CRTO & RNG Look Good Despite Software & Services Weakness
The Internet-Software & Services industry is highly correlated to the economy; consequently, estimates are moving down as tariffs, inflation and interest rate decisions increase economic uncertainty. The industry appears to be in cost-saving mode as operating expenses are coming down to generate profit despite revenue softness. Capital investments are also being limited, barring a couple of companies. In this background, companies like Criteo (CRTO) and RingCentral (RNG) are shining through for a number of reasons. First, they are leveraging AI, which is translating to revenue growth and helping offset the ongoing economic weakness. Second, they have developed systems of client retention through subscriptions and platforms. Being the backbone of the digital economy, it's hard to see this industry doing badly over the long term. The diversity of players in this group leads to some dissonance. Valuations have been improving since April.
About the Industry
The Internet Software & Services industry is relatively small, primarily involved in enabling platforms, networks, solutions and services for online businesses, and facilitating customer interaction and use of Internet based services.
Top Themes Driving the Industry
The level of technology adoption by businesses impacts growth. While some companies have already built platforms facilitating the development and use of artificial intelligence, others are scrambling to catch up in order to stay competitive. This is further accelerating the adoption of technology that can help collect and analyze data, whether on company premises or in the cloud. Additionally, today we have many more cloud-first companies than ever before. Therefore, there is steadily increasing demand for software and services delivered through the Internet.
Despite recent rate cuts, the economy continues to slow down, which isn't good news for an industry that thrives on strong economic growth. No matter what the other variables – and there are many, considering the motley crowd that makes up this group – an economic slowdown always leads customers to make do with less, i.e. reduce expenditures on software and services. Additionally, geopolitical tensions in Europe and the Middle East have a bearing on oil prices and supply chains, and therefore, contribute to the volatility and uncertainty within the economies. The decision of the U.S. government to first impose tariffs and then alleviate them, along with its trading partners' retaliatory tariffs, adds further complexity to the operating environment. This means that the outlook for 2025 is a bit cloudy.
Given the colorful international politics and the resultant volatility in international markets, there is notable impact on the performance of each player. The fact that they also serve a very broad spectrum of markets also makes it difficult to predict specific outcomes for the group, as a whole. Players increasingly prefer a subscription-based model, which brings relative stability to their businesses. This works especially well when the companies have critical offerings. The ability to retain subscribers and raise prices as necessary is proving to be the key to success in the current environment.
The higher volume of business being operated through the cloud and the increasing demand for enabling software and services involves infrastructure buildout, which increases costs for players. This causes great fluctuations in profitability as new infrastructure is depreciated and fresh debt is serviced. So even for those players that see revenue growth accelerate, profitability is often a challenge. That said, most of the companies in this industry have been working down debt over the last few years with a positive impact on results.
Zacks Industry Rank Indicates Limited Prospects
The Zacks Internet – Software & Services industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #203, which places it in the bottom 17% of nearly 250 Zacks classified industries.
The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates that the growth prospects are deteriorating. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The aggregate estimate revision trend warrants some caution. That is because the estimates for both fiscal years 2025 and 2026 have moved around quite a bit and have now taken a downward turn. The 2025 estimate was more or less steady through July 2024 before dipping in August. It picked up again through December before dropping back down thereafter. The 2026 estimate was also relatively steady through July, dropping sharply in August and picking up again from October before dropping sharply again this month. Net-net, the 2025 estimate is down 23.7% over the past year while he 2026 estimate is down 21.2%.
Before we present a few stocks that you may want to consider for your portfolio, let's take a look at the industry's recent stock-market performance and valuation picture.
Industry's Stock Market Performance Is Strong
The Zacks Internet – Software & Services Industry lagged both the broader Zacks Computer and Technology Sector and the S&P 500 through most of 2024, reversing the trend this year.
Overall, the industry returned 20.5% over the past year compared with the broader sector's return of 11.7% and the S&P 500's 11.0%.
