3 Outperforming Software Stocks That Have More Room to Run: Akamai, Amdocs and Box While the recent increase in interest rates and expected additional increases this year could mar the technology industry's growth, the software industry should keep growing due to strong demand in...
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While the recent increase in interest rates and expected additional increases this year could mar the technology industry's growth, the software industry should keep growing due to strong demand in an extended remote working culture and the continuing digital transformation. Therefore, we think it could be wise to add quality software stocks Akamai (AKAM), Amdocs (DOX), and Box (BOX) to one's portfolio now. These stocks have outperformed the S&P 500's returns so far this year and are well-positioned to maintain their performance. Read on.
The Federal Reserve raised its target fund rates by a quarter percentage point this week and announced plans to raise interest rates six more times this year to control record-high inflation. These actions could mar the growth of the broader tech industry.
However, extended remote lifestyles and continuing digitization should keep driving the software industry's growth. The global industrial automation software industry's revenue is expected to grow at a 7.8% CAGR through 2028. Therefore, fundamentally strong software stocks with innovative future business prospects are worth investors' attention at this juncture.
The shares of fundamentally sound software companies Akamai Technologies, Inc. (AKAM), Amdocs Limited (DOX), and Box, Inc. (BOX) have outperformed the S&P 500's more than 7% year-to-date decline. So, we think these stocks could be solid bets now.
Click here to check out our Software Industry Report for 2022
Akamai Technologies, Inc. (AKAM)
AKAM in Cambridge, Mass., provides cloud services for securing, delivering, and optimizing content and business applications over the internet in the United States and internationally. The company has the world's largest and most trusted edge platform.
On Feb. 15, 2022, Dr. Tom Leighton, AKAM's CEO, said, "We believe our planned acquisition of Linode in cloud computing, and our recent acquisition of Guardicore in enterprise security, combined with our robust product portfolios, enterprise-focused go-to-market capabilities and widely distributed edge platform, will uniquely position us for success in these two large and fast-growing markets."
AKAM's revenue increased 7% year-over-year to $905.36 million for the fourth quarter, ended Dec. 31, 2021. Its non-GAAP net income came in at $243.05 million, up 10.6% year-over-year, while its non-GAAP EPS came in at $1.49, up 12% year-over-year.
Analysts expect AKAM's revenue to increase 8.4% year-over-year to $4.06 billion in 2023. Its EPS is estimated to increase 12% per annum for the next five years. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. Its stock has declined 1.6% in rice year-to-date to close yesterday's trading session at $115.23.
AKAM's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
AKAM has a B grade for Growth, Value, and Quality. In the Software - Business industry, it is ranked #7 out of 59 stocks. Click here to see the additional POWR Ratings for Momentum, Sentiment, and Stability for AKAM.
Amdocs Limited (DOX)
DOX, through its subsidiaries, provides software and services worldwide. The Saint Peter Port, Channel Islands, company designs, develops, operates, implements, supports, and markets open and modular cloud portfolios.
On Feb. 1, 2022, Shuky Sheffer, president and CEO of Amdocs Management Limited, said, "We are pleased to announce the acquisition of DevOpsGroup, a boutique U.K.-based cloud company which complements the high-end expertise of Amdocs' Sourced Group by bringing specialist engineering, consultancy and training services for enterprises implementing cloud and DevOps."
DOX's revenue came in at $1.10 billion for its fiscal year 2022 first quarter, ended December 31, 2021, up 1.7% year-over-year. Its non-GAAP operating income came in at $193.61 million, up 3% year-over-year. And its non-GAAP EPS was $1.20, up 3.4% year-over-year.
DOX's revenue is expected to grow at 10.3% year-over-year to $4.16 billion in 2022. Its EPS is expected to grow 12.3% to $4.75 in 2022. The stock has gained 8.7% in price year-to-date to close yesterday's trading session at $81.31.
DOX has an overall B rating, which equates to a Buy in our proprietary rating system.
In addition, it has a B grade for Stability and Quality. DOX is ranked #3 in the Software - Business industry. Click here to see the additional POWR Ratings for DOX (Growth, Value, Momentum, and Sentiment).
Recently the Reitmeister Total Return Portfolio (RTR) closed a winning trade in DOX for a 25% gain. Learn more about the RTR service here.
Box, Inc. (BOX)
BOX in Los Altos, Calif., provides a cloud content management platform that enables organizations of various sizes to manage and share their content from anywhere on any device. It has more than 105,000 paying organizations, and its solution is offered in 25 languages. It has 77.7 million registered users.
On March 2, 2022, Aaron Levie, BOX's co-founder and CEO said, "Businesses today are adopting a digital-first, cloud-delivered focus, reimagining how they work in a world of distributed and hybrid teams. Content is at the center of this shift, and Box is uniquely positioned to capitalize on this opportunity. Our strong execution in FY22 and continued business momentum give us confidence in our ability to drive continued growth while delivering the industry's leading content cloud platform to our customers."
BOX's revenue increased 17.3% year-over-year to $233.36 million for the fourth quarter, ended Jan. 31, 2022. Its net loss came in at $4.33 million compared to $4.94 million in the year-ago period. Also, its total current assets came in at $916.56 million for the period ended Jan. 31, 2022, versus $879.29 million for the period ended Jan. 31, 2021.
Analysts expect BOX's revenue to be $993.90 million in 2023, representing a 13.7% year-over-year rise. The company's EPS is expected to increase 32.9% to $1.13 in 2023. It surpassed the Street's EPS estimates in each of the trailing four quarters. The stock has gained 4.2% in price year-to-date to close yesterday's trading session at $27.28.
BOX has an overall A rating, which indicates a Strong Buy in our proprietary rating system.
It has an A grade for Growth and Quality and a B grade for Value. BOX is ranked #4 of 77 stocks in the Technology - Services industry. Click here to see the additional POWR Ratings for Momentum, Stability, and Sentiment for BOX.
Click here to check out our Software Industry Report for 2022
AKAM shares were trading at $116.23 per share on Friday afternoon, up $1.00 (+0.87%). Year-to-date, AKAM has declined -0.69%, versus a -7.15% rise in the benchmark S&P 500 index during the same period.
Akamai Technologies, Inc. (AKAM) is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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