3 Software Stocks Wall Street Predicts Will Rally by More Than 110%

The software industry has grown by leaps and bounds, especially since the onset of the COVID-19 pandemic. Even with significant progress on the vaccination front this year, the need to work remotely and the ongoing digitalization of almost every industry have increased the demand for advanced software. Furthermore, consistent innovations by software companies are expanding the industry’s relevance.

According to Statista, software market revenue is expected to hit $581.18 billion this year. Moreover, the sector’s revenue is expected to grow at a 7.2% CAGR over the next five years to $823.71 billion by 2026. Investors’ interest in software stocks is evident in the SPDR S&P Software & Services ETF’s (XSW) 6.1% gains over the past three months.

Given this backdrop, we think it could be wise to add quality software stocks Yalla Group Limited (YALA), NeoGames S.A. (NGMS), and Viant Technology Inc. (DSP) to one’s  watch list. Wall Street analysts expect them to rally by more than 110% in price in the coming months.

Click here to check out our Software Industry Report for 2021

Yalla Group Limited (YALA)

Headquartered in Dubai, the United Arab Emirates, YALA operates primarily a voice-centric social networking and entertainment platform and various group chatting and gaming services. In addition, it offers Yalla Ludo, a mobile application that features online versions of board games that are highly popular in the Middle East and Northern Africa (MENA).

On May 21, 2021, YALA announced that its board of directors had authorized a $150 million share repurchase program. In addition, its management commented that specific allegations by short sellers against the company are misleading, and as a result, the share repurchase step was  taken to protect shareholders' value and demonstrate the company’s confidence in its continued growth and long-term prospects.

YALA’s total revenue increased 110.3% year-over-year to $66.62 million for its  fiscal second quarter, ended June 30, 2021. While its non-GAAP operating income came in at $32.55 million, representing a 102.1% year-over-year rise, its non-GAAP net income increased 101.4% to $32.14 million. Also, its non-GAAP EPS was  $0.18, up 50% year-over-year.

For its fiscal year 2021, analysts expect YALA’s revenue to be $277.65 million, representing a 105.8% year-over-year rise. In addition, the company’s EPS is expected to increase 42.1% year-over-year to $0.81 in fiscal 2021.

The stock has gained 38.2% in price since hitting its 52-week low of $6.26 on October 1, 2020, to close Friday's trading session at $9.56. Wall Street analysts expect the stock to hit $25 in the near term, which indicates a potential 161.5% upside.

NeoGames S.A. (NGMS)

NGMS, headquartered in Tel Aviv, Israel, provides a suite of iLottery technology solutions worldwide. The company is ranked number #1 iLottery provider in the United States.  

NGMS announced the rollout of a multi-game progressive jackpot feature in selected eInstant games in August 2021. This new feature is designed to offer lotteries the opportunity to attract new players and audiences to eInstant games. So, this could lead to increased revenues for the company.

NGMS’ total revenues decreased 0.6% year-over-year to $12.89 million in the second quarter, ended June 30, 2021. However, the company’s net income increased 16.1% year-over-year to $2.78 million. Its EPS remained flat at $0.10, and its  adjusted EBITDA came in at $8.31 million, up 6.6% year-over-year.

Analysts expect NGMS’ revenue and EPS to grow 59.9% and 55.6%, respectively, year-over-year to $78.69 million and $0.42 in fiscal 2021.

Over the past nine months, the stock has gained 88% in price to close Friday’s trading session at $37.79. Wall Street analysts expect the stock to hit $80 in the near term, which indicates a potential 111.7% upside.

Viant Technology Inc. (DSP)

Advertising software company DSP’s offerings include Adelphic, an enterprise software platform enabling marketers to plan, buy, and measure advertising across channels. The Irvine, Calif., company operates through three segments: Home, Office, and Mobile.

DSP and Kochava Collective announced the integration of Kochava Collective’s real-world location data within the Adelphic advertising software on September 9. Jon Schulz, DSP’s CMO, said, “Our partnership with Kochava Collective will bolster insights for brands and agencies looking to better understand how their marketing efforts are driving foot traffic, and ultimately, brick-and-mortar sales.”

For its fiscal second quarter, ended June 30, 2021, DSP’s net revenue increased 65.7% year-over-year to $50.41 million. Its adjusted EBITDA increased 203.1% year-over-year to $8.35 million. Its  total assets came in at $356.38 million for the period ended June 30, 2021, versus  $133.52 million for the period ended December 31, 2020.

DSP’s revenue is expected to come in at $241.69 million in its fiscal year 2022, representing a 15.1% year-over-year rise. In addition, the company’s EPS is expected to increase 70.4% year-over-year in the next year.

The stock has gained 5.7% since hitting its 52-week low of $12.84 on August 26, 2021, to close Friday's trading session at $13.72. Wall Street analysts expect the stock to hit $37.50 in price in the near term, which indicates a potential 173.3% upside.

Click here to check out our Software Industry Report for 2021

YALA shares were trading at $9.18 per share on Monday morning, down $0.38 (-3.97%). Year-to-date, YALA has declined -35.94%, versus a 20.47% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

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