One-Year Price Performance
Image Source: Zacks Investment Research
Industry Is Somewhat Overvalued
On the basis of forward 12-month price-to-earnings (P/E) ratio, we see that the industry is currently trading at a 24.96X multiple, which is a 15.2% premium to the S&P 500 and a 2.2% discount to the technology sector. Technology stocks usually trade at a higher multiple because investors pay a higher premium for innovation. In this case, it is also worth noting that the industry is trading at its highest multiple over the past year.
The industry has traded in the range of 16.95X to 24.96X and a median level of 19.14X over the past year, as the chart below shows.
Forward 12 Month Price-to-Earnings (P/E) Ratio
Image Source: Zacks Investment Research
2 Stocks Worth Considering
Criteo S.A. (CRTO): Paris-based Criteo S.A. provides a commerce media platform delivering marketing and monetization services in North and South America, Europe, the Middle East, Africa and Asia-Pacific. Its unified, AI-driven platform directly connects advertisers with retailers and publishers to drive commerce on retailer sites and on the open Internet.
The company's strategy is to harness AI to expand its reach across audiences, seeking to expand its ecosystem across advertisers, retailers and third-party platforms, using the commerce dataset to feed its AI models.
As advertiser budgets are sensitive to macroeconomic factors like the geopolitical conflicts in Ukraine and the Middle East, as well as things like inflation and interest rates back home, this market hasn't done exceptionally well in the past year. However, Criteo was able to leverage its Retail Media platform to offset some of this softness.
Despite the loss of a large customer that is expected to hurt results from the fourth quarter of 2025, the company has a depth of offerings to continue to add many more. Existing customer spending soared in the last quarter, with ex-TAC (traffic acquisition costs) same retailer contribution retention at 120%.
As brands and retailers continue to onboard its platform, networking effects kick in, helping results. Its client retention remained close to 90% in the last quarter. Overall Retail Media ex-TAC contribution growth was 18%. Performance media ex-TAC contribution growth was a more sedate 4%, helped by growing strength in its AI-powered commerce solution.
Shares of this Zacks Rank #2 (Buy) company have lost 20.5% over the past year. The Zacks Consensus Estimate for 2025 is down -12 cents (2.7%) in the last 30 days. The 2026 earnings estimate is down -37 cents (7.7%). Analysts expect sales to increase +2.4% this year with earnings declining -3.9%. Earnings are currently expected to grow +0.9% the following year on the back of +2.7% revenue growth.
Price and Consensus: CRTO
Image Source: Zacks Investment Research
RingCentral Inc. (RNG): Belmont, CA-based RingCentral's AI-powered product portfolio includes the Unified Communications as a Service (UCaaS), Contact Center as a Service (CCaaS), Video & Events, and RingSense AI solutions. Its success is as much a function of its innovative communications and collaboration solutions as its diverse range of strategic partners, global service providers, channel partners and third-party developers.
The company's new AI-based solutions are doing extremely well and management has said that in the last quarter, average recurring revenue ARR exceeded $2.5 billion. The newly-launched AI receptionist (AIR) operates as a digital phone assistant, automatically recording key details on calls, including decisions and action items; and generates context aware chat messages in real time, as well as context-based SMS. There are already 1000 activated customers on AIR. Other highlights of the quarter included its integration into the Salesforce CRM ecosystem and big customer wins such as Cox Communications and Altafiber (previously Cincinnati Bell).
Shares of this Zacks Rank #3 (Hold) company have lost 26.5% over the past year. The Zacks Consensus Estimate for 2025 is level with the estimate 30 days ago while the 2026 earnings estimate is down 3 cents. Analysts are looking for revenue growth of 4.6% in 2025 and 5.8% in 2026, with earnings expected to grow a respective 13.5% and 11.2%.
