The software applications market is thriving due to the high demand for cloud computing, which streamlines business operations with services like storage, databases, and AI products. As cloud demand grows, investors might consider robust software stocks like Intuit Inc. (INTU), Autodesk, Inc. (ADSK), and Workday, Inc. (WDAY), driving digital transformation.
Cloud computing is used by 94% of companies worldwide, fostering innovation and flexibility. Statista predicts the global public cloud computing market will expand rapidly and reach $675 billion by 2024. Alongside, the software market is expected to grow at a 5.3% CAGR from 2024 to 2028, reaching $858.10 billion.
Consequently, cloud computing drives digital transformation through increased migration efforts, the adoption of AI applications, data security measures, and the facilitation of remote work capabilities. Global spending on public cloud services is expected to grow by 20.4%, reaching $675.4 billion in 2024, up from $561 billion in 2023. This growth is fueled by generative AI and application modernization.
Furthermore, the sector is set to grow due to sustainability benefits, increased security concerns, the rise of serverless computing, and its scalability, which will enable businesses to innovate quickly, manage resources efficiently, and address evolving technological and environmental challenges.
Now, let's take a closer look at the fundamentals of the Software - Application stocks mentioned above, beginning with the third choice.
Stock #3: Intuit Inc. (INTU)
INTU provides financial management and compliance products and services for consumers, small businesses, self-employed, and accounting professionals in the United States, Canada, and internationally. The company operates in four segments: Small Business & Self-Employed, Consumer, Credit Karma, and ProTax.
On June 20, 2024, INTU announced the expansion of its IDEAS program, partnering with the Los Angeles Urban League to offer small businesses in Atlanta, Los Angeles, and Philadelphia free access to Intuit products, services, business counseling, and coaching. The program aims to help businesses improve efficiency and revenue.
On June 13, 2024, INTU announced it would acquire technology from Zendrive to enhance Credit Karma’s usage-based auto insurance product, Karma Drive, helping members save on auto insurance. The acquisition aims to bring more transparency and personalized discount offers based on driving habits.
In terms of the trailing-12-month levered FCF margin, INTU’s 29.69% is 201.2% higher than the 9.86% industry average. Its 19.43% trailing-12-month net income margin is 543% higher than the 3.02% industry average. Likewise, the stock’s 24.02% trailing-12-month EBIT margin is 389.3% higher than the 4.91% industry average.
INTU’s net revenues for the third quarter ended April 30, 2024, increased 11.9% year-over-year to $6.74 billion. Its non-GAAP operating income grew 10.5% from the year-ago value to $3.71 billion. The company’s non-GAAP net income came in at $2.80 billion and $9.88, up 11.1% and 10.8% from the prior year’s quarter, respectively.
Street expects INTU’s EPS and revenue for the quarter ending July 31, 2024, to increase 12.6% and 13.8% year-over-year to $1.86 and $3.09 billion, respectively. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 45% to close the last trading session at $649.82.
INTU’s POWR Ratings reflect strong prospects. It has an overall rating of B, which translates to a Buy in our proprietary system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #36 out of 135 stocks in the Software - Application industry. It has an A grade for Quality and a B for Growth. Click here to see INTU’s Value, Momentum, Stability, and Sentiment ratings.
Stock #2: Autodesk, Inc. (ADSK)
ADSK provides 3D design, engineering, and entertainment technology solutions worldwide. The company offers AutoCAD Civil 3D, BuildingConnected, AutoCAD, AutoCAD LT, CAM software, Fusion 360, and Industry Collections for professionals in various industries, including civil engineering, preconstruction, design, manufacturing, and media.
On May 21, 2024, ADSK announced the acquisition of Wonder Dynamics, aiming to enhance 3D content creation for media and entertainment industries using AI technology. This acquisition will make it easier for artists to animate and integrate 3D characters in their projects.
On April 24, 2024, ADSK announced an interoperability agreement with the Nemetschek Group to enhance open collaboration and efficiencies in the AECO and M&E industries. This agreement will improve data exchange between the companies' cloud and desktop products, optimizing workflows and project outcomes.
In terms of the trailing-12-month Return on Total Assets, ADSK’s 10.14% is 447.9% higher than the 1.85% industry average. Likewise, its 91.73% trailing-12-month gross profit margin is 87.2% higher than the 49.01% industry average. Furthermore, its 23.19% trailing-12-month EBITDA margin is 133.4% higher than the 9.94% industry average.
During the fiscal first quarter that ended April 30, 2024, ADSK’s total net revenue amounted to $1.42 billion, up 11.7% year-over-year. Its non-GAAP income from operations rose 21.3% from the year-ago quarter to $490 million. Furthermore, the company’s net income and non-GAAP net income per share stood at $252 million and $1.87, up 56.5% and 20.6% from the prior-year quarter, respectively.
Analysts expect ADSK’s EPS for the quarter ending July 31, 2024, to increase 4.9% year-over-year to $2. Its revenue for the same quarter is expected to grow 10.3% year-over-year to $1.48 billion. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 21% to close the last trading session at $243.85.
ADSK’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It is ranked #34 in the same industry. It has an A grade for Quality and a B for Growth. To see ADSK’s Value, Momentum, Stability, and Sentiment ratings, click here.
Stock #1: Workday, Inc. (WDAY)
WDAY provides enterprise cloud applications internationally. Its applications help customers plan, execute, analyze, and extend to other applications and environments to manage their business and operations.
On June 12, 2024, WDAY announced that Clemson University has selected Workday Financial Management, Human Capital Management, and Strategic Sourcing to modernize its finance and HR operations and support the university's strategic plan.
On June 3, 2024, WDAY announced new AI capabilities for its developer platform, Workday Extend, and the launch of the Workday AI Marketplace. These innovations aim to help developers build intelligent apps and provide customers with access to AI solutions from WDAY and its partners in one centralized place.
In terms of the trailing-12-month Capex / Sales, WDAY’s 3.30% is 45.7% higher than the 2.27% industry average. Similarly, its 75.64% trailing-12-month gross profit margin is 54.3% higher than the industry average of 49.01%. In addition, its 19.67% trailing-12-month net income margin is 551% higher than the industry average of 3.02%.
For the first quarter that ended on April 30, 2024, WDAY’s total revenues rose 18.2% year-over-year to $1.99 billion. The company’s net income was $107 million, and its non-GAAP operating income grew 30.1% year-over-year to $515 million.
For the same quarter, WDAY’s non-GAAP net income per share increased 30.8% over the prior-year quarter to $1.74. In addition, its free cash flows stood at $291 million, up 33.5% from the previous year’s quarter.
For fiscal the quarter ending July 31, 2024, WDAY’s revenue and EPS are expected to increase 15.9% and 15.1% year-over-year to $2.07 billion and $1.65, respectively. WDAY surpassed the Street EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 3.9% to close the last trading session at $221.95.
WDAY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Growth and a B for Sentiment and Quality. Within the Software – Application industry, it is ranked #24. To access the additional POWR Ratings for WDAY for Value, Momentum, and Stability, click here.
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INTU shares were trading at $649.81 per share on Tuesday afternoon, down $9.77 (-1.48%). Year-to-date, INTU has gained 4.27%, versus a 17.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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