Software stocks are getting hammered, but is this the moment to be greedy when others are fearful? Some analysts think so, pointing to a unique combination of oversold conditions and underlying strength in a select few companies.
Key Points
- Software stocks are broadly oversold, presenting potential opportunities.
- DocuSign, Intuit, and Atlassian show oversold conditions *and* strong analyst support.
- These companies are leveraging AI to improve their products and expand their market reach.
- Distinguishing between fundamentally sound companies and those with real problems is crucial.
DocuSign: More Than Just E-Signatures?
DocuSign (DOCU) has taken a beating, but they’re building something bigger: Intelligent Agreement Management (IAM). Think of it as managing contracts from creation to completion, not just the signature part.
According to CFO Blake Grayson, DocuSign has a “significant data advantage” with 150 million consented agreements on their IAM platform.
“If you go to ChatGPT and use these LLMs (Large Language Models, the AI models that power tools like ChatGPT), they’re partially accurate,” Grayson said. “A 15-point improvement is super valuable, and it provides even more to the trust component that our customers get from using DocuSign.”
They’ve also improved their dollar net retention (how much existing customers spend) from 98% to 102%. Six of the 20 analysts covering the stock rate it a “Strong Buy.” The average price target is $85.12, significantly above the current price.
Intuit: AI-Powered Financial Tools
Intuit (INTU), the company behind TurboTax and Credit Karma, is betting big on AI. They’ve been working on it for seven years, long before the recent AI hype.
According to consumer platform chief Mark Notarainni, AI is helping TurboTax users cut tax prep time. In fact, they saw a 12% reduction last year.
Intuit is using AI to make their experts more efficient, opening up a massive market of assisted tax filers. Twenty of the 31 analysts tracking the stock recommend “Strong Buy,” with an average price target of $800, well above the current price.
Atlassian: Riding the AI Wave in Software Development
Atlassian (TEAM), known for Jira and other collaboration tools, is also seeing benefits from AI. They just crossed $6 billion in annual revenue.
CEO Mike Cannon-Brookes noted that their remaining performance obligations (RPO) grew 44% year-over-year. “Those are tens of thousands of seats signing multiyear deals,” he said, indicating long-term confidence in their platform.
Interestingly, AI is *increasing* Jira usage, not replacing it. Twenty of the 28 analysts covering the stock recommend “Strong Buy,” with an average price target of $217.40, more than double the current share price.
Stocks Mentioned
What This Means For You
- Don’t blindly buy into the software dip. Do your homework.
- Look for companies with strong fundamentals and clear AI strategies.
- Consider companies with high analyst ratings and significant upside potential based on price targets.
- Remember that valuations are still high. Invest cautiously and diversify your portfolio.
- This isn’t a recommendation to buy these specific stocks. It’s a framework for thinking about opportunities in a volatile market.
Source: finance.yahoo.com