Price and Consensus: RNG
Image Source: Zacks Investment Research
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Ringcentral, Inc. (RNG) : Free Stock Analysis Report
Criteo S.A. (CRTO) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CNN
2 hours ago
- CNN
‘We can't let our foot off the gas pedal': Jeffries on Dems' plan to counter ‘Trump's one, big ugly bill'
When you visit any website, it may store or retrieve information on your browser, mostly in the form of cookies. This information might be about you, your preferences or your device and is mostly used to make the site work as you expect it to. The information does not usually directly identify you, but it can give you a more personalized web experience. Because we respect your right to privacy, you can choose not to allow some types of cookies. Click on the different category headings to find out more and change our default settings. However, blocking some types of cookies may impact your experience of the site and the services we are able to offer.
Forbes
6 hours ago
- Forbes
How To Make A Good Password – 4 Strong Password Examples
A good password is one that's impossible to guess. One of the simplest ways for a hacker to gain control of your online accounts is by getting hold of your password. Sometimes, they do this through brute force attacks — automatically checking millions of random permutations — or by working through words in the dictionary. Sometimes, they'll use credential stuffing, exploiting the fact that many people reuse passwords across different sites. We're constantly told that it's important to always use really strong passwords — but what does this mean in practice? We look at how to create a strong password and help keep your online accounts safe from attack. A good password is, essentially, one that it's impossible or very difficult for an attacker to guess. That means avoiding anything obvious — 'password' or '123456' for example, both of which are surprisingly frequently used. Generally speaking, the longer a password is, the better, and it should include a combination of upper-case letters, lower-case letters, numbers and symbols. While a combination of real words and other symbol is fine, using the name of your child or your favorite sports team is a really bad idea. And you should make sure that each password you use is unique — never reuse a password, or even a very similar one — across more than one site. If you're coming up with a password yourself, you could, of course, simply bash your keyboard at random and use whatever comes out — and that's actually not a bad way of doing it. You should make sure that whatever you come up with is reasonably long and complex. Some cyber experts recommend using a passphrase — several words strung together — as a starting point; although anything like a song lyric or famous quotation is a really bad idea. It's also less clever than you might think to use special characters in place of normal letters — pa$$w0rd', or the like — as hackers are on to that one. Finally, there are a number of password generators online that will come up with one for you that should fulfill all the criteria for a good password. Using a random string of upper- and lower-case letters, symbols and numbers should usually generate a very strong password. The longer it is the better, with security experts recommending that it should have at least 14 characters. Obviously, this won't exactly be easy to remember — but there are dozens of free password manager services online that you can use to do the job for you. To create a password that's secure but a little easier to remember, many security agencies, including the U.S.'s Cybersecurity and Infrastructure Security Agency, suggest the use of a passphrase. One way to do this is to think of three random words and string them together — needless to say, they should be random, rather than a part of a well-known phrase or something based on personal information, such as 'MyCatTibbles', for example. Perhaps the simplest solution for coming up with a really strong password is to use a password generator, which does all the hard work for you. Password generators use random number generators to create strong, random passwords with no patterns or predictable sequences. Most allow you to customize your passwords, and will store them securely — so that the only one you'll have to remember is the one for the password manager itself. When it comes to creating a strong password, the longer it is, the better. It's usually recommended that it should have at least 14 characters. A strong password will usually contain a mixture of upper- and lower-case letters, numbers and symbols, although it's also possible to create a good one by stringing together a series of unrelated words. There's no need to tailor a password to a particular site, although some will require you, for example, to use a minimum number of characters or to include numbers or symbols. One hard-and-fast rule is that you should never reuse the same or very similar passwords on more than one site — and don't use any of the examples given below, just in case hackers are reading this article too. This password — 'qo34inhj#';[ladfbyulB' — was produced by hitting the keyboard randomly, and includes a mixture of letters and other characters. It's a good length, contains no personal information, and is obviously impossible to guess. It does have one flaw, which is the lack of an upper-case letter — adding a couple in would