Stocks to buy

The SaaS Surge: 3 Unstoppable Stocks to Propel Your Portfolio to New Heights

Software stocks have generally on a big roll since late last year. Indeed, the iShares Expanded Tech-Software ETF (BATS:IGV) climbed 20% between Oct. 27 and April 19. And, overall in 2023 it soared 59%. Moreover, as of February 2024, Investor’s Business Daily ranked its enterprise services software sector 14th out of its 197 sectors. And within the software space, I’ve noticed that a majority of the most successful firms are those which enable their customers to pay monthly subscriptions for their products. Such companies are known as software-as-a-service (SaaS) providers. Here are three unstoppable SaaS stocks for investors to buy now.

ServiceNow (NOW)

Source: Sundry Photography / Shutterstock.com

ServiceNow (NASDAQ:NOW) recently announced that it would begin selling cloud transformation tools through Amazon’s (NASDAQ:AMZN) cloud infrastructure unit, AWS. NOW says that its offerings will enable faster migration to the cloud and easier management of cloud workloads. According to the well-respected tech research firm, Gartner, 70% of workloads will be in the cloud by 2028, compared with 25% last year. By offering cloud transformation products, NOW should be able to better exploit the trend going forward.

Moreover, NOW also disclosed that it would also provide a next-generation contact center solution through AWS. It will utilize AI and enable customers to be effectively served by NOW’s top-notch automatic tools. As a result, firms that utilize this tool will reduce the amount of money they spend on customer-service representatives while lowering their costs. With many small-and-medium businesses looking to incorporate AI into their customer service offerings to save money, I believe that NOW will be able to generate a great deal of revenue and profits from this initiative.

Tyler Technologies (TYL)

Tyler Technologies (TYL) logo on the website homepage.

Source: Casimiro PT/ Shutterstock.com

Tyler Technologies (NYSE:TYL) is one of the SaaS stocks that specializes in providing products to the public sector. The renowned research firm Morningstar reported that they view TYL as the clear leader in the public service software market. The firm expects TYL to get a lift from efforts by local governments to update their management software. And it named TYL as one of nine “undervalued software stocks.”

In the first quarter, Tyler’s top-line climbed 6.3% versus the same period a year earlier to $481 million. Meanwhile its subscription revenue jumped 11.4% year-over-year (YoY) to $286 million. And its net income, excluding certain items, soared by an impressive 15.6% YoY.

On its Q4 earnings call, TYL reported that it was reducing its costs by transitioning an increasing number of its customers to the cloud. For the first time, the firm was able to convince a number of its public safety customers to transition to SaaS offerings and convince a meaningful number of new customers in the sector to adopt such products.

AppLovin (APP)

The AppLovin (APP) info on an iPhone and laptop screen.

Source: T. Schneider / Shutterstock.com

AppLovin (NASDAQ:APP) generates revenue from both mobile app developers and marketers. It does so by creating matches between marketers who want to show ads on apps and app developers.

For advertisers, the company offers a SaaS mobile marketing platform called Adjust. The AI-powered software allows marketers to find the best apps for their ads. It also provides an auction system called AppDiscovery, which allows marketers to buy and app owners to sells ads extremely quickly.

In Q4, the company’s top-line jumped 36% YoY to $953 million. And its EBITDA, excluding certain items, soared 83% year-over-year to $476 million.

APP is well-positioned to continue to0 benefit from the rapidly strengthening U.S. advertising market, making it one of the best SaaS stocks to buy.

On the date of publication, Larry Ramer held long positions in NOW and AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.

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