We recently compiled a list of the 8 High Growth Software Stocks That Are Profitable In 2024. In this article, we are going to take a look at where Intuit Inc. (NASDAQ:INTU) stands against the other high growth software stocks.
The Software Industry: An Analysis
The software market is experiencing robust growth, driven by various trends and technological advancements. According to Precedence Research, the global software market size reached $659.17 billion in 2023. Looking forward, the market is expected to grow at a compound annual growth rate (CAGR) of 11.8% during 2024 – 2034 to reach $2.24 trillion by the end of the forecast period. In 2023, the North American region led the software market, holding a substantial share of 44%. The Asia-Pacific region is expected to witness significant growth during the forecast period.
A key factor influencing the market is the rise of artificial intelligence (AI). AI technologies are being integrated into software solutions to enhance efficiency and automate repetitive tasks. A study from Salesforce reveals that 85% of IT leaders expect AI to boost developer productivity over the next three years. This expectation underscores the growing recognition of AI’s role in streamlining workflows and optimizing software performance.
Another significant trend is the shift towards cloud-based software. Companies are migrating from traditional on-premises solutions to cloud services due to their flexibility, scalability, and cost-effectiveness. This transition allows businesses to access applications remotely and across various devices, which has become crucial in today’s digital landscape.
The 2024 AlgoSec State of Network Security report highlights a notable shift towards multi-cloud environments. The research, based on surveys conducted in H2 of 2022 and 2023, evaluated major players like AWS and Microsoft Azure. It indicates that security, continuity, and compliance are key factors driving organizations to adopt cloud platforms. While cloud adoption is growing, Azure remains the most popular platform, with AWS rapidly gaining ground.
The report also reveals that the move to remote work has significantly boosted Software-Defined Wide Area Networks (SD-WAN) deployment, dropping the percentage of organizations without SD-WAN from 55.2% in 2022 to 34% in 2023. Secure Access Service Edge (SASE) has become a popular solution for organizations by consolidating security functions into a unified cloud service. Additionally, firewall implementation has surged, with only 7.1% of respondents reporting no firewalls in 2023, down from 28.4% in 2022. This trend reflects a growing focus on securing cloud networks against external threats.
With an overview of the global software market in mind, let’s take a look at the 8 high-growth software stocks that are profitable in 2024.
Methodology
To compile our list of the 8 high-growth software stocks that are profitable in 2024, we used stock screeners from Finviz and Yahoo Finance. We sorted our results based on market capitalization and picked the top 50 largest software companies by market cap.
To narrow down our list to high-growth software stocks, we focused on companies with a compound annual growth rate (CAGR) in net revenue exceeding 18% over the past 5 years.
Next, we focused on profitability. From this initial list of high-growth software stocks, we narrowed our choices to stocks that had positive trailing twelve-month (TTM) net income and stocks that have grown their net income positively over the past 5 years.
To ensure the reliability of our findings, we consulted reputable sources such as SeekingAlpha, which provided insights into the net income CAGR and revenue CAGR over the past five years, and YCharts, which offered information on TTM net income.
Finally, from this list of high-growth software stocks that met our criteria, we focused on the top 8 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s database of 912 elite hedge funds. The 8 high-growth software stocks that are profitable in 2024 are ranked below in ascending order based on the number of hedge funds holding stakes in them as of Q2 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A professional tax preparer, using a laptop to complete an income tax return.
Intuit Inc. (NASDAQ:INTU)
TTM Net Income: $2.96 Billion
5-Year Net Income CAGR: 13.73%
5-Year Revenue CAGR: 19.14%
Number of Hedge Fund Holders: 82
Intuit Inc. (NASDAQ:INTU) is a leading American software company specializing in financial technology solutions. It offers well-known products such as TurboTax for tax preparation, QuickBooks for small business accounting, Credit Karma for personal finance management, and Mailchimp for email marketing. The company is actively integrating advanced technologies like artificial intelligence to improve user experiences and streamline financial processes.
The company is leveraging its investments in AI to enhance its offerings. Intuit Inc. (NASDAQ:INTU) recently introduced Intuit Assist, a generative AI-powered assistant designed to simplify financial tasks for consumers and small businesses. In fiscal year 2024, TurboTax Live’s revenue increased by 17%, while QuickBooks Live saw its new customer base more than triple. The company also achieved a 20% year-over-year growth in total online payment volume and helped small businesses secure $2.4 billion in financing through QuickBooks Capital. With ongoing investments to digitize the financial experience, Intuit Inc. (NASDAQ:INTU) is well-positioned to deliver innovative solutions that meet the evolving needs of its users.
According to Insider Monkey’s database, INTU has attracted increased interest from institutional investors, with 82 hedge funds holding stakes in the company as of Q2 2024, up from 77 in Q1 2024. This growing confidence reflects the company’s impressive growth trajectory. In the last five years, Intuit Inc. (NASDAQ:INTU) has achieved a revenue growth rate of 19.14% annually, while its net income has grown at an average rate of 13.73% during the same period.
Intuit Inc. (NASDAQ:INTU) ranks among the top 3 on our list of the high-growth software stocks that are profitable in 2024. Analysts are also bullish on INTU. Analysts currently hold a consensus buy rating on the stock and the 1-year median price target of $740.00 set by analysts indicates a potential upside of 19.54% from current levels.
Baron Funds stated the following regarding Intuit Inc. (NASDAQ:INTU) in its “Baron FinTech Fund” second quarter 2024 investor letter:
“Intuit Inc. (NASDAQ:INTU) has been rolling out Intuit Assist, a GenAI powered digital assistant, across its product lines to help Credit Karma users select new credit cards, QuickBooks customers forecast cash flow, Mailchimp customers create targeted email marketing campaigns, and TurboTax customers understand changes in their tax returns from the prior year. Klarna, the privately held consumer lending and payments company, is cutting costs by using GenAI assistants to handle two-thirds of customer service chats and reduce its dependency on external marketing agencies. We consider these GenAI advancements to be evolutionary rather than revolutionary, but we continue to closely monitor the impact of new technologies on the fintech industry.”
Overall INTU ranks 3rd on our list of the high growth software stocks that are profitable in 2024. While we acknowledge the potential of INTU as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than INTU but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.