make it even stronger. A passphrase consisting of several real words is an awful lot easer to remember than a randomly-generated password, making it an attractive option. However, you shouldn't be tempted to use related words or a quotation, such as 'BigBrownDog' or 'ShallICompareThee', as this could potentially be guessable. Instead, use completely unrelated words, such as 'BillPlantKitchenEngine'. A passphrase will be stronger if it, too, contains numbers or special symbols: 'Bill&PlantKitchenEngine1', for example. An ideal password is one that you can remember, but others can't guess, and one possibility is to create one based on a string of characters that means something to you, but nothing to anyone else. You could, for example, start with the sentence 'My new house is in San Francisco and is painted white with blue trim'; then take the last letter of each word to come up with 'ywesnnodsdehem'. This does have the failing that it lacks upper-case letters or symbols, but could easily be improved by adding a couple in. Some sites allow you to use alternative methods to verify your identity and access your account. This may be facial recognition, a fingerprint or a passkey, which will be sent to you by text or email and which you then use to sign in. All these methods are more secure than passwords — and in the case of biometric identification, are also quicker to use and a good deal less hassle. Bottom Line We're constantly told about the importance of using a strong, unique password — but it's not necessarily clear how to do that. A good password is one that's impossible to guess, so you should avoid anything obvious or based on findable information, like your children's names. Go for something long, with a mixture of letters and symbols instead. How Often Should You Change Your Password? However strong your passwords are, it's a good idea to change them regularly — especially passwords for sensitive accounts like your bank or other financial services. Many experts recommend doing this every three months or so. You should also change all your passwords if you've been hacked, or if a service you use has experienced a data breach. Some security experts recommend changing passwords if you've used public wifi too. It's worth noting that, while some organizations demand that staff change their passwords regularly, this is considered a bad idea by cyber security authorities, as the hassle of doing it means that people are more likely to reuse passwords or even write them down. How Long Should A Password Be? Many sites impose a minimum length for a password, often eight characters, as the longer a password, the more secure it is. Security firms have different recommendations, but generally speaking suggest a minimum character count of between 12 and 20. There's no maximum — apart from the length of time you're prepared to spend typing — but anything longer than 30 or 40 characters is probably overkill. Some password generators create passwords of more than 100 characters, but as password managers store these for you, there's no extra hassle involved. Should You Be Password Recycling? While it's tempting to reuse your passwords from one account to another, there are very good reasons for using a radically different password for all of your online accounts. When criminals get hold of one of your passwords they will often use a technique called credential stuffing to try the same one against all your other accounts and potentially gain access. And, note, it's not enough to just change a password slightly — if you're using Tibbles123 on one account, they'll check Tibbles321, and other variations, too.
Yahoo
12 hours ago
- Yahoo
Make your internet a safer place with AdGuard, now $16 for life
The following content is brought to you by Mashable partners. If you buy a product featured here, we may earn an affiliate commission or other compensation. TL;DR: Online safety for the whole family is easy with this lifetime AdGuard Family Plan, now just $15.97 (reg. $169) with code FAMPLAN. Opens in a new window Credit: AdGuard AdGuard Family Plan: Lifetime Subscription $15.97 $169.99 Save $154.02 with code FAMPLAN Get Deal The internet isn't just cluttered with ads; there are also trackers and other hidden threats. AdGuard keeps you safe online by blocking intrusive ads, stopping trackers, and safeguarding your privacy across all your devices. Right now, you can grab lifetime protection for the whole crew with the AdGuard Family Plan. Cover up to nine devices for only $15.97 (reg. $169.99) with code FAMPLAN. The internet should be fun, not frustrating. AdGuard tackles the most annoying parts of online life, like pop-ups, autoplay videos, and banner ads, so that you can enjoy your time browsing, streaming, and scrolling again. Aside from blocking ads, AdGuard also protects your privacy. Your information will stay safe from trackers and activity analyzers, and you'll be shielded from malware and phishing websites that you or your family members could fall victim to. Moms and dads will love AdGuard's parental control feature, which keeps your kids safe from inappropriate content online. This Family Plan lets you protect up to nine devices with AdGuard, so you can make sure everyone's devices stay safe. And it works with Android and iOS operating systems alike, so it can be used on tablets, smartphones, and laptops. Secure your own AdGuard Family Plan for life for just $15.97 with code FAMPLAN. StackSocial prices subject to change.
