The Internet software and services market is gaining momentum thanks to robust IT spending on solutions that support hybrid operating environments. The level of technology adoption by companies and the proliferation of connected consumer devices, which can help people connect and conduct business online, is also accelerating the sector’s growth.
The excellent penetration of mobile devices among users makes sense for companies to invest heavily in web-based infrastructure, applications and security software. Within the Technology sector, the Zacks-defined Internet Software industry currently sits in the top 13% of the Zacks Industry Rank.
Over the past year, the sector has achieved a return of 48.9%. Year to date progress is up 43.9%. With the sector ranked in the top half of Zacks Ranked Industries, we expect the Internet Software industry to outperform the market over the next three to six months.
We recommend five stocks from this segment that have great potential for 2025. These are: Fortinet Inc. FTNT Twilio Inc. TWLO, monday.com Ltd. MNDY, Toast Inc. TOST and Olo Inc. OLO.
The Internet software industry is benefiting from the continued demand for a global digital transformation. The growth prospects are particularly attractive due to the rapid adoption of Software as a Service (SaaS), which enables flexible and cost-effective application delivery.
SaaS seeks to deliver applications to any user, anywhere, anytime, and on any device. It effectively meets customer expectations for seamless communication across multiple channels, including voice, chat, email, web, social media and mobile.
The growing need to secure cloud platforms amid the rampant incidence of cyber-attacks and hacking is driving the demand for web-based cybersecurity software. As companies continue to move their on-premise workloads to cloud environments, application and infrastructure monitoring is becoming increasingly important. This increases the demand for web-based monitoring tools for performance management.
These five stocks have strong growth potential through 2025 and have seen positive earnings estimates over the past 60 days. Each of our picks carries a Zacks Rank #1 (Strong Buy). You can see it The complete list of today’s Zacks #1 Rank stocks can be found here.
The chart below shows the price performance of our five picks so far.
Fortinet’s third-quarter results reflect strong demand from large enterprise customers and security subscription growth amid a slowdown in networking products, along with sales execution and marketing efficiency challenges. Continually winning deals, especially those with high value, is FTNT’s main driver.
Increased IT spending on cybersecurity is expected to further cause FTNT to grow faster than the security market. The focus on improving FTNT’s unified threat management portfolio through product development and acquisitions has the wind at its back.
Fortinet expects revenue and profit growth of 12.1% and 5.3%, respectively, by 2025. The Zacks Consensus Estimate for 2025 earnings has improved 8.3% over the past 60 days.
Twilio is benefiting from accelerated digital transformations amid a growing trend of hybrid working. TWLO’s selective acquisitions and strategic investments in companies and technologies strengthen its product portfolio and strengthen its global presence.
TWLO benefits not only from a solid expansion of its existing customer base, but also from new deals with new customers thanks to its strong focus on product introduction and a go-to-market sales strategy. TWLO’s continued cost-saving initiatives are boosting profits and margins, which is commendable.
Twilio expects revenue and profit growth of 7.6% and 18.1%, respectively, by 2025. The Zacks Consensus Estimate for 2025 earnings has improved 10.5% over the past 60 days.
monday.com develops software applications in the United States, Europe, the Middle East, Africa and internationally. MNDY offers Work OS, a cloud-based visual work operating system consisting of modular building blocks used and assembled to create software applications and work management tools.
MNDY also offers product solutions for work management, sales CRM, software development verticals, business development, pre-sales and customer success services. MNDY serves organizations, educational or government institutions and individual business units of an organization.
monday.com expects revenue and profit growth of 25.6% and 11.7%, respectively, by 2025. The Zacks Consensus Estimate for 2025 earnings has improved 10.9% over the past 60 days.
Toast operates a cloud-based digital technology platform for the restaurant industry in the United States and Ireland. TOST offers Toast POS, a software module that integrates payment processing with point of sale functionality, Toast Invoicing, which allows restaurants to send invoices and collect payments, Toast Mobile Order & Pay, Kitchen Display System software that connects the home to the kitchen staff and multi-location management.
TOST also offers Toast Flex, hardware for ordering and paying at the counter, Toast Go, an integrated handheld POS device, Toast Tap, a card reader for accepting EMV contactless payments, Toast Online Ordering and Toast TakeOut, First-Party Delivery , POS integration for restaurants using third-party delivery services to receive orders and eliminate the need for additional third-party tablets, and loyalty, email marketing and Toast Gift Cards services.
Toast has projected revenue and earnings growth of 24.2% and over 100%, respectively, through 2025. The Zacks Consensus Estimate for 2025 earnings has improved 5.1% over the past 30 days.
Olo operates an open SaaS platform for restaurants in the United States. OLO’s platform enables on-demand digital commerce activities including digital ordering, delivery, front-of-house management and payments. OLO’s solutions include Order, a suite of solutions that power the on-demand commercial operations of restaurant brands, enabling digital ordering, delivery and channel management across ordering, shipping, rails, switchboard, network, virtual brands, kiosks, catering and synchronization modules.
OLO’s Engage offers a suite of restaurant-focused marketing solutions that optimize guest lifetime value by strengthening and improving restaurants’ direct guest relationships, through the guest data platform, marketing, sentiment and host modules. OLO’s Pay provides a frictionless payments platform that helps restaurants grow and protect their digital operations through a customer payments experience that delivers advanced fraud prevention to improve authorization rates for valid transactions and increase shopping cart conversion through the Olo Pay module.
Olo has projected revenue and earnings growth of 16.4% and 23.2%, respectively, for 2025. The Zacks Consensus Estimate for 2025 earnings has improved 16.7% over the past 60 days.
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