In this article, we will look at the 12 Best Software Stocks to Buy According to Analysts.
Software Industry Update
According to the MCF Corporate Finance Q4 2024 software update report, software company valuations have reached unprecedented heights due to the AI boom, especially with innovations surrounding GenAI. Investors are increasingly viewing strong AI roadmaps as essential for revenue and margin expansion, leading to heightened interest in software companies that integrate advanced AI capabilities into their offerings. According to the report, software companies are trading at 6.2x the Current median EV / NTM revenue estimate.
As highlighted by the report, another key reason for increased valuations has been the high adoption rate of GenAI. The enterprise-level usage of GenAI almost doubled year-over-year in 2024 and around 65% of the enterprises now use the technology. The report noted that organizations have now transitioned from the pilot testing phase to full-scale GenAI implementations, enhancing workflows and customer experiences while unlocking new revenue streams. Moreover, the investment and funding for GenAI-based software companies also increased sharply. According to the report GenAI raised around $56 billion in funding in 2024, driven by a $10 billion round of DataBricks, a $6.6 billion round by OpenAI, and a $4 billion round of Anthropic. Not only this, GenAI also claimed more than 40% of the total AI funding across the United States, Europe, and Israel.
Talking about how AI has started to play in the favor of software, Jeff Richards, managing partner at Notable Capital appeared on a CNBC interview a month ago. He noted that AI is actively working for the software sector, indicating that the technology is not just a prospect but is already being utilized effectively in various applications within the industry. Richards highlighted that the development of AI which started with semiconductor chips, then moved to data centers and servers is now in the software development stage where software application companies are in high demand to integrate AI applications in various industries. Similar to the findings by the MCF corporate finance report, Richards also highlighted that venture capital funds have been heavily funding software startups for the past two to three years to ensure the effective application of GenAI, which we are witnessing right now.
With that, let’s take a look at the 12 best software stocks to buy according to analysts.
A data analyst in a lab monitoring a cloud-based software system to detect cardiac disease.
Our Methodology
To curate the list of the 12 best software stocks to buy according to analysts, we used the Finviz stock screener and CNN. Using the screener we first aggregated a list of software stocks with analyst upside potential of more than 50%. Next, we cross-checked the analyst upside potential for each stock using CNN. Lastly, we ranked these stocks in ascending order of analysts’ upside potential. We have also added the number of hedge funds holding each stock, sourced from Insider Monkey’s third-quarter hedge funds database. Please note that the data was recorded on January 16, 2025.
Why do we care about what hedge funds do? 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).
12 Best Software Stocks to Buy According to Analysts
12. MicroStrategy Incorporated (NASDAQ:MSTR)
Stock Price: $360.62
Number of Hedge Fund Holders: 25
Analyst Upside Potential: 52.52%
MicroStrategy Incorporated (NASDAQ:MSTR) focuses on two main areas including its AI-powered business intelligence software and bitcoin development. It ranks as one of the best software stocks to buy according to analysts. The company has designed a flagship business analytics software called MicroStrategy ONE, which allows users to visualize complex data through dashboards and reports, making it easier for companies to understand their operations and improve efficiency. It serves some major corporate giants including eBay, Sony, Pfizer, and KFC.
MicroStrategy Incorporated (NASDAQ:MSTR) has been leveraging AI to improve its software platform. On October 1, management announced the latest version of its AI-powered business intelligence platform. A few notable enhanced AI features include the MicroStrategy AI bot, which allows users to interact with the bot within Microsoft Teams, enabling them to get answers without switching applications. Moreover, the AI can generate natural language summaries of data visualizations, making it easier for users to understand complex data.
While the company already enjoys a healthy subscription services revenue of $27.8 million (as of Fiscal Q3 2024), the enhanced software platform has enabled the company to form new partnerships. For instance, on January 8th, MicroStrategy Incorporated (NASDAQ:MSTR) announced a partnership with STACKIT to create the MicroStrategy Sovereign European Cloud, designed specifically for highly regulated businesses in Europe. This partnership will allow organizations to use the company’s AI-powered business intelligence tools while ensuring compliance with strict data sovereignty laws and the General Data Protection Regulation (GDPR).
11. Jamf Holding Corp. (NASDAQ:JAMF)
Stock Price: $14.16
Number of Hedge Fund Holders: 16
Analyst Upside Potential: 55.37%
Jamf Holding Corp. (NASDAQ:JAMF) specializes in software designed to help organizations manage and secure Apple devices, such as Macs and iPads, ensuring they are secure and functioning properly. The company works closely with Apple and other partners to reach customers worldwide and runs on a subscription model allowing customers to pay a regular fee rather than buying it outright.
