Digital Transformation Drives Computer Software Firms: 5 Picks

Digital transformation is often perceived differently across the organization structure that leads to confusion. But, in the last few years, companies around the world have put in collective effort to enable smooth business transformation. The coronavirus outbreak in the beginning of 2020 pushed employees to adapt to remote working, which eventually led to digital transformation.

This digital transformation has boosted spending on technologies and services, specifically computer software. These software support applications are related to cloud computing, digital media and marketing, customer relationship management, accounting & tax purposes, human capital management, cybersecurity and more.

Innovation on Pandemic Push

Computer software plays a predominant role in technological innovation and digital transformation. Amid the pandemic, companies have been forced to shift on-premise operations to cloud architecture and SaaS has become the preferred delivery vehicle.

And why not? Businesses are constantly in demand for applications that help in instant and real-time response for analysis of big data. This would help them create better products and services and formulate efficient business models to gain a competitive edge.

Additionally, software companies have found demand for personalized digital transformation. Different companies have different sets of challenges, such as sales operation, enterprise collaboration, and digital customer base, hence they require specialized solutions.

In fact, spending on technologies and services that enable digital transformation of business practices, products, and organizations is expected to reach $2.3 trillion in 2023, per the International Data Corporation (IDC) Worldwide Semiannual Digital Transformation Spending Guide. Digital transformation spending is expected to see a CAGR of 17.1{b35c63bac5fac9ed648f97d4700fe9ffe9c190bec929f61ce1f7fc4e68d68241} from 2019 to 2023.

Along with that, in the past few years, a series of breakthroughs in cloud computing, machine learning, AI, digital personal assistants and IoT have paved the path for strong growth for the software industry. In fact, the work-from-home and online-learning rush has boosted demand and forced software companies to develop better, cost-effective and secure applications to capture the market.

Moreover, software is now a vital element of the new digital world, with their role constantly shifting from just running devices to managing massive infrastructure.

5 Stocks to Buy Now

Given the current scenario, where the pandemic has forced businesses to operate virtually, digital transformation might boost the computer software industry like never before. According to a marketsandmarkets report, the global digital transformation market size is expected to rise from a worth of $469.8 billion in 2020 to $1009.8 billion by 2025, at a CAGR of 16.5{b35c63bac5fac9ed648f97d4700fe9ffe9c190bec929f61ce1f7fc4e68d68241}.

Hence, we have shortlisted five software companies that belong to the Zacks Computer – Software Industry and can make the most from this boom.

Aspen Technology, Inc. AZPN provides asset optimization solutionsthat optimize asset design, operations, and maintenance lifecycle in various industrial environments. The company has an expected earnings growth rate of 5.9{b35c63bac5fac9ed648f97d4700fe9ffe9c190bec929f61ce1f7fc4e68d68241} for the current year. The Zacks Consensus Estimate for its current-year earnings has climbed 6.5{b35c63bac5fac9ed648f97d4700fe9ffe9c190bec929f61ce1f7fc4e68d68241} over the past 60 days. Aspen Technology sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Blackbaud, Inc. BLKB provides cloud-based platform designed to offer fundraising and relationship management solutions and services. The company has an expected earnings growth rate of 18.3{b35c63bac5fac9ed648f97d4700fe9ffe9c190bec929f61ce1f7fc4e68d68241} for the current year. The Zacks Consensus Estimate for its current-year earnings has risen 29.9{b35c63bac5fac9ed648f97d4700fe9ffe9c190bec929f61ce1f7fc4e68d68241} over the past 60 days. Blackbaud sports a Zacks Rank #1.

Cadence Design Systems, Inc. CDNS provides software, hardware, services, and reusable integrated circuit design blocks. The company has an expected earnings growth rate of 15.9{b35c63bac5fac9ed648f97d4700fe9ffe9c190bec929f61ce1f7fc4e68d68241} for the current year. The Zacks Consensus Estimate for its current-year earnings has climbed 3.7{b35c63bac5fac9ed648f97d4700fe9ffe9c190bec929f61ce1f7fc4e68d68241} over the past 60 days. Cadence Design Systems carries a Zacks Rank #2 (Buy).

Rosetta Stone Inc. RST provides technology-based learning products. The company has an expected earnings growth rate of 58.2{b35c63bac5fac9ed648f97d4700fe9ffe9c190bec929f61ce1f7fc4e68d68241} for the current year. The Zacks Consensus Estimate for its current-year earnings has climbed 10.3{b35c63bac5fac9ed648f97d4700fe9ffe9c190bec929f61ce1f7fc4e68d68241} over the past 60 days. Rosetta Stone carries a Zacks Rank #2.

Avid Technology, Inc. AVID develops, markets, sells, and supports software and integrated solutions for video and audio content creation, management, and distribution. The company has an expected earnings growth rate of 3.9{b35c63bac5fac9ed648f97d4700fe9ffe9c190bec929f61ce1f7fc4e68d68241} for the current year. The Zacks Consensus Estimate for its current-year earnings has moved up 51.4{b35c63bac5fac9ed648f97d4700fe9ffe9c190bec929f61ce1f7fc4e68d68241} over the past 60 days. Avid Technology carries a Zacks Rank #2.

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