NTWK, ZIXI, SMSI: Long Plays in Application Software Space

Application software stocks such as NetSol Technologies Inc (NASDAQ: NTWK), Zix Corporation (NASDAQ: ZIXI) and Smith Micro Software Inc (NASDAQ: SMSI) are taking positive cues from the broader markets and have substantially recovered from their intermediate lows of last week. However, there is more to these stocks than just the ability to trend along with the markets.

When it comes to investing in small companies, investors often feel shortchanged in terms of future revenue visibility, profitability and corporate governance.  However, NetSol Technologies Inc (NASDAQ: NTWK) comes across as a company that has been around for quite some time and has a profitable business to boast of. The stock currently trades at $0.67, down around 1.5 per cent in the morning trade and has a market capitalization of $38 million. In the past 52 weeks, it has moved in a range of $0.49 on the lower side and $2.39 on the upside. Having been around for a long time, the company is now looking to acquire United Kingdom-based Virtual Lease Services Ltd, a provider of asset and loan finance services to corporate and professional firms in the UK. NetSol’s full-year results, although disappointing on the top line, maintained bottom-line growth.

Texas-based email encryption solution provider Zix Corporation (NASDAQ: ZIXI) created a new 52-week low of $2.16 early this month, but has been quick to recover to the current level of $2.84. Incidentally, in the recent past, the stock’s trading volume has gone up substantially indicating value buying taking place at lower levels. However, the stock is still down around 10 per cent on a monthly basis and has a lot of upside potential.  The current market price is nearly 4.5 times its full-year earnings that provide all the more reason for the stock to appreciate in value.

August and September marked continuous value erosion in Smith Micro Software Inc (NASDAQ: SMSI), but the stock seems to be bottoming out now after hitting a 52-week low early this month. It has picked up a strong momentum, having rebounded from $1.4 to $1.68 in the last week. However, the company has got some concerns around its operations and it is best to wait for another quarterly set of numbers before initiating fresh long-term positions. Buying for quick trading gains still makes sense.