It has been a decent year for some of the major large-cap players in the software industry.
And more recently, we’ve seen shares really begin to appreciate in lockstep with the broader equity market.
Using Profit Scanner, we have immediate access to all the important technical happenings that help determine whether a particular stock is a good buy or not.
Today, we’ll look at three well-known software companies to see if they currently present any favorable trading opportunities for investors.
Software Stocks to Buy: Adobe Systems Incorporated (ADBE)
Adobe Systems Incorporated (ADBE) recently announced fiscal Q1 2016 results — and shareholders were pleased. The company reported year-over-year revenue growth of about 24%, which brought revenue for the quarter to $1.38 billion, versus $1.11 billion back in Q1 2015.
Additionally, GAAP net income rose from $84.8 million to $254.3 million, representing a 200% leap. Hence, Adobe’s top and bottom lines improved significantly and were well above guidance.
Of note, digital media revenue climbed to $932 million (+33%), and marketing cloud revenue grew to $377 million (+21%). And, as an added boost to shares, Adobe went into the market and repurchased 1.5 million shares of its own stock at a cost of $133 million.
Looking ahead, Adobe CFO Mark Garrett had this to say: “Based on our strong Q1 results and business momentum, we are increasing our annual revenue and earnings targets for the year.”
That said, we can use Profit Scanner’s Technical Event Lookup feature to search for any company ticker that piques our interest. In the chart below, ADBE appears poised to fight for new highs following a long period of wide price-range movement. But the stock will likely have to fill the recent gap down to $90 per share first — just a few dollars shy of where ADBE is currently trading.
The system kicked out an intermediate-term event in which the price crossed above its 21-week moving average, confirming the bullish trend.
As you may already know, a moving average is an indicator that shows the average value of a security’s price over a period of time. They are beneficial in the sense that they can help reduce “noise” associated with day-to-day price fluctuations for any given stock or index.
Software Stocks to Buy: Microsoft Corporation (MSFT)
Since the March 2009 market lows, shares of Microsoft Corporation (MSFT) have gone parabolic. And that isn’t something you’d expect from an established tech company whose name rolls off the tongue for those who love and loathe their products.
With Satya Nadella now at the helm, things have turned around in a big way. Long gone are the days of failure, marked by the Nokia Corporation (ADR) (NOK) deal, Windows 8 and Lumia smartphones. With Windows 10, Nadella was able to rally the company and its employees around a single vision, one that implements the platform across all devices.
Sure it’s great for consumers, but it’s also a big boost for app developers as well.
And with PC sales slowing, Nadella found success in the release of the Microsoft Surface, which merged the best of both the tablet and laptop worlds, selling nearly 30% more of these devices than they did a year prior and lifting total revenues up to about $24 billion.
Based on what investors have seen under Nadella’s leadership thus far, there are plenty of reasons to be optimistic going forward.
But what does Profit Scanner have to say?
Well, again, we have an intermediate-term bullish event in which the price of MSFT has crossed above its 21-week moving average. Prior to that, on March 9, we were informed that the shares had crossed above the 50-day moving average (see chart below).
The system tells us that resistance is found at $54 per share, right about at current prices.
With the stock continually bumping up against this price level over the past six months, investors have to be thinking that it’s just a matter of time before the bulls break down that barrier and demand a higher valuation.
Software Stocks to Buy: Oracle Corporation (ORCL)
Lastly, we’ll look at Oracle Corporation (ORCL), which is one of the other major software developers out there. On March 15, the company announced fiscal 2016 Q3 results. Earnings came in at 64 cents per share, just above the 62-cent estimate that analysts were expecting.
Similar to others in the space, Oracle has enjoyed tremendous growth in its cloud business (+40% in USD), which generates $735 million in revenues. This segment now accounts for 8% of total sales, up from 6% a year prior.
In the chart below, we can see that investors have taken the news quite well. Shares are on the march higher and have begun to pull away from their 50-day moving average in what appears to be a very strong price move to the upside.
Using Profit Scanner, we’ve seen nothing but bullish signals — four in total — since Feb. 17 when the stock was trading for $36.63. Since then, various technical developments have occurred that continue to confirm the trend’s strength.
Just two days after our initial signal indicating a price break above the 50-day moving average, we received another intermediate-term alert focusing on the Moving Average Convergence Divergence (MACD) indicator. A bullish event is generated when the MACD crosses above the signal line, showing that the current MACD is actually higher than its average, a sign of increasing strength for the price.
Since then, we’ve seen the stock climb to $41.39 (+13%). While there are likely marginal gains to be had, the system remains cautious near $43.57 per share, where overhead resistance can be found.
Profit Scanner powered by Recognia can help traders of all levels uncover these signals to determine the best timing to buy. Or use Profit Scanner’s technical insight to validate your own trading ideas. See how easy this powerful tool is to help you uncover hidden opportunities in the market.
