3 Software Stocks That are a Better Buy Than Palantir

3 Software Stocks That are a Better Buy Than Palantir

Posted On July 14, 2021 11:57 pm

Despite a not-so-impressive stock market debut last September, the ‘secretive’ data company Palantir Technologies Inc. (PLTR – Get Rating) has attracted investors’ interest by entering several strategic alliances, accepting bitcoin as payment and being popular on social media, such as Reddit. However, the stock has lost 11.7% in price over the past three months and 9% over the past month to close yesterday’s trading session at $22.45.

PLTR’s revenue increased 49% year-over-year to $341 million for its fiscal first quarter ended March 31, 2021. However, the company’s net loss increased 127.5% year-over-year to $123.47 million in the quarter. And its loss per share for the quarter came in at $0.07 compared to $0.10 in the year-ago period.

Analysts expect the company’s EPS to decline 66.7% for the quarter ending September 30, 2021, and 30% in its fiscal year 2021. But, despite the company’s unimpressive financials and unfavorable analyst estimates, the stock is currently trading at an expensive valuation. In terms of forward P/CF and P/S, PLTR’s 258.78x and 29.55x, respectively, are higher than the 22.67x and 4.02x industry averages. So, it’s wise to avoid the stock now.

The software industry has been gaining the attention of investors owing to increasing adoption of advanced software in almost every industry as part of their digital transformation efforts. So, we think it’s wise to bet on fundamentally sound companies Microsoft Corporation (MSFT – Get Rating), Oracle Corporation (ORCL – Get Rating), and Synopsys, Inc. (SNPS – Get Rating) that could deliver solid returns in the coming months.

Click here to check out our Software Industry Report for 2021

Microsoft Corporation (MSFT – Get Rating)

Tech giant MSFT develops, licenses, and supports software, services, devices, and solutions worldwide. Its offerings range from Microsoft Teams, Office 365 Security and Compliance to Xbox hardware and Xbox content and services in the gaming segment. It has strategic collaborations with several companies, including  DXC Technology (DXC), Dynatrace, Inc. (DT), Morgan Stanley (MS), and Micro Focus (MFGP).

MS and MSFT announced a strategic cloud partnership on June 2 aimed at accelerating MS’ digital transformation and shaping future innovation in the financial services industry. In addition to its cloud transformation, the partnership is expected to help MSFT broaden its product and services portfolio and create additional collaborative  opportunities in the financial services industry focused on the modern workplace and  broader developer experience.

MSFT’s revenue increased 19% year-over-year to $41.70 billion for its  fiscal third quarter, ended March 31, 2021. Its operating income grew 31% year-over-year to $17 billion. Its non-GAAP net income came in at $14.80 billion, which represents a 38% year-over-year increase, while its non-GAAP EPS came in at $1.95, up 39% year-over-year.

For its fiscal year 2021, analysts expect MSFT’s EPS to be  $7.77, which represents a 34.9% year-over-year increase. It surpassed the consensus EPS estimates in each of the trailing four quarters. The company’s revenue is expected to increase 19.1% year-over-year to $42.54 billion for the quarter ending September 30, 2021. The stock has gained 35.7% over the past year to close yesterday’s trading session at $280.98.

MSFT’s POWR Ratings reflect solid prospects. The company has an overall B rating,  which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting. It has a B grade for Stability, Sentiment, and Quality.

Click here to see the additional POWR Ratings for MSFT (Growth, Momentum, and Value). MSFT is ranked #16 of 131 stocks in the Software – Application industry.

Oracle Corporation (ORCL – Get Rating)

ORCL provides products and services that address enterprise information technology environments worldwide. Its Oracle cloud software-as-a-service offering includes various cloud software applications, such as  Oracle Fusion cloud enterprise resource planning (ERP), Oracle Fusion cloud enterprise performance management, and Oracle Fusion cloud supply chain and manufacturing management.

On July 13, 2021, TTX Company replaced SAP with ORCL’s Oracle Fusion Cloud Applications Suite to support its mission to  improve regional transportation efficiency. In addition, TTX has selected Oracle Analytics Cloud and Oracle Autonomous Data Warehouse to improve decision making. These sales could have a positive effect on ORCL’s revenue.

ORCL’s revenues increased 8% year-over-year to…

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