In this article, we will discuss the 10 Oversold Software Stocks to Buy According to Analysts.
As per The Business Research Company, a leading market research firm, the increased automation of business processes can fuel the growth of the broader software services market. The use of automation software remains a superior method of limiting costs where an opportunity lies to expand customer service while constantly reducing expenses. Therefore, the use of automation in business processes can improve the demand for software services market. Technological advancement remains the key trend that has been gaining popularity.
The Business Research Company believes that renowned companies operating in the software service market continue to develop innovative products, including cloud infrastructure platforms, in a bid to address larger customer bases.
What Lies Ahead for the Software Industry?
S&P Global expects that uneven global macroeconomic conditions might influence IT spending in 2025. That being said, the firm sees another year of strong software growth of ~10% in 2025 as compared to ~9% in 2024. This marginal acceleration in the rate sustains the growth trend of the previous 2-3 years, with some uplift expected due to AI-associated spending. The AI-related spending growth is expected to outpace that of overall software growth, although it will make up a smaller share—lower than 10%—of the total spending, which is expected to be in the range of $1 trillion – $1.2 trillion.
The firm expects that key drivers will include enterprise digital transformation initiatives, AI integration in software, and business automation workflows in a bid to enhance efficiencies, and a strong focus on cloud and network security, among others.
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AI To Help the Software Industry’s Growth
In 2024, software spending remained resilient, demonstrating the power of the recurring subscription model, although growth rates among smaller, sponsor-owned software providers were much lower, says S&P Global. The software segment (~10%) is expected to outpace the overall IT industry. While AI-associated gains remain nascent overall, the firm expects that continued strong growth among software vendors validates the strategy of offering productivity gains and reducing customers’ operational costs.
While the AI hype has not yet translated to significant software revenues for large SaaS companies, client interest remains robust. The companies believe that ongoing technological development and investment can result in deal activity. Therefore, S&P Global expects enterprise AI experimentation and interest to remain elevated, with new product rollouts garnering incremental growth and value-based average selling price increases for software vendors.
Amidst such trends, we will now have a look at the 10 Oversold Software Stocks to Buy According to Analysts.
A close-up view of an AI-platform software code running on a monitor.
Our Methodology
To list the 10 Oversold Software Stocks to Buy According to Analysts, we used a screener to shortlist the stocks catering to the broader software sector. Next, we chose the ones that have declined significantly over the past 6 months and that analysts see significant upside to. Finally, the stocks were arranged in ascending order of their average upside potential, as of February 14. We also mentioned the hedge fund sentiment around each stock, as of Q3 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Oversold Software Stocks to Buy According to Analysts
10) Marqeta, Inc. (NASDAQ:MQ)
% Decline Over Past 6 Months: ~33.2%
Average Upside Potential: ~52.7%
Number of Hedge Fund Holders: 33
Marqeta, Inc. (NASDAQ:MQ) operates a cloud-based open application programming interface platform that delivers card issuing and transaction processing services. In Q3 2024, the company’s growth trajectory was aided by lapping of Block contract renewal, while at the same time, demonstrating operational discipline to fuel robust adjusted EBITDA. This, together with numerous new product announcements, enhances Marqeta, Inc. (NASDAQ:MQ)’s platform to offer transformative payment solutions at scale for its expanding customer base.
For example, the company rolled out the Portfolio Migration service which reduces complexity for customers who plan to upgrade existing card programs onto Marqeta, Inc. (NASDAQ:MQ)’s platform, without impacting their existing cardholder experience. Notably, the company has migrated millions of Klarna cards in Europe onto its platform from Klarna’s incumbent processor. For Q4 2024, Marqeta, Inc. (NASDAQ:MQ) expects net revenue growth of 10% – 12% and gross profit growth of 13% – 15%.
The growth in the software industry resulted in a surge in embedded finance, where non-financial companies tend to integrate financial services into their offerings. Marqeta, Inc. (NASDAQ:MQ)’s flexible platform enables businesses throughout sectors to embed payment solutions easily, expanding the customer base.
9) PDF Solutions, Inc. (NASDAQ:PDFS)
% Decline Over Past 6 Months: ~30.1%
Average Upside Potential: ~61.5%
Number of Hedge Fund Holders: 13
PDF Solutions, Inc. (NASDAQ:PDFS) offers proprietary software and physical intellectual property products for integrated circuit designs, electrical measurement hardware tools, proven methodologies, and professional services. The company has been witnessing challenges in aligning customer data for AI applications, which might affect the adoption of their AI-related products. Furthermore, PDF Solutions, Inc. (NASDAQ:PDFS)’s several end-market segments have been struggling. For Q4 2024, it reported total revenues of $50.1 million, demonstrating an increase of 22% as compared to the same period last year.
For FY 2025, PDF Solutions, Inc. (NASDAQ:PDFS) remains optimistic, expecting a revenue growth rate approaching 15% YoY. The company remains focused on expanding its customer base and enhancing its product offerings to fuel further growth. With the growth in AI and high-performance computing applications, semiconductor companies have been investing in improving chip yields and manufacturing efficiency. PDF Solutions, Inc. (NASDAQ:PDFS)’s Exensio® Analytics Platform aids chipmakers in optimizing production, which results in reducing defects and improving performance.
Therefore, continued growth in the software industry, mainly in AI, cloud computing, and semiconductor manufacturing, drives demand for PDF Solutions, Inc. (NASDAQ:PDFS)’s data analytics and software tools.
8) PagSeguro Digital Ltd. (NYSE:PAGS)
% Decline Over Past 6 Months: ~43.4%
Average Upside Potential: ~67.3%
Number of Hedge Fund Holders: 25
PagSeguro Digital Ltd. (NYSE:PAGS) is engaged in the provision of financial and payment solutions for consumers, individual entrepreneurs, micro-merchants, and small and medium-sized companies. The company’s strong revenue growth in Q3 2024, together with healthy margins, reflects the effectiveness of PagSeguro Digital Ltd. (NYSE:PAGS)’s strategic investments in process optimization, innovation, and service quality. In Q3 2024, the company reported net revenues of R$4.8 billion, reflecting a growth of 20% YoY.
PagSeguro Digital Ltd. (NYSE:PAGS)’s stock appears to be well-placed to witness growth considering competitive advantages, like the integration of PIX into its platform, and a healthy growth in online banking. The company’s credit portfolio recorded strong growth in Q3 2024, rising 30% YoY to R$3.2 billion. Notably, low-risk, high-engagement products, such as credit cards, payroll loans, and FGTS anniversary withdrawal advances fueled this expansion. The growth was also aided by the resumption of credit lines, including working capital loans for SMEs and expanded credit card limits for low-risk borrowers. PagSeguro Digital Ltd. (NYSE:PAGS) continues to expect these as key drivers of future loan portfolio growth.
Overall, the growth in the broader software industry, primarily in fintech, offers a favourable environment for the company’s expansion. By aligning its services with evolving digital trends and using technological advancements, PagSeguro Digital Ltd. (NYSE:PAGS) is well-placed to capitalize on opportunities.
