Software stocks have recently faced significant downturns, with the iShares Expanded Tech-Software Sector ETF (IGV) dropping over 20%. Investors are concerned that advances in artificial intelligence (AI) could disrupt traditional software business models. Despite these concerns, analysts suggest that market reactions may be overstated and that durable software companies might be undervalued, creating investment opportunities.
Several key players in the software industry are trading near cyclical lows despite their strong competitive positions. Companies like AppLovin (APP), Palantir Technologies (PLTR), Salesforce (CRM), ServiceNow (NOW), and Robinhood Markets (HOOD) are highlighted as appealing investment options due to their reset valuations. For instance, Salesforce is trading at a historical low of approximately 14.7x forward earnings, while Palantir’s revenue is expected to surge by 61.4% this year. AppLovin’s revenue is projected to grow 18.2% this year, demonstrating the potential for recovery among these firms.
Investor sentiment towards these technology stocks may be shifting, offering a compelling buy signal for long-term investors. ServiceNow and Robinhood are also noted for their attractive growth prospects, with revenue anticipated to grow by 20.1% and 53%, respectively. As valuations have reset across these prominent names, market conditions may be favorable for investors with a multi-year horizon.
