Wrapping up Q4 earnings, we look at the numbers and key takeaways for the vertical software stocks, including Toast (NYSE:TOST) and its peers.
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 17 vertical software stocks we track reported a mixed Q4; on average, revenues beat analyst consensus estimates by 2.94%, while on average next quarter revenue guidance was 3.73% under consensus. There has been a stampede out of high valuation technology stocks as raising interest rates encourage investors to value profits over growth again and while some of the vertical software stocks have fared somewhat better that others, they have not been spared, with share prices declining 5.33% since the previous earnings results, on average.
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 $769 million, up 49.4% year on year, beating analyst expectations by 2.11%. It was a mixed quarter for the company, with exceptional revenue growth but underwhelming guidance for the next year.
“Toast’s strong Q4 results round out a year of durable, efficient top-line growth, consistent margin improvement, and continued product innovation. As we continue to enhance our all-in-one digital platform, we’re helping restaurants diversify into additional service models, unlock new revenue streams, alleviate key pain points, and thrive in this dynamic operating environment,” said Toast CEO Chris Comparato.
The stock is down 31.6% since the results and currently trades at $17.75.
Is now the time to buy Toast? Access our full analysis of the earnings results here, it's free.
Best Q4: ANSYS (NASDAQ:ANSS)
Used to help design the Mars Rover, Ansys (NASDAQ:ANSS) offers a software-as-a-service platform that enables simulation for engineering and design.
ANSYS reported revenues of $694.1 million, up 5.86% year on year, beating analyst expectations by 6.87%. It was a very good quarter for the company, with very optimistic guidance for the next quarter and very strong guidance for the next year.
ANSYS delivered the highest full year guidance raise among its peers. The stock is up 20.3% since the results and currently trades at $321.41.
Is now the time to buy ANSYS? Access our full analysis of the earnings results here, it's free.
Slowest Q4: 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 $146.5 million, up 11.1% year on year, missing analyst expectations by 1.87%. It was a weak quarter for the company, with revenue guidance for the next quarter and the full year missing analysts' expectations.
Q2 Holdings had the weakest performance against analyst estimates in the group. The stock is down 25.4% since the results and currently trades at $23.67.
Read our full analysis of Q2 Holdings's results here.
nCino (NASDAQ:NCNO)
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 $109.2 million, up 45.7% year on year, beating analyst expectations by 4.5%. It was a mixed quarter for the company, with exceptional revenue growth but underwhelming guidance for the next year.
The stock is up 6.12% since the results and currently trades at $23.76.
Read our full, actionable report on nCino here, it's free.
2U (NASDAQ:TWOU)
Originally named 2tor after the founder's dog Tor, 2U (NASDAQ:TWOU) provides software for universities and colleges to deliver online degree programs and courses.
2U reported revenues of $236 million, down 3.11% year on year, in line with analyst expectations. It was a weaker quarter for the company, with slow revenue growth and a decline in gross margin.
The stock is down 44.2% since the results and currently trades at $5.5.
Read our full, actionable report on 2U here, it's free.
The author has no position in any of the stocks mentioned