Investors are always on the lookout for stocks with powerful earnings prospects. Alkami Technology (ALKT) is offering up a potential entry as earnings look set to rev up.

The company is a cloud-based digital banking provider. It serves banks, credit unions and fintech companies.

Its addressable market consists of financial institutions with assets of $100 million to $450 billion and it is targeting the top 2,500 of these by assets, excluding megabanks.

The Texas-based company's subscription-based software offerings are meant to help these firms compete with larger, technologically advanced institutions such as JPMorgan Chase (JPM) and Wells Fargo (WFC).

Analyst Bullish On Software Stock

Wall Street experts are bullish on the firm's prospects. It currently boasts an average price target of 44.56, according to TipRanks. It traded around 40 Thursday.

Citi analyst Andrew Schmidt is rating Alkami stock as a buy with a 44 target. He thinks it is a high-growth play on bank and credit union modernization.

"Alkami has a multiyear runway in its existing digital banking market, supported by required digital transformation at banks/credit unions (large generational wealth transfer is one driver)," he said in a Nov. 21 research note.

"We expect it to continue to drive user growth, and add functionality organically and inorganically (e.g., average revenue per user). Over the next 5+ years, there is opportunity to extend the growth runway by engaging adjacent areas of nondiscretionary spend."

Alkami Stock Analysis

Overall performance is strong, with Alkami having a near-perfect IBD Composite Rating of 98. Price performance is its strongest suit, and it sits in the top 7% of issues over the past 12 months.

Earnings performance is also improving for the software stock, netting it an EPS Rating of 81 out of 99. It has turned a profit in each of the past five quarters, having turned profitable in Q3 of 2023, according to MarketSurge.

The company is expected to swing from a loss of 94 cents per share in 2023 to earnings of 27 cents per share in 2024. Full-year EPS is then seen surging 88% to 50 cents in the year ahead, according to MarketSurge data. This is above the 25% growth level sought by those following IBD investing principles.

Alkami made solid progress from a prior consolidation buy point of 34.20, though it has yet to reach its 20% profit target. It is currently rebounding from its 10-week moving average, which can also be used as an entry. It is actionable as much as 5% above the benchmark.

Investors should wait for a stock's price to rebound in rising volume after a touchback to the 10-week line. This demonstrates that the stock is finding institutional support.

Institutional ownership is very high, with 76% of stock being held by funds. Noteworthy holders include the Columbia Acorn Fund (ACRNX).

Please follow Michael Larkin on X at @IBD_MLarkin for more analysis of growth stocks.

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