four quarters, which is impressive. Analysts expect the company’s revenues to rise 15.2% in the about-to-be reported quarter to $1.95 billion.

INTU has gained more than 110% to hit its 52-week high of $398.12 in January, since hitting its 52-week low of $187.68 in March. Currently trading at $361.23, analysts expect INTU to hit $415.89 soon, indicating a potential upside of 12.4%.

INTU’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A which equates to Strong Buy. INTU has a grade of A for both Quality and Sentiment and B for Momentum.

In addition to the POWR Ratings grades I’ve just highlighted, you can see the INTU ratings for Growth, Value, Stability, Sentiment, and Industry.

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ORCL shares were trading at $61.78 per share on Monday afternoon, up $1.35 (+2.23%). Year-to-date, ORCL has declined -4.13%, versus a 0.58% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...