It has been a bruising year for the equity investors, with the S&P 500 down more than 16% year-to-date. The Fed's hawkish stance to curb surging inflation and the consequences of the Ukraine-Russia war have caused a massive tech sell-off over the past few weeks. Despite Friday's 4% relief rally, the tech-heavy Nasdaq is down more than 25% year-to-date.
According to Bank of America strategists Michael Hartnett, during the past week's brutal stock market sell-off, technology stocks witnessed their biggest retreats of the year, with investors pulling $1.1 billion out of the sector. However, the rising need for enterprise software in recording and managing customer experience, a spur in demand for e-commerce from various industries, and an increase in IT budgets of businesses could help the enterprise software market grow significantly in the near term. The global enterprise software market is projected to grow at a 6.46% CAGR to $84.94 billion by 2027.
Therefore, we think fundamentally sound enterprise software stocks Workday, Inc. (WDAY) and Veeva Systems Inc. (VEEV) could be solid bets at their current price levels.
Click here to check out our Software Industry Report for 2022
Workday, Inc. (WDAY)
Headquartered in Pleasanton, Calif., WDAY offers enterprise cloud applications internationally. Its applications help its customers plan, execute, analyze, extend to other applications and environments, and manage their business and operations.
During the first quarter, ending Jan. 31, 2022, WDAY's total revenue increased 21.6% year-over-year to $1.38 billion. Its non-GAAP operating income grew 12.4% from its year-ago value to $237.14 million, while its non-GAAP net income improved 11.6% from its prior-year quarter to $205.97 million. The company's non-GAAP EPS rose 6.9% year-over-year to $0.78.
The $4.62 consensus EPS estimate for its fiscal year ending Jan. 31, 2023, represents 28.3% year-over-year growth. Analysts expect revenue to increase 21.3% year-over-year to $1.43 billion for the first quarter ending April 2022. In addition, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has plunged 35.6% in price year-to-date.
WDAY's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
The stock also has an A grade for Growth and a B grade for Sentiment and Quality. Within the Software – Application industry, it is ranked #32 of 157 stocks. To see additional POWR Ratings for Value, Stability, and Momentum for WDAY, click here.
Veeva Systems Inc. (VEEV)
VEEV is a provider of industry cloud-based software solutions for the global life sciences industry. The Company’s industry cloud solutions for the life sciences industry are grouped into two product areas: Veeva Commercial Cloud, a suite of software, data, and analytics solutions; and Veeva Vault. Veev is based in Pleasanton, Calif.
This month, VEEV announced that Lucid Diagnostics Inc. (LUCD), a commercial-stage cancer prevention medical diagnostics company, and majority-owned subsidiary of PAVmed Inc. (PAVM), has selected Veeva Vault CDMS to provide electronic data capture (EDC), coding, and data cleaning in their forthcoming study for EsoGuard in patients undergoing standard of care screening for, and management of, Barrett's esophagus or esophageal adenocarcinoma.
Also, this month, VEEV announced that AmplifyBio is building a base for advanced quality, study execution, and reporting with Veeva Vault Quality Suite. With the help of a modern quality system with built-in industry best practices, the company will simplify and automate processes to increase the efficiency of its preclinical drug testing.
VEEV's total revenues increased 22.4% year-over-year to $485.50 million for the fourth quarter, ending Jan. 31, 2022. Its non-GAAP operating income grew 21.6% from its year-ago value to $186.25 million, while its non-GAAP net income improved 16.5% from its prior-year quarter to $146.95 million. The company's EPS rose 15.4% year-over-year to $0.90.
Analysts expect VEEV's revenue to increase 14.4% year-over-year to $495.88 million for the first quarter, ending April 2022. The company's EPS is expected to grow 1.3% year-over-year to $0.92 in the first quarter, ending April 30, 2022. Furthermore, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in all the trailing four quarters. The company's shares have declined 36.5% in price year-to-date.
It is no surprise that VEEV has an overall B rating, which equates to Buy in our POWR Ratings system. VEEV has an A grade for Quality and a B grade for Growth. In the Medical - Services industry, it is ranked #23 of 83 stocks. Click here to see the additional POWR Ratings for VEEV (Stability, Sentiment, Momentum, and Value).
Note that VEEV is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
Click here to checkout our Healthcare Sector Report for 2022
WDAY shares were unchanged in after-hours trading Tuesday. Year-to-date, WDAY has declined -36.55%, versus a -13.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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