In the ever-evolving landscape of the global economy, technology stands as a cornerstone. As the world continues its digital transformation, the demand for robust digital infrastructure continues to surge. Among the key players in this arena is enterprise software, providing companies with essential tools to optimize operations, enhance workflow efficiency, and trim costs.
Enterprise software has permeated businesses of all sizes, from small startups to corporate giants. As businesses expand and technological advancements continue, this translates into increasing demand and, consequently, burgeoning sales. Here, we spotlight three promising enterprise software companies that warrant your attention:
1. HubSpot
HubSpot, Inc. (NYSE:HUBS) distinguishes itself as a leading provider of customer relationship management (CRM) solutions, offering a comprehensive suite of cloud-based offerings encompassing marketing, sales, service, payment, and content management. HubSpot prides itself on delivering powerful software without unnecessary complexities. Their user-friendly freemium model, replete with rich features, has made them a preferred choice among small and medium-sized businesses.
HUBS has experienced impressive customer growth, with recent second-quarter financials revealing a 23% year-over-year increase in customers. Their commitment to innovation and the introduction of new solutions, including AI implementations, positions HUBS for even more substantial growth. Remarkably, the company has consistently reported revenue growth, with revenues up by more than 5% in each of the last five quarters.
Analyst Ratings
Analysts have a favorable outlook on HUBS, with a “Strong Buy” consensus among 26 financial experts. Of these, 21 recommend it as a Strong Buy, 2 as a Moderate Buy, and 1 as a Hold. The mean price target for HUBS stands at $562.08, with the high target reaching $695.00, offering an upside potential of 28.1%.
2. Fair Isaac Corporation
Fair Isaac Corporation (NYSE:FICO), headquartered in Montana, operates in two primary segments: Credit Scoring and Software. The company provides both business-to-business (B2B) and business-to-consumer (B2C) scoring, enabling clients to assess consumer credit risk effectively. FICO plays an integral role in the realm of consumer lending, also offering decision-management solutions and pre-configured analytics for fraud detection, customer management, compliance, and specialized processes.
FICO’s recent third-quarter financial results exceeded expectations, with a 24% year-over-year increase in B2B revenues and a 16% rise in software revenues due to recurring and point-in-time revenues. Additionally, the annual recurring revenue for their software surged by 20% year-over-year. The company has updated its 2023 guidance, raising revenue expectations from $1.48 billion to $1.50 billion and GAAP Net income from $406 million to $428 million.
Analyst Ratings
Analysts have given FICO a “Moderate Buy” rating, based on 4 Strong Buy recommendations, 2 Moderate Buy recommendations, and 2 Holds. The mean target price for FICO is $904.93, with the high target reaching $1,100.00, offering an upside potential of 21.56%.
3. ServiceNow
ServiceNow, Inc. (NYSE:NOW) operates as an enterprise software company, aiding industries, governments, and universities in their digital transformation journeys. The company’s “Now Platform” facilitates seamless workflow connectivity across systems and departments, allowing for planning, building, and operation throughout the technology lifecycle. This empowers customers to reimagine their workflows, enhancing customer experience and loyalty. Workflows can be designed, tested, and deployed on the Now Platform for employee use.
NOW has been delivering exceptional performance and robust growth, reporting a remarkable 30% year-over-year growth in new net ACV (Annual Contract Value) of $1M+ transactions, alongside a total revenue growth of 23% year-over-year. Furthermore, subscription revenue saw a 25% year-over-year increase, and earnings per share exceeded estimates by an impressive 79.07%. This remarkable performance has been a consistent trend over the last four quarters.
Analyst Ratings
Analysts unanimously rate NOW as a “Strong Buy,” backed by 28 Strong Buy recommendations, 2 Moderate Buy recommendations, and 2 Holds. The mean target price for NOW stands at $626.00, with the high target reaching $700, offering an upside potential of 15.52%.
Final Thoughts
While industry giants like Microsoft, Salesforce, and Oracle have historically dominated the enterprise software sector, there is merit in exploring alternative investment avenues. Investing in companies with the potential for substantial growth, though not as massive as the industry giants, can still yield significant returns for your portfolio. Diversifying your investments beyond the crowd’s consensus can be a strategic move in today’s dynamic business landscape.
Featured Image: Unsplash @ Campaign Creators
