Do you have $ 3,000? Here are 3 of the best software stocks to own in 2021
The past year brought some very impressive gains for some technological actions, as investors scrambled to find safe places to grow their money during a global pandemic and recession in the United States. But with 2020 now in the rearview mirror and with hopes that life could possibly return to normal later this year, investors may wonder what stocks might be great investments in 2021 and beyond.
To help you find some solid investments for this year, we asked a few Motley Fool contributors for software stocks that they think are good places to invest a few thousand dollars in 2021. They came back with it. DocuSign (NASDAQ: DOCU), Okta (NASDAQ: OKTA), and Roku (NASDAQ: ROKU). Here’s why.
DocuSign: initiating a new wave of digital transformation
Brian withers (DocuSign): The coronavirus has caused the closure of many corporate offices and DocuSign’s growth has accelerated as many have turned to the electronic signature specialist to continue operating in a remote working environment. But to think of this software as a service (Saas) company as a coronavirus game would be to underestimate the power of its platform. With the 38,000 new business and commercial customers added in the nine months since January 30, 2020, it is poised to have a strong 2021.
To put these new customers in perspective, at the end of its 2020 financial year, the company had 75,000 corporate and commercial customers. This is only a small percentage of the total of 589,000 customers, but they represent 88% of sales. Large organizations that joined DocuSign for nine months in 2020 increased their total number of important customers by 50%. Most of these customers have come to automate paper signatures, but are likely to stick around for the long haul for even more value.
When large customers start adopting electronic signature features, they often underestimate their overall usage. When companies deploy this new digital capability for digital agreement capture, they often find that there are many other areas of the business where this time-saving feature can be implemented. This service is also incredibly sticky. Once customers implement electronic signatures, they certainly won’t go back to manual paper methods. Over time, customers are paying on average more each year, as evidenced by its strong net dollar retention of 122%.
But DocuSign is more than just an electronic signature tool. He built an agreement cloud to allow large clients to manage the entire agreement lifecycle through the stages of preparation, signing, management and action. The Accord Cloud brings many value-added features such as standard agreement generation, centralized contract storage and classification, and even artificial intelligence-based search to compare similar clauses between contracts. This fully functional cloud platform is expected to double its addressable market, and it’s just getting started. Currently, the revenues from these enhanced services are not yet significant compared to the massive growth of electronic signatures. But that will change over time.
With billing growth (sum of all future contract values) of 63% year over year surpassing current revenue growth of 53%, these new customers are looking to fuel another record year for DocuSign. Investors who want to participate today can buy four stocks for $ 1,000 and have some cash. In a few years, your future self will thank you for making this smart investment.
Okta: a port in the cybersecurity storm
Danny Vena (Okta): There is no doubt that one of the biggest challenges businesses face is cybersecurity. Just look at the recent Solar winds hack, which compromised U.S. government agencies and tech companies. Add to that the acceleration of digital transformation resulting from the pandemic and the increased reliance on remote employees, and it’s easy to see why cybersecurity will take center stage in the months and years to come. One of the key components of protection against these intrusions is Okta.
Okta is the clear leader in identity and access management, taking on the complicated task of verifying identities and controlling access for employees, contractors and customers. By integrating with more than 6,500 business applications, its SaaS platform can create a single secure connection, while providing more complex multi-factor authentication. The company has more than 9,400 global companies as customers who rely on Okta to manage their identification and access protocols.
Okta is building a solid reputation. Research company Gartner named Okta an industry leader in access management, adding it to its famous Magic Quadrant for the fourth year in a row. Okta has also been recognized by Forrester Research as a leading Identity as a Service (IDaaS) provider for businesses.
All of these reviews have produced impressive financial results. For the third quarter, revenue grew 42% year-over-year, while subscription revenue increased 43%. This continuous income stream helps prepare the business for future success. At the same time, Okta’s remaining performance obligation (RPO) – which represents the backlog of subscription revenue – soared 53%, helping to illustrate the company’s continued potential. Like many high growth companies, Okta is not yet profitable. Perhaps more importantly, however, its free cash flow – which excludes non-cash expenses – continues to stay in the positive column and has more than quadrupled to 19% of revenue.
One of the biggest contributors to its financial success is the growing customer base. In the third quarter, Okta added more than 100 clients with annual contract values over $ 100,000, bringing the total to 1,780. The number of clients spending over $ 500,000 climbed 50% year over year. the other to reach 320. These large companies now represent 80% of the value of Okta’s annual contracts.
The need to secure corporate networks is not disappearing – in fact, it has never been greater. A growing number of companies are adopting new long-term remote working policies and the news is replete with stories of corporate and government hacks. It’s the world we live in, but Okta helps business executives sleep a little easier at night. This makes essential stock for investors.
Video streaming has never looked better
Chris Snow (Roku): Roku’s share price soared over 148% in 2020 as streaming TV shows and movies became one of the only forms of entertainment people could enjoy during lockdowns and social distancing. .
The pandemic has helped accelerate a cord-cutting trend that was already in place long before the arrival of COVID-19, and Roku’s video streaming platform harnessed it to the full. Roku makes money by selling advertising and taking a share of the subscription services that people sign up for through the platform – and the business is booming.
Roku’s revenue jumped 73% in the third trimester and active customers jumped 43% from the quarter last year, with average revenue per user (ARPU) of 20%.
But the company is not only having a good quarter. More and more people are abandoning traditional cable and satellite TV subscriptions and flocking to complementary streaming services like Apple Television +, Netflix, Disney+, and many others. In fact, 6 million people abandoned traditional pay-TV services in 2020, and an estimated one-third of Americans will have cut the cord by 2024.
Roku’s platform allows users to sign up and stream major services, and many smaller ones, meaning that whatever services will become the most popular in the years to come, the platform of Roku will benefit.
While Roku is already benefiting from the rise of streaming services, investors would be wise to pay close attention to this action in 2021.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.