Buy RingCentral & Criteo to Tap Software & Services Growth

Industry Overview - The Internet-Software & Services industry is experiencing a slow economy, with estimates fluctuating due to varying expectations on interest rate decisions [1] - Companies are in cost-saving mode, reducing operating expenses to maintain profitability despite revenue softness [1] - Capital investments are limited, with only a few companies making significant investments [1] Key Players - RingCentral (RNG) and Criteo (CRTO) are performing well by leveraging AI for revenue growth and developing client retention systems through subscriptions [2] - RingCentral's AI-powered product portfolio includes Unified Communications as a Service (UCaaS) and Contact Center as a Service (CCaaS), with average recurring revenue from new products exceeding $50 million for the first time [16][17] - Criteo's AI-driven commerce media platform connects advertisers with retailers, maintaining a strong client base of around 17,000 and a client retention rate of approximately 90% [21][23] Market Performance - The Zacks Internet – Software & Services Industry has shown improvement, returning 9.5% over the past year, outperforming the broader sector's return of 7.1% and the S&P 500's 8.8% [11] - The industry is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 22.3X, which is a 7.4% premium to the S&P 500 [13] Growth Prospects - The Zacks Industry Rank for the Internet-Software & Services industry is 45, placing it in the top 18% of over 250 classified industries, indicating strong growth prospects [6][8] - Despite recent rate cuts, the economic slowdown poses challenges for the industry, as customers tend to reduce software and service purchases during such times [7] Financial Estimates - The aggregate estimate revision trend shows caution, with estimates for fiscal years 2025 and 2026 experiencing fluctuations [9] - Analysts expect revenue growth of 5.7% for RingCentral in 2025 and 2.5% in 2026, while Criteo is projected to see sales increase by 4.8% this year [19][24]