The equity markets are near record highs and a few software stocks have seen massive gains in the past month. While the tech sector has handily beat broader market returns in the last decade, several companies have also been part of a short squeeze strategy orchestrated by a group of retail traders on social media platform Reddit this year.
Here, we take a look at two software stocks in Support.com (SPRT) and Monday.com (MNDY) that have outpaced major indexes in the last month. While SPRT stock is a Reddit favorite, Monday.com has impressed investors with its solid quarterly results.
Let’s take a look to see if these stocks should be on the radar of fundamental investors right now.
Support.com stock is up more than 95% in the last month
Shares of Support.com have gained over 850% year to date and are up 164% in the last month. Despite these market-beating gains, SPRT stock is also down 42% from its record high. A report from Vanda Research identified Support.com as one of the most shorted stocks in recent trading sessions. In fact, SPRT stock had a short-interest ratio of almost 60% last month allowing traders to initiate a short squeeze successfully.
Support.com is an enterprise-facing technology company that offers a cloud-based platform servicing clients across multiple domains that include healthcare, retail, tech, and media & communication. It’s also eyeing the cryptocurrency space and recently merged with digital mining company Greenidge Generation.
But long-term investors should know that Support.com sales have declined from $69.54 million in 2018 to $43.86 million in 2020. Its operating profit narrowed from $2.95 million in 2019 to $52,000 last year.
In Q2 of 2021, Support.com reported a year-over-year decline of 23% in its top line. It also reported a net loss of $0.03 per share compared to earnings of $0.03 per share in the year-ago period.
This suggests SPRT stock is trading at a forward price to sales multiple of 9.88x which is very steep making it a high-risk investment right now.
Monday.com stock has gained more than 50% in the last month
Monday.com went public in June and has since gained over 100% since its IPO. In the last one-month MNDY stock is up close to 50%, valuing it at a market cap of $16.14 billion. This large-cap tech stock provides cloud-based project-management solutions to enterprises. These software solutions are easy to use and do not require extensive coding skills.
Monday.com reported its first quarter as a publicly-listed company and its sales in Q2 almost doubled to $70.6 million. Its revenue growth was driven by an expanding customer base and higher sales to already existing customers. Monday.com stated its net dollar retention rate for enterprises with more than 10 users stood at over 125%. It means existing customer spending increased by 25% in Q2.
Monday.com’s operating loss also narrowed to $9.9 million in Q2, compared to a loss of $14.9 million in the year-ago period. The company now expects sales in 2021 to rise by 75% year over year to $282 million.
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SPRT shares were trading at $14.74 per share on Tuesday morning, down $4.36 (-22.83%). Year-to-date, SPRT has gained 570.00%, versus a 19.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditya Raghunath
Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...
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