Currently, the Zacks Internet Software industry currently ranks in the top 14% of nearly 250 Zacks industries.
In this area, a number of intriguing software stocks are starting to stand out after beating their third-quarter earnings and earnings expectations earlier this month. Sporting a Zacks Rank #1 (Strong Buy), here are three of these highly ranked software stocks to consider.
Five9 FIVN provides cloud software for contact centers The shares appear poised for a sustained rebound, making the case that they are in oversold territory. FIVN is trading below $40 per share, down from its 52-week high of $90, and is at a more reasonable earnings multiple of 15.7x. Additionally, Five9’s annual earnings per share are now expected to rise 15% in fiscal 2024 and are expected to rise another 8% in fiscal 2025 to $2.56 per share.
Five9 also expects revenue growth of over 10% in FY24 and FY25, with projections heading north of $1 billion. Reassuringly, Five9 was able to beat third-quarter earnings and revenue estimates by 15% and 3%, respectively, with FIVN rating an “A” Zacks Style Scores grade for both growth and momentum.
Image source: Zacks Investment Research
Security software provider Fortinet FTNT has seen its stock rise more than 50% in 2024 after recently hitting an all-time high of $100. Notably, FTNT checks out a “B” style score for growth and an “A” for momentum.
Fortinet posted third-quarter earnings and revenue surprises of 23% and 2%. In addition, Fortinet has been able to achieve record gross and operating margins, making its growth trajectory more attractive.
Image source: Zacks Investment Research
Rounding out the list is Toast TOST, that provides software that allows restaurants to build an on-demand network for online and on-site orders. Toast has been one of the best performing stocks in 2024, with TOST skyrocketing over +130% year to date.
The rally in TOST could continue at a 52-week high of $42 per share after Toast posted a surprise profit of $0.07 per share, compared to Q3 estimates of $0.01. Toast is expected to go public in 2021 and is expected to cross the profitability line in FY24 and is expected to grow stellar EPS in FY25 with forecasts of $0.39.
Optimism about Toast’s future earnings potential is reflected in its rapid revenue growth, with total revenue expected to rise 27% in FY24 and a further 24% in FY25 to $6.13 billion. TOST has an “A” style score for growth and a “B” for momentum.
Image source: Zacks Investment Research
