Software stocks continue to outperform the general market so far this year, as the subscription fees and cloud-based applications underlying profit growth. The dependence on the working distance throughout the coronavirus pandemic has provided the sustained demand for Software-as-a-Service (Saas) solutions that allow companies and employees to communicate seamlessly through voice, chat, e-mail, web and applications. In addition, this trend seems to continue, given the resurgence of COVID-19 infections in many parts of the world in the last few weeks.
In addition, the group will have a need for a security software in the middle of a growing number of incidents of piracy and cyber-attacks targeting individuals and companies. Market research portal Statista expects the global cybersecurity market to reach $248 billion in 2023, up from $ 184 billion in 2020.
Below, we take a more detailed look at the three main software inventories and explore more trading ideas using technical analysis.
F5 Networks, Inc. (IFFIM)
Seattle-based F5 Networks, Inc. (IFFIM), sell multi-cloud software products for the networking traffic, security and policy management. Morgan Stanley analyst Meta Marshall upgraded the stock Thursday to “Overweight” from “Equal Weight,” saying that it believes that the company can develop its core software business between 10% and 15%, even if this division has already increased 80% over the last 12 months. The analyst has also raised Goldman’s price target on the F5 key shares from $135 to $175, implying an increase of 21% from Thursday’s $144.81 close. July 10, 2020, F5 Networks shares have gained 3.69% year to date and 15% over the past three months.
After a drop below $90 per share during the March sale, the stock staged a remarkable recovery to reach a new 52 weeks in a little over a month of trading. However, since then, the price has traded mostly sideways in a consolidation pattern, which is a significant support from a multi-year downtrend line and the 200-day simple moving average (SMA). Morgan Stanley upgrade prompted a great yesterday, that may see a boost based on the buyers to test the key overhead resistance at around $170. Those who take a trade to protect capital with a stop below this month’s low at $132.94.
Fortinet, Inc. (FTNT)
Fortinet, Inc. (FTNT) allows the automation of cyber security solutions on a global scale, targeting mid-size companies and government entities. The $24.18 billion that the company gets the lion’s share of its subscription services revenue from its FortiGuard security software and FortiCare technical support. Sales of this segment rose 24.1% year on year in the first quarter to $384.6 million. Trading at $149.60, the stock has increased 40% year-on-year, outperforming the software infrastructure of the industry average during the same period of 8%, effective July 10, 2020.
Fortinet shares have formed a two-month symmetrical triangle on the top of significant support around $120. Thursday breakout above the pattern provides a swing trading opportunity for those who want the position to upside continuation. Remember to book profits using a trailing stop to stay in the bullish trend remains intact. For example, traders could exit the position on the first close below 20-day SMA.
Oracle Corporation (ORCL)
The Company Oracle (ORCL) offers a range of enterprise software solutions. Although almost 70% of its revenue comes from software licenses, support and maintenance, the company has increased its target of generating sales of cloud subscriptions to help grow its top line. Chief executive officer Larry Ellison has stated that subscription revenues should see a minimal impact of the pandemic, taking account of the greater part is already committed. July 10, 2020, Oracle stock has a market capitalization of $176.54 billion dollars, offer a 1.69% dividend yield, and is trading 9.49% this year.
The software giant’s share price has been largely range for the last year, outside of the strong pandemic induced by the decline and later recovery, between February and April. Last week, the price broke above the neckline of what now looks like a reverse head and shoulders pattern. In addition, the 50-day SMA crossed above the 200-day SMA in mid-June to indicate the emergence of a new bullish trend. Consider using a trailing stop here as well to let profits run. Manage the risk by placing a stop-loss order below the neckline and adapting it to the threshold of profitability if the price, takes the all-time high of $59.44.