Already back in 2011, billionaire software engineer Marc Andreessen published an essay titled, “Why Software Is Eating the World.” In it, Andreessen anticipated made a bold call for the decade ahead: “…I expect many more industries to be disrupted by software, with new world-beating Silicon Valley companies doing the disruption in more cases than not.”
Worthy of note, Andressen went on to mint the 2011 Forbes Midas List of Tech’s Top Investors- and landed first on CNET’s 2011 most influential investors list.
This was the year the billionaire’s co-founded venture capital firm Andreessen Horowitz made history. After all, Andreessen Horowitz became the first venture firm to hold positions in all four of the leading, privately held social media giants of that time: Facebook (FB), Groupon (GRPN), Twitter (TWTR), and Zynga (ZNGA).
By 2016, the billionaire announced a new mentality: “Software programs the world.” Andressen declared, “The world has never been more ripe for a large wave of innovation that would be easy to finance.”
Fast forward to 2018 and it’s clear: software tech continues to rule the market. This has proved to be a standout year for software. Look no further than the iShares North American Tech-Software ETF (IGV), which has exploded over 28%.
We turned to TipRanks’ data to determine which software players are looking healthy- from upside potential to risk/reward. How do we determine if the reward is enticing? Each of these three software kings has attracted top Street-side bulls to the table. Using the analytics platform, we scoped software stocks stirring up confidence on Wall Street- from new price target jumps to upgrades.
Dell subsidiary VMware (VMW) offers cloud computing and platform virtualization software and services. VMware’s claim to fame: becoming the first commercially successful tech player to virtualize the x86 architecture. IT departments were drawn to VMware’s virtualization software, upbeat on lower expenses of running server farms. Today, the tech company towers at an over $62 billion market cap.
VMW just posted second fiscal quarter earnings for 2019 that earned the bullish attention of a top analyst on Wall Street. Matthew Hedberg of RBC Capital – ranked #6 out of over 4,800 analysts we cover on TipRanks – boosted his price target on VMW from $172 to $180 on back of a “strong quarter.”
Hedberg maintains an Outperform rating on VMware, highlighting the company’s “nice” earnings beat along with free cash flows. VMware posted a 19% surge in billings and 15% jump in licenses in its quarterly earnings show. (See Matthew Hedberg’s other stock recommendations)
Moreover, this software player is achieving strides forward in its multi-product and cross-cloud strategies. Particularly, the analyst is “excited” about VMWare Cloud’s and Amazon (AMZN) Web Services’ (AWS) partnership.
Bottom line, the print proved solid and VMware even lifted its third fiscal quarter and full-year guide for 2019 – thanks to positive customer responses to alliances with AWS and IBM (IBM). Still, the shares took a dip following the print, slipping 4% within 72 hours.
Are top analysts fazed? Not at all. Another one of Wall Street’s best-performing analysts – John Difucci of Jefferies (#11 on Wall Street) advises investors to seize the buying opportunity. (See John Difucci’s other stock recommendations)
There “doesn’t seem to be enough of a reason” for the pullback, writes the analyst, hiking his expectations. Difucci reiterates a Buy rating on VMW while raising his price target from $185 to $186 (21% upside potential).
VMware stands as a Wall Street favorite, according to our TipRanks data. We can see 12 best-performing analysts have issued bullish recommendations on VMW over the last three months. With a solid upside potential of 12%, the stock’s consensus price target stands tall at $171.87. See VMW Price Target and Analyst Rating Details.
In 2018 alone, data security and analytics firm Varonis Systems (VRNS) stock has raced nearly 51%. Yet, VRNS hit a rough patch this summer. From the end of July to the start of August, shares got beaten in the market, crashing almost 26%. After reaching a low of $59.75 (the company’s lowest point since March 16), Varonis stock already climbed its way back to $73.90- to close out the month almost 24% higher than when it started. How does the word on the Street size up this software player?
Consider that in December 2016, RBC Capital’s Hedberg underscored Varonis as a top software pick of the small-cap sector. Two years later, ahead of the company’s print, Hedberg continues to rate VRNS as an Outperform. In fact, the analyst even recently dialed up his price target from $78 to $85, which calls for another 15% in upside on tap.
Hedberg sees a tech company in strong standing to keep tracking in growth- as well as benefit from “multiple drivers” that lie ahead. The top analyst boasts a 94% success track record on rating VRNS- and this has translated to a cool 54.5% in average profits for Hedberg.
While the stock suffered following its second quarter results, Varonis remains a ‘Strong Buy’ on Wall Street. The stock has received 7 buys over the last three months. With a solid return potential of 6%, the stock’s consensus price target stands at $78.57. See VRNS Price Target and Analyst Rating Details.
Home security camera leader Arlo Technologies (ARLO) uses a cloud-based platform for an upper-hand in the security solutions market. Arlo just went public on August 3 as a spin-off from global computer networking company Netgear (NTGR). One month later, the software player has convinced a four-star analyst to get positive on its opportunity.
Arlo just won an upgrade from Guggenheim’s Rob Cihra, who joined the bulls only two days after initiating coverage from the sidelines. Why? Now that the stock has dipped from its IPO, the share weakness offers compelling upside potential.
“ARLO’s pullback, in our view, makes owning it directly even more attractive than just through NTGR,” writes Cihra, explaining: “Our initial NEUTRAL rating on ARLO came from its then-limited-upside to our $26 price target, and calculation that there was more upside from buying ARLO through its parent NTGR.”
The analyst cheers, “Not only units but also new recurring subscription services that can leverage its >2mil user installed base, cloud connectivity + storage and AI-based services that start applying machine learning/computer vision to its millions of daily video streams.”
Cihra upgrades ARLO from a Neutral to a Buy, keeping his $26 price target. In other words, the new bull spotlights 32% upside potential ahead for the home security camera firm. (See Rob Cihra’s other stock recommendations)
The ‘Moderate Buy’ stock now has two bulls in its corner, with one best-performing analyst hedging bets on the sidelines. That said, even the analyst playing it safe on Arlo calls for over 21% in return potential ahead for the stock. Consensus expectations round out to a confident $26.00 12-month average price target. Wall Street sees nearly 32% in upside potential for Arlo shares. See ARLO Price Target and Analyst Rating Details.
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