Over the years, the software industry has changed the way organizations conduct their businesses and people connect with each other on the back of technological progress and innovations.
When we think of the software industry, the first name that comes to our mind is Microsoft Corporation (MSFT – Analyst Report). Its operating systems are installed on the majority of computers globally. It is also one of the leading providers of cloud infrastructure and services.
With its sustained focus on innovation, the world’s largest software company has reached market capitalization of over $423 billion. Moreover, Microsoft has an enviable history of surpassing the Zacks Consensus Estimate.
Microsoft beat the Zacks Consensus Estimate in the trailing six quarters with an average surprise of 13.5%. In the last reported quarter, the company’s top line and bottom line surpassed the respective estimates.
For the third-quarter fiscal 2016 too, we expect Microsoft to beat our expectations as it currently carries a Zacks Rank #3 (Hold) and Earnings ESP of 1.59%. Further, the company is now focusing on pushing its cloud infrastructure software, which should be a positive.
Microsoft’s shift to the cloud is paying off as its commercial cloud revenue runrate touched $9.4 billion in second-quarter fiscal 2016. Therefore, the company’s target of touching $20 billion in annualized commercial cloud revenue runrate by 2018 looks achievable.
Microsoft has huge growth potential; however, there are other players in the software industry which may outperform it.
3 Stocks to Consider in the Software Industry
With the help of our style score system, we have identified three software stocks with excellent growth potential and a favorable Zacks Rank that can significantly boost your portfolio.
Our Growth Style Score condenses all the essential metrics from the company’s financial statements to achieve a true sense of quality and sustainability of its growth. Our research shows that stocks with Growth Style Scores of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best investment opportunities in the growth investing space.
