The software market is growing, with more businesses embracing digital transformation and rapid cloud migration. Businesses are spending billions of dollars on software upgrades to improve their business processes. And most industries worldwide—from manufacturing to transportation and healthcare—are now dependent on solutions and services offered by software companies.
The global software market is expected to reach $823.71 billion by 2026, registering a 7.2% CAGR. And investors’ interest in the software industry is evident in the iShares Expanded Tech-Software Sector ETF’s (IGV) 28.6% returns over the past year.
Hence, we think it could be worth watching low-priced software stocks Rackspace Technology, Inc. (RXT), ON24, Inc. (ONTF), and BM Technologies, Inc. (BMTX). Wall Street analysts expect them to rally by more than 50% in price in the near term.
Rackspace Technology, Inc. (RXT)
RXT is a multi-cloud technology services company that is based in San Antonio, Tex. It designs, builds, and manages solutions across applications, data, and security. The company operates through Multicloud Services and Apps & Cross-Platform segments. Its segments offer cloud-native applications and managed applications and enables applications to run on a public cloud built on open-source technology, and many other services.
This month, RXT launched Rackspace Elastic Engineering for VMware. VMware should provide many advantages for organizations adopting a multi-cloud strategy. With these latest Elastic Engineering solutions, customers can access the exact solutions they need and help them to navigate beyond the data center.
RXT’s revenue for the third quarter, ended September 30, 2021, increased 11.9% year-over-year to $762.5 million. The company’s gross profit came in at $231.7 million. Its loss from operations decreased 80.3% from its year-ago value to $2.9 million. Also, the company’s net loss declined 65.6% from the prior-year quarter to $34.8 million.
RXT’s revenue increased 11% year-over-year to $3 billion in its fiscal year 2021. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Its EPS is expected to grow 16.9% in the current year. The stock has surged 13.1% in price over the past three months.
Closing the last trading session at $15.22, the average analyst price target of $23.8 represents a 56.4% potential upside.
ON24, Inc. (ONTF)
Incorporated in 1998, San Francisco-based ONTF is a cloud-based platform that enables businesses to convert customer engagement into revenue through interactive webinars, virtual events, and multimedia content experiences worldwide. The company’s product range includes ON24 Webcast Elite, ON24 Engagement Hub, ON24 Intelligence, and other platforms.
This month, ONTF integrated with HubSpot, a CRM platform for scaling companies, and got listed in the HubSpot App Marketplace. This integration should provide greater visibility into prospect and customer engagement. Also, the companies will provide customers a single view and engagement activities to improve interactions and turn engagement into first-person insights that drive sales and marketing.
During the third quarter, ended September 30, 2021, ONTF’s total revenue increased 15.9% year-over-year to $49.36 million. The company’s gross profit grew 9.8% from its year-ago value to $37.3 million. Its cash and cash equivalents grew 239.6% from $58.24 million as of December 31, 2020, to $197.79 million as of September 30, 2021.
ONTF’s revenue is expected to increase 29.4% year-over-year to $203.16 million in fiscal 2021. The company has beaten the consensus EPS in three of the trailing four quarters.
The consensus price target of $24.2 represents a 53.7% potential gain from the stock’s last closing price of $15.75.
BM Technologies, Inc. (BMTX)
BMTX is a digital banking platform in the U.S. It is headquartered in Wayne, Pa. The company uses cloud-based technology to provide checking and savings accounts to consumers and offers a distribution model by connecting consumers to an FDIC-insured banking institution. BMTX also provides access to a suite of banking products, including personal loans, credit cards, and student refinancing.
This month, BMTX agreed to merge with First Sound Bank, a Seattle, Washington-based community business bank. BMTX believes that this merger has helped it to move a step forward in creating a disruptive FinTech bank that combines financial technology with a compliant FDIC-insured institution. Also, the merger is expected to meaningfully expand BMTX’s technology-based business model and enhance its diversified earnings.
ONTF’s total operating revenues increased 19.8% year-over-year to $21.97 million for its third quarter, ended September 30, 2021. The company’s income from operations grew 555.4% from its year-ago value to $3.99 million. Its net income rose 3,417.6% from the prior-year quarter to $8.79 million. Also, the company’s EPS increased 1,750% year-over-year to $0.74.
Analysts expect ONTF’s revenue to increase 17.1% year-over-year to $107.86 million for its fiscal year 2022. Its EPS is expected to grow 82.2% next year. Moreover, the stock has gained 72.5% in price over the past month.
Closing its last trading session at $13.82, the average analyst price target of $23 represents a 66.4% potential upside.
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RXT shares were trading at $15.32 per share on Wednesday afternoon, up $0.10 (+0.66%). Year-to-date, RXT has declined -19.62%, versus a 26.42% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research. More...
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