The demand for Jamf Holding Corp. (NASDAQ:JAMF) software solutions remains robust, as indicated by its customer base of 76,000 clients and 33.9 million connected devices. The company has made significant strides in expanding its mobile solutions, particularly in managing Apple devices for various sectors. For instance, during the fiscal third quarter of 2024, management secured several substantial contracts, including a major agreement with one of the world’s largest biotech companies for the management of 30,000 iOS devices.
Management of Jamf Holding Corp. (NASDAQ:JAMF) has been focused on growing both the management and security components of its business. In Q3, 16 out of the top 20 deals included both management and security components. As a result around 40% of its commercial pipeline now consists of security opportunities and Annual Recurring Revenue from security solutions has surpassed $152 million, representing a growth of 26% year-over-year. During the fiscal third quarter of 2024, the company generated a total revenue of $159.3 million, marking a 12% increase year-over-year, driven by an increase in subscriptions. Looking ahead, the company is focusing on desk-less workflows, which cater to industries like transportation and healthcare. This approach addresses the unique needs of workers who do not have a fixed desk but still require reliable device management and security.
10. VTEX (NYSE:VTEX)
Stock Price: $6.10
Number of Hedge Fund Holders: 11
Analyst Upside Potential: 55.74%
VTEX (NYSE:VTEX) is a cloud-based software company that offers one-stop software solutions for online retailers. The company not only provides a software-as-a-service e-commerce platform that allows companies to create and manage online stores but also enables omnichannel retailing, as businesses can sell through various channels using its platform.
One of the key features that differentiate the platform is its marketplace offering which allows retailers to build their online marketplaces where multiple sellers can offer products. The company operates in over 43 countries and supports more than 3,500 active online stores. It has established itself as a leader in the digital commerce space, particularly in Latin America, and continues to expand its global presence.
VTEX (NYSE:VTEX) has made notable advancements in its financial performance and strategic positioning, particularly regarding its Rule of 40 metric, which combines revenue growth and profitability. The company achieved a Rule of 40 score of 32% in fiscal Q3 2024, an improvement from 28% in the same period last year. This metric is significant as it indicates a healthy balance between growth and profitability, essential for SaaS companies. During the third quarter, the company grew its subscription revenue by 22%, whereas gross profits rose by 28%, achieving a margin of 74%. Management remains optimistic to reach the 40% target, as discussed during their investor day last year, suggesting that they are on track to enhance both their revenue growth and profit margins in the coming quarters. It is one of the 12 best software stocks to buy according to analysts.
9. Alight, Inc. (NYSE:ALIT)
Stock Price: $6.79
Number of Hedge Fund Holders: 40
Analyst Upside Potential: 62.00%
Alight, Inc. (NYSE:ALIT) is a leading cloud-based technology company focused on managing human resources (HR) and employee benefits. Through its Alright Worklife platform, the company provides Human Capital Management and Employee Benefits Administration services to more than 50% of Fortune 500 and around 70% of Fortune 100 companies.
Polen US Small Company Growth Strategy during its Q3 2024 investors letter decided to exit its positions from Alight, Inc. (NYSE:ALIT) stating they were not satisfied with the company’s plan and the new standalone business. However, management remains optimistic regarding the future of the company mainly on the back of improved profitability during the fiscal third quarter and new partnerships signed during the quarter.
Although the quarterly revenue decreased slightly by 0.4% year-over-year to $555 million due to lower volumes and project revenues, as well as the winding down of certain business operations. On the bright side, the gross profit margins improved from 29.8% in the previous year to 31.4% during the current year. In terms of new partnerships, Alight, Inc. (NYSE:ALIT) signed notable companies including Hewlett Packard Enterprise, Nokia, and Siemens, indicating increased revenue growth in the coming quarter.
As a result, management now expects revenue of $665 million to $685 million, indicating a $10 million increase at the midpoint versus the previous 2nd half guidance. Moreover, management also expects an adjusted EBITDA ranging from $208 million to $233 million, pointing towards optimism for continued growth despite recent challenges. Here’s what Polen U.S. Small Company Growth Strategy stated the following regarding Alight, Inc. (NYSE:ALIT) in its Q3 2024 investor letter:
“We exited four positions during the quarter, including SiTime, AppFolio, RH, Doximity, and Alight, Inc. (NYSE:ALIT). Our position in Alight, a benefits outsourcing, and business process-as-a-service company, was an unsuccessful investment. We decided to move on due to activist pressure that led to a breakup of the business. We were dissatisfied with both the plan and the new standalone business. This culminated with the CEO leaving and uncertainty over the company’s long-term strategic direction. As a result, we felt it was time to move on with better investment ideas in our pipeline.”
8. MongoDB, Inc. (NASDAQ:MDB)
Stock Price: $242.91
Number of Hedge Fund Holders: 49
Analyst Upside Potential: 64.67%
MongoDB, Inc. (NASDAQ:MDB) is a software company that provides a developer platform that helps developers manage and work with data effectively. In addition to an integrated suite of databases and services for various application needs, the company also provides MongoDB Atlas, a cloud-based service that allows users to store and manage data across multiple cloud providers like AWS, Google Cloud, and Azure.
