Software is an interesting stock to analyze and predict amid the financial crisis created by the coronavirus pandemic. Like many other stocks, software has taken a significant hit in recent months, but it’s still a necessary component for companies to operate effectively. However, due to new virtual working arrangements, the investment opportunities investors are used to may not be the same. Recurring revenue is one of the main factors for the rebound of software stock growth, and we’ve explored some of the facts and predictions for investors.
Software-as-a-Service Companies Stand Out
Software-as-a-Service (SaaS) companies stand out the most among all software stocks because of their recurring revenue from subscriptions. Organizations have become more comfortable with cloud operations rather than traditional software options on-premise. Cloud operations are also beneficial to organizations since they can receive automatic updates online so security or workplace efficiency is not compromised. The result is more purchases of subscription-based software and has led experts to believe SaaS companies will be the quickest to rebound. From an investor’s perspective, it’s also important to note that SaaS stocks are commonly involved in acquisitions and mergers, which help them trade at high multiples.
Which Software Stocks Are Strongest Amid COVID-19?
Some of the best software stocks in terms of strength rating today include:
- Zoom Video Communications
- Veeva Systems
- Coupa Software
Companies like Zoom Video Communications and RingCentral have seen their stocks rise amid COVID-19 as they support work-from-home initiatives. DocuSign has become an essential tool for companies needing signatures to close deals, as the software digitizes the entire process of creating contracts and other documents. There may be some great investment opportunities with these companies even after the coronavirus pandemic since businesses are seeing the value of them for their normal operations.
Software Spending May Be A Slow Rebound
Software spending in general is expected to decline this year as the financial crisis continues. Spending was up roughly 10% in 2019, but the projection for 2020 is that it will only increase by about 2%. But while the short-term outlook doesn’t look promising for software stocks, the long-term outlook is promising as companies still focus on digital transformation, cloud computing and artificial intelligence. The recurring revenue from subscription-based services will keep the stocks afloat until business operations return to normal. As with many industries, the reality is the software industry may be looking at a slow rebound to get back to where they were.
Stock Investing Info expects a lot of market volatility even when the financial crisis begins normalizing. This makes portfolio management a challenge for investors of all ages since even experts don’t know exactly what to expect. Software will always be an important part of an organization, but how quickly the stocks rebound remains to be seen. Our experts are ready to help you sort through the uncertainties and find the right investment opportunities to boost your portfolio, so contact us today to speak with us.