The end of an earnings season can be a great time to assess how companies are handling the current business environment and discover new stocks. Let’s have a look at how Q2 Holdings (NYSE:QTWO) and the rest of the vertical software stocks fared in Q2.
Software is eating the world, and while a large number of solutions such as project management or video conferencing software can be useful to a wide array of industries, there are industries that have very specific needs. Whether it is life-sciences, education or banking, the demand for so called vertical software, addressing industry specific workflows, is growing, fueled by the pressures on improving productivity and quality of offerings.
The 12 vertical software stocks we track reported a weaker Q2; on average, revenues missed analyst consensus estimates by 0.53%, while on average next quarter revenue guidance was 3.23% under consensus. Tech multiples have reverted to the historical mean after reaching all time levels in early 2021 and vertical software stocks have not been spared, with share prices down 24.4% since the previous earnings results, on average.
Q2 Holdings (NYSE:QTWO)
Founded in 2004 by Hank Seale, Q2 (NYSE:QTWO) offers software as a service that enables small banks provide online banking and consumer lending services to their clients.
Q2 Holdings reported revenues of $140.3 million, up 13.5% year on year, in line with analyst expectations. It was a weaker quarter for the company, with an underwhelming revenue guidance for the next quarter and slow revenue growth.
The stock is down 38.5% since the results and currently trades at $29.55.
Best Q2: Toast (NYSE:TOST)
Founded by three MIT engineers at a local Cambridge bar, Toast (NYSE:TOST) provides integrated point of sale (POS) hardware, software, and payments solutions for restaurants.
Toast reported revenues of $675 million, up 58.9% year on year, beating analyst expectations by 4.22%. It was an impressive quarter for the company, with very optimistic guidance for the next quarter and exceptional revenue growth.
Toast scored the strongest analyst estimates beat and fastest revenue growth among its peers. The stock is up 4.13% since the results and currently trades at $18.88.
Is now the time to buy Toast? Access our full analysis of the earnings results here, it's free.
Slowest Q2: Unity (NYSE:U)
Started as a game studio by three friends in a Copenhagen apartment, Unity (NYSE:U) is a software as a service platform that makes it easier to develop and monetize new games and other visual digital experiences.
Unity reported revenues of $297 million, up 8.58% year on year, missing analyst expectations by 0.67%. It was a weak quarter for the company, with guidance for both the next quarter and full year missing analysts' expectations. Unity previously announced that it has entered into an agreement to merge with ironSource.
The stock is down 36.9% since the results and currently trades at $31.60.
Founded in 2010 and named for a combination of “docs” and “proximity”, Doximity (NYSE: DOCS) is the leading professional network for U.S. medical professionals.
Doximity reported revenues of $90.6 million, up 24.7% year on year, beating analyst expectations by 1.1%. It was a weak quarter for the company, with revenue guidance for both the next quarter and the full year missing analysts' expectations.
The stock is down 36.6% since the results and currently trades at $25.50.
Founded in 2011 in North Carolina, nCino (NASDAQ:NCNO) makes cloud-based operating systems for banks and provides that software as a service.
nCino reported revenues of $99.6 million, up 49.7% year on year, beating analyst expectations by 2.17%. It was a strong quarter for the company, with exceptional revenue growth.
The stock is up 1.65% since the results and currently trades at $29.85.
The author has no position in any of the stocks mentioned