The company is focusing on expanding its enterprise customer base, recognizing this segment offers the strongest returns. Management plans to enhance its strategic account program and educate developers in large enterprises to maximize the use of MongoDB’s capabilities. MongoDB, Inc. (NASDAQ:MDB) is also working on modernizing its legacy applications using AI technologies, which can significantly reduce costs and risks associated with migration.
During the fiscal third quarter of 2024, the company generated $529 million in revenue, marking a 22% increase compared to the same quarter last year and exceeding management’s expectations. Its MongoDB Atlas cloud service database was a major contributor accounting for 68% of the total revenue and grew 26% year-over-year. It is one of the best software stocks to buy according to analysts.
Fidelity Growth Strategies Fund stated the following regarding MongoDB, Inc. (NASDAQ:MDB) in its Q2 2024 investor letter:
“An underweight in software & services firm MongoDB, Inc. (NASDAQ:MDB) (-30%) was the next-largest contributor to the fund’s result versus the benchmark. The company’s shares fell sharply in May, after it reported disappointing Q1 results and reduced full-year guidance for its cloud storage platform, MongoDB Atlas.”
7. PagSeguro Digital Ltd. (NYSE:PAGS)
Stock Price: $6.92
Number of Hedge Fund Holders: 25
Analyst Upside Potential: 73.00%
PagSeguro Digital Ltd. (NYSE:PAGS) is a Brazilian financial technology solutions company that helps individuals and businesses manage their transactions. It provides various payment solutions, digital banking services, point-of-sale devices, and other comprehensive financial services. The company’s majority customer base is small and medium business owners looking for easy payment solutions.
The company is actively enhancing its product offerings to improve the customer experience, particularly through innovative solutions like the Multiple Card. This new product combines both credit and debit functions into a single card, making it easier for users to manage their finances. As a result of its innovative platform and strong market presence in Brazil PagSeguro Digital Ltd. (NYSE:PAGS) has been growing its total clients thereby increasing its total payment value and quarterly revenue.
During the fiscal third quarter of 2024, the company increased its client base by 6.2% and subsequently its total payment value by 36.5%, year-over-year. Its target market small, and medium businesses (MSMBs) performed well with 26% year-over-year growth in total payment value. This also led the company’s quarterly revenue higher to R$ 4.8 billion, representing a 20% increase year-over-year. It is one of the best software stocks to buy according to analysts.
6. WEBTOON Entertainment Inc. (NASDAQ:WBTN)
Stock Price: $13.27
Number of Hedge Fund Holders: 7
Analyst Upside Potential: 73.32%
WEBTOON Entertainment Inc. (NASDAQ:WBTN) operates an international digital storytelling platform that allows creators and users to discover, create, and share stories. It provides two main formats of content including web comics and web novels, and allows authors to monetize their work through various means such as paid content and advertising. The platform has a presence in over 150 countries with 170 million monthly active users, the majority of which are from Korea, Japan, and North America.
To increase user engagement on its digital platform, management on November 15th announced the opening of its Online Retail WEBTOON Shop for Webcomic merchandise. This launch is also expected to add another revenue stream to its business model as the online retail shop allows it to sell merchandise directly to customers.
Moreover, WEBTOON Entertainment Inc. (NASDAQ:WBTN) posted encouraging results during its fiscal third quarter of 2024. Its revenue of $347.9 million grew 9.5% year-over-year. The revenue growth was mainly driven by the increased use of paid content and advertising. It is one of the best software stocks to buy according to analysts.
5. StoneCo Ltd. (NASDAQ:STNE)
Stock Price: $8.74
Number of Hedge Fund Holders: 22
Analyst Upside Potential: 73.38%
StoneCo Ltd. (NASDAQ:STNE) specializes in financial technology and software solutions that help small and medium-sized businesses manage their payments effectively. Its financial solutions include point-of-sale systems, online payment gateways, digital banking, and credit solutions. Its software solutions include customer relationship management and enterprise resource planning solutions making it a comprehensive partner for businesses.
In 2024, they plunged 52.02% due to the mishap of unreliable government data usage for client creditworthiness assessment. However, regardless of the decline in stock price the company demonstrated progress towards its strategic goals and maintained its market position. During the fiscal third quarter of 2024, StoneCo Ltd. (NASDAQ:STNE) achieved a record take rate for Micro, Small, and Medium Businesses (MSMBs) of 2.58%. As a result its Total Payment Value for MSMBs for the third quarter also increased by 23% on a year-to-date basis.
The investment case for the company remains strong as it operates in the emerging market of Brazil which is on its way to becoming cashless due to booming mobile technology. According to DigitalPortal Brazil 2024 report more than 210 million cellular connections occurred last year indicating the strong adoption of mobile technology.
