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2 Beaten Down Software Stocks to Scoop Up in January

The rapid adoption of software solutions to facilitate hybrid working arrangements, and increased organizational expenditures on software upgrades, should fuel the software industry’s growth. Therefore, we believe recent price dips could be an opportune time to bet on fundamentally sound software stocks Blackbaud (BLKB) and Agilysys (AGYS). Let’s discuss.

The expanding use of cloud-based platforms owing to increasing benefits, such as flexibility, cost-effectiveness, and mobility, has sparked the demand for cloud-based software solutions from small- and medium-sized businesses. Furthermore, because software tools are required to cater to the demands of remote working, the resumption of remote working trends with a resurgence of COVID-19 infections should drive the industry’s growth.

In addition, the growing use of advanced technologies, such as hybrid architecture, artificial intelligence, and machine learning, is projected to further contribute to the market’s growth. Investors’ interest in the software industry is evident in the iShares Expanded Tech-Software Sector ETF’s (IGV) 5.5% returns over the past year.

Given this backdrop, we think it could be wise to bet on quality software stocks Blackbaud, Inc. (BLKB) and Agilysys, Inc. (AGYS). They have witnessed significant price declines over the past months, but we think are well-positioned to soar in the near term.

Blackbaud, Inc. (BLKB)

BLKB in Charleston, S.C. is a global software company that serves corporations, education institutions, healthcare organizations, and other social- good entities. The company offers fundraising and relationship management solutions, marketing and engagement solutions, financial management solutions, and grant and award management solutions.

This month, BLKB acquired EVERFI, a global social impact technology company, in a cash and stock transaction for approximately $750 million. Together, the companies can strengthen the technology and data-driven impact space and should benefit companies committed to social impact.

BLKB’s total revenue increased 7.5% year-over-year to $231.22 million in the third quarter, ended Sept. 30, 2021. The company’s gross profit grew 6.2% from its  year-ago value to $123.54 million. Its income from operations rose 17.4% from the prior-year quarter to $11.85 million. Also, the company’s net income increased 26.9% year-over-year to $6.19 million.

Analysts expect BLKB’s revenue for its fiscal year 2022 to be $997.48 million, representing 8.2% growth year-over-year. The company has an impressive earnings surprise history; it beat the consensus EPS in each of the trailing four quarters. Its EPS is expected to grow marginally in fiscal 2021. Also, its stock has declined 7.2% in price over the past month. However, BLKB has gained 17.1% in price over the past year.

BLKB’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

Also, BLKB’s stock has a B grade for Quality and Growth. We have also graded BLKB for Stability, Sentiment, Momentum, and Value. Click here to access all BLKB’s ratings. BLKB is ranked #10 of 62 stocks in the Software - Business industry.

Agilysys, Inc. (AGYS)

AGYS in Alpharetta, Ga., is a hospitality company that offers cloud-native software-as-a-service (SaaS) and on-premises guest-centric technology solutions for universities, hotels, cruise, sports, healthcare, and other sectors. The company also offers property management systems, venue management, activity management, document management, and analytics and marketing loyalty solutions.

Last month, AGYS acquired ResortSuite, a Canada-based property management solution provider. This acquisition should create property management solutions and hospitality technology to serve the resort market. AGYS should also provide ResortSuite’s customers an opportunity to enjoy numerous modern technology options, including migrating to the cloud.

During the fiscal second quarter ended September 30, 2021, AGYS’ total revenue increased 10.3% year-over-year to $37.89 million. The company’s gross profit grew 4.8% from its year-ago value to $24.26 million. Its operating income came in at $1.12 million. Also, the company’s net income amounted to $982,000.

AGYS’ revenue is expected to increase 17.6% year-over-year to $161.32 million in its fiscal 2022. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the four trailing quarters. Its EPS is expected to increase 19.7% in fiscal 2022. The stock has declined 26.2% in price over the past six months. However, AGYS has gained 4.8% in price over the past year.

AGYS’ POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. Also, the stock has an A grade for Quality and a B grade for Growth and Sentiment.

In addition to the POWR Rating grades I’ve just highlighted, one can see AGYS’ ratings for Value, Momentum, and Stability here. The stock is ranked #5 in the Software - Business industry.

Click here to check out our Software Industry Report

BLKB shares were trading at $71.96 per share on Thursday afternoon, down $0.88 (-1.21%). Year-to-date, BLKB has declined -8.89%, versus a -1.12% rise in the benchmark S&P 500 index during the same period.

About the Author: Priyanka Mandal

Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.


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