As we look back at vertical software stock gains in the second quarter, we examine this quarter’s best and worst performers, including Upstart (NASDAQ:UPST) and its peers.
Software is eating the world, and while a wide range of solutions, such as project management or videoconferencing software, can be useful for a wide range of industries, some have very specific needs. As a result, the software vertical, which addresses industry-specific workflows, is growing, fueled by pressure to improve productivity, whether in a life sciences, education or banking company.
The fifteen vertical software stocks we track reported a mixed second quarter. As a group, revenues exceeded analyst consensus expectations by 1.9%, while revenue expectations for the next quarter were 1.1% above.
Inflation has recently risen toward the Fed’s 2% target, prompting the Fed to cut its policy rate by 50 basis points (half a percent or 0.5%) in September 2024. This is the first reduction in four years. While the CPI (inflation) numbers have been supportive lately, the employment measures have turned out to be almost worrisome. Markets will debate whether the timing of this rate cut (and more potential ones in 2024 and 2025) is ideal to support the economy, or whether it is a bit too late for a macro that has already cooled too much.
Fortunately, vertical software stocks have performed well, with share prices up an average of 12.6% since the last earnings results.
Upstart (NASDAQ:UPST)
Founded by former head of Google’s enterprise business Dave Girouard, Upstart (NASDAQ:UPST) is an AI-powered lending platform that helps banks better assess the risk of lending money to an individual and make loans to more customers.
Upstart reported revenue of $127.6 million, down 6% year over year. This print exceeded analyst expectations by 2.5%. Despite the revenue increase, it was still a mixed quarter for the company with optimistic revenue expectations for next quarter but a decline in gross margin.
“The guidance we released today shows that we are on track toward resuming our role as a fintech known for high growth and healthy margins,” said Dave Girouard, CEO of Upstart.
Interestingly, the stock is up 57.6% since reporting and is currently trading at $37.60.
Is Now the Time to Buy Upstart? See our full analysis of earnings results here. It’s free.
Best Second Quarter: Olo (NYSE:OLO)
Olo (NYSE:OLO), founded by Noah Glass, who wanted to grab a quick cup of coffee on the way to work, provides restaurants and food retailers with software to manage food orders and deliveries.
Olo reported revenue of $70.5 million, up 27.6% year over year, beating analyst expectations by 4.1%. The company had a very strong quarter with an impressive increase in analysts’ GMV (gross merchandise value) estimates and a solid increase in analyst expectations.
Olo scored the fastest revenue growth and the highest full-year guidance increase among its peers. The market seems pleased with the results, as the stock is up 5.4% since reporting. It is currently trading at $5.05.
Is this the time to buy Olo? See our full analysis of earnings results here. It’s free.
Weakest Quarter 2: PTC (NASDAQ:PTC)
PTC’s (NASDAQ:PTC) software-as-service platform, used in the design of the Airbus A380 and Boeing 787 Dreamliner commercial aircraft, helps engineers and designers create and test products before they go into production.
PTC reported revenue of $518.6 million, down 4.4% year over year, falling 2.8% short of analyst expectations. It was a weaker quarter as analyst expectations were not met and gross margin fell.
PTC delivered the weakest performance against analyst estimates and the weakest full-year forecast update in the group. The stock is flat since the results and is currently trading at $177.78.
Read our full analysis of PTC’s results here.
Unit (NYSE:U)
Founded as a game studio by three friends in an apartment in Copenhagen, Unity (NYSE:U) is a software-as-a-service platform that makes it easier to develop and monetize new games and other visual digital experiences. generate.
Unity reported revenue of $449.3 million, down 15.8% year over year. This result exceeded analyst expectations by 1.7%. Apart from that, it was a mixed quarter, missing analyst expectations.
Unity had the slowest revenue growth among its peers. The stock is up 60.2% since reporting and is currently trading at $23.
Read our full, actionable report on Unity here. It’s free.
Cadence (NASDAQ:CDNS)
With the name chosen to capture the idea of a repeating pattern or rhythm in electronic design, Cadence Design Systems (NASDAQ:CDNS) offers a software-as-a-service platform for semiconductor engineering and design.
Cadence reported revenue of $1.06 billion, up 8.6% year over year. This result exceeded analyst expectations by 1.7%. That aside, it was a mixed quarter as it also showed solid improvement over analyst expectations but a decline in gross margin.
The stock is down 5.7% since reporting and is currently trading at $270.90.
Read our full, actionable report on Cadence here. It’s free.
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