ASX stock of the day: Nitro Software (ASX:NTO) shares rocket 11%

The Nitro Software Ltd (ASX:NTO) share price is rocketing today, Crash Bandicoot-style. Here’s what might be behind the Nitro explosion.

| More on:
The letters PDF on a red banner with a down arrow representing falling Nitro Software share price

Image source: Getty Images

The Nitro Software Ltd (ASX: NTO) share price is on fire today. Nitro shares have rocketed 11.36% higher at the time of writing to $2.94 a share after closing at $2.64 yesterday and opening at $2.68 this morning. But at one point today, the Nitro share price was all the way up to $3.02, a rise of more than 14%. Today’s moves continue the momentum that Nitro Software has been enjoying since early March. Since 9 March, Nitro shares are up roughly 30%. Not bad for a month’s work. The shares are also up ~125% over the past 12 months, although they are also close to 20% off the nitro 52-week high of $3.66 that we saw in October last year.

So who is Nitro Software? And why are Nitro shares rocketing today?

Exploding the Nitrocrate

Nitro Software might sound like something out of a bandicoot-based game from the ’90s. But perhaps unsurprisingly, it’s not. Nitro specialises in software that helps individuals and businesses work with PDF documents. PDFs are a format for electronic documents I’m sure we’d all be reasonably familiar with. However, what you might not be familiar with is the PDFs intricate history. Unlike most document formats, the PDF format was privately developed by the US company Adobe Inc (NASDAQ: ADBE). As such, commercial use of PDFs can often bring licensing costs and difficulties. That’s where Nitro comes in. 

The company offers a range of products, all delivered under a Software-as-a-Service (SaaS) model, where users pay a monthly fee for use of the software. These allow users to create, convert, edit and annotate PDF files, as well as various cloud-based storage and verification features. Nitro also allow users to ‘eSign’ documents, which is a feature that is expanding rapidly in today’s workplaces.

Why are Nitro Software shares rocketing today?

It’s not immediately obvious why the Nitro share price is rocketing so enthusiastically today. The last major piece of news out of the company was an announcement that the company’s executive chairman Kurt Johnson would have his contract extended by one year

However, Nitro did release its full-year results for FY2020 back in February, which investors might be reconsidering lately. In these results, Nitro reported revenue growth of 13% to $40.2 million, $27.7 million of which was annual recurring revenue. Subscription revenue also grew strongly, up 61% year on year. Nitro ended up delivering an operating loss of $2.4 million, which far exceeded the guidance of a $4 million loss. The company also told investors that it expects annual recurring revenue to grow between 41-51.6% in FY2021. 

As we reported at the time, the Nitro share price actually fell when these numbers were released, but perhaps investors have had a change of heart over the past month or so.

Another factor that might be at play is broker bullishness.

As my Fool colleague James Mickleboro reported last month, broker Morgan Stanley recently kept its overweight rating on Nitro and raised its price target for Nitro shares to $3.70 a share. Perhaps investors are jumping on Morgan Stanley’s train here. 

Whatever the reason, it’s certainly been a good day, and month, to hold Nitro shares. On the current share price, Nitro Software has a market capitalisation of $582.1 million

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Adobe Systems. The Motley Fool Australia has recommended Adobe Systems and Nitro Software Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News