Stocks

5 Internet Software Stocks Up More Than 200% in 2020

Internet has been instrumental in fundamentally changing the way one works. The ubiquitous nature of Internet essentially renders physical presence null and void to a large extent, and thus has turned out to be a blessing amid the coronavirus pandemic.

Resultantly, Internet software companies providing enterprise workspace solutions, enterprise communication platforms, and online education portals witnessed robust growth through 2020 on strong demand for their services as enterprises continued to shift from on-premise to cloud environments — both public and hybrid.

Moreover, secular growth in the e-commerce space, momentum in web-based conferencing and remote desktop tools, increasing popularity of social-media platforms and digital ad-spending have been major growth drivers. Increasing popularity of programmatic ad-buying is a key catalyst, in this regard.

Further, growing popularity of online gaming, music, payment portals, education and video streaming services enhances growth opportunities for Internet software companies amid coronavirus-induced social distancing norms.

These factors led to scintillating performance by Internet- software stocks, including CrowdStrike Holdings Inc. CRWD, Digital Turbine, Inc. APPS, Zoom Video Communications, Inc. ZM, Square, Inc. SQ and Pinterest PINS, each of which has seen share price growth of more than 200% in 2020 so far.

Year-to-Date Performance

Internet Software Industry 2021 Prospects

The software market is expected to see a solid 2021 on robust demand for SaaS-based services amid the ongoing digital transformation as well as remote working, learning and diagnosis trends. Per Gartner’s latest report, Enterprise Software-related IT spending is expected to grow 7.2% year over year in 2021, following an estimated 3.6% decline in 2020.

Spike in adoption of cloud-based services, increasing proliferation of IoT, AR/VR devices and accelerated deployment of 5G are expected to aid Internet software users in 2021.

Enterprises have been increasingly adopting digital transformation techniques to automate and accelerate business processes, with an aim to boost productivity. Advancements in AI, machine learning (ML), deep learning (DL), natural language processing (NLP), and neural networks, have transformed enterprise processes with robust team collaboration tools, virtual assistants and chat bots.

This is also the primary reason behind SaaS-based (or Software as a Service) application and infrastructure monitoring gaining importance.

Moreover, demand for cloud infrastructure monitoring, web-based application performance management, human capital management (HCM), and cyber security software are increasing rapidly.

5 Internet-Software Stocks With Over 200% YTD Gain

Shares of CrowdStrike Holdings have returned 312.9% on a year-to-date basis. This Zacks Rank #2 (Buy) company is riding on buoyant demand for cyber-security solutions owing to the slew of data breaches and the increasing need for security and networking products amid the COVID-19 pandemic-led remote working trend.

This $49.76-billion company’s portfolio strength, mainly the Falcon platform’s 10 cloud modules, boosts its competitive edge and helps boost its user base. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Further, the company’s next-generation antivirus EDR and device-control products are well poised to gain from the thriving remote work culture.

The consensus mark for its 2020 bottom line is pegged at 22 cents per share, having been revised a whopping 266.7% upward in the past 60 days. For 2021, the consensus mark for earnings has moved 45.5% north to 32 cents per share over the same time frame.

Digital Turbine’s shares have returned a whopping 641.5% year to date. This $4.9-billion company is gaining traction from robust demand for its cloud-based mobile software offerings as enterprises continued the shift from on-premise to cloud environments, especially amid the coronavirus lockdown.

Additionally, this Zacks #2 Ranked company’s diversified partner base, a large content business partner and the rollouts with newer international partners are expected to drive the top line.

The Zacks Consensus Estimate for fiscal 2021 and 2022 earnings has moved 18% and 16.2% north to 63 cents and 86 cents per share, respectively in the past 60 days.

Moreover, the acquisition of Mobile Posse is expected to strengthen its comprehensive mobile content delivery platform, which is anticipated to boost adoption further.

Zoom Video Communications is well poised to capitalize on evolving workspace demands for seamless enterprise communication tools. Ongoing workspace trends of Bring Your Own Device (BYOD), rise in smartphone penetration and increasing number of mobile workers are expected to bolster adoption of the company’s enterprise communication solutions.

Moreover, a hybrid model that includes a couple of days of work from home is likely to be popular among employees. This also bodes well for Zoom. This $100.5-billion company has a Zacks Rank of 3 (Hold) at present. The stock has skyrocketed 419.9% on a year-to-date basis.

The consensus mark for its 2020 bottom line is pegged at $2.85 per share, having been revised 14.9% upward in the past 60 days. For 2021, the consensus mark for earnings has moved 17.5% north to $2.82 per share over the same time frame.

Square has been benefiting from robust performance of product lines such as Square Terminal, Cash Card, Square Register and Square Capital. Moreover, the company’s seller ecosystem, which helps in strengthening relationship with sellers, is likely to contribute to the payment volume and the top line.

Additionally, growing adoption of Cash App in the bitcoin space is a tailwind for this Zacks Rank #3 stock, which has gained 242.1% in the year-to-date period.

Pinterest shares have been up 266.3% year to date. The social media provider is benefiting from user base expansion, boosted by coronavirus-led lockdown. Availability of features like Today and Shop tab for Pinners are primary tailwinds.

Moreover, enhanced product offerings, wider Pinner and advertiser base, and simplified ad systems through Verified Merchant Program and Pinterest Partners Program for small businesses bode well.

This $41.9-billion company has a Zacks Rank of 3 at present.

Zacks Top 10 Stocks for 2021

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Square, Inc. (SQ): Free Stock Analysis Report
 
Digital Turbine, Inc. (APPS): Free Stock Analysis Report
 
Zoom Video Communications, Inc. (ZM): Free Stock Analysis Report
 
Pinterest, Inc. (PINS): Free Stock Analysis Report
 
CrowdStrike Holdings Inc. (CRWD): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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