Ave Maria World Equity Fund stated the following regarding StoneCo Ltd. (NASDAQ:STNE) in its fourth quarter 2023 investor letter:
“StoneCo Ltd. (NASDAQ:STNE) provides solutions that enable merchants and integrated partners to conduct electronic commerce seamlessly across in-store, online, and mobile channels in Brazil. StoneCo has faced near-term operational challenges because of the pandemic and high levels of inflation in Brazil. The company appears to be moving past these challenges and it appears that the successful integration of the newly acquired software business with its payments business will drive substantial shareholder value longer term.”
4. Nebius Group N.V. (NASDAQ:NBIS)
Stock Price: $37.02
Number of Hedge Fund Holders: NA
Analyst Upside Potential: 107.69%
Nebius Group N.V. (NASDAQ:NBIS) is one of the best software stocks to buy according to analysts. Based in the Netherlands the company focuses on building infrastructure for artificial intelligence. The company operates through its brands including Toloka, TripleTen, and Avride providing powerful computing resources, storage solutions, and cloud platforms tailored for AI workloads.
On January 13, Hamed Khorsand, analyst at BWS Financial initiated a Buy rating on the stock, setting a price target of $51. Khorsand expressed his bullish sentiment for Nebius Group N.V. (NASDAQ:NBIS) stating that the company is set to grow with the rising demand for artificial intelligence. The fiscal third-quarter results of 2024, back the observation of Khorsand as the company saw a 1.7 times quarter-over-quarter increase in its revenue. The increase was driven by a robust performance in its AI infrastructure business which grew 6.5 times year-over-year.
Moreover, Nebius Group N.V. (NASDAQ:NBIS) is making significant strides in the US market by launching its first NVIDIA GPU cluster in Kansas City. The GPU cluster which will be located in Kansas City, Missouri, and is designed to initially house thousands of NVIDIA H200 Tensor Core GPUs is scheduled to go live in the first quarter of 2025.
3. Zeta Global Holdings Corp. (NYSE:ZETA)
Stock Price: $17.89
Number of Hedge Fund Holders: 31
Analyst Upside Potential: 134.77%
Zeta Global Holdings Corp. (NYSE:ZETA) is a technology company that specializes in marketing solutions. Its AI and data-driven platform helps businesses to optimize customer acquisition, retention, and engagement. Its data-driven insights are a key differentiator for the company as it helps businesses predict what customers want and how they are likely to behave in the future.
During the fiscal third quarter of 2024, Zeta Global Holdings Corp. (NYSE:ZETA) successfully broke the “Rule of 60” for the first time, indicating strong revenue growth and profitability metrics. The company generated $268 million in revenue, marking a 42% increase year-over-year, driven by strong acquisition of its software.
Management also landed high-value deals ensuring sustained near-term growth. The company landed an eight-figure deal with a global retail brand to enhance customer experience and reduce costs using AI and a seven-figure deal with a professional sports league for improved identity resolution and customer insights. It is one of the best software stocks to buy according to analysts. Carillon Tower Advisers, an investment management company, released its Q3 2024 investor letter. Here is what the fund said:
“Zeta Global Holdings Corp. (NYSE:ZETA) is a marketing automation software vendor focused on customer data. The company has seen a healthy growth rate while posting solid margins and cash flow. This past quarter, investors appreciated acceleration in growth driven by Zeta’s artificial intelligence-based modules leading to increased spending on the company’s platform. Furthermore, Zeta’s exposure to political ad spending during a major election is raising expectations regarding growth in the second half of the year.”
2. Pagaya Technologies Ltd. (NASDAQ:PGY)
Stock Price: $8.81
Number of Hedge Fund Holders: 21
Analyst Upside Potential: 161.07%
Pagaya Technologies Ltd. (NASDAQ:PGY) is a financial technology company that specializes in the lending market. It differentiates based on its use of cutting-edge technology, including artificial intelligence (AI) and data science, to enhance the process of assessing customer creditworthiness. The company collaborates with a wide range of partners, from fast-growing fintech firms to traditional banks, as well as companies involved in auto financing and real estate services.
Pagaya Technologies Ltd. (NASDAQ:PGY) recently completed two large transitions worth $1 billion, indicating the company’s fourth AAA-rated personal loan asset-backed security (ABS) transaction and their first AA-rated auto ABS transaction. Moreover, the company has raised over $25.2 billion through 62 ABS transactions since 2018.
The company reported encouraging financial results for the fiscal third quarter of 2024. It grew its network volume by 11% year-over-year to reach $2.4 billion driven by its existing partnerships and point-of-sale loans which grew 8% during the same time. Pagaya Technologies Ltd. (NASDAQ:PGY) reported a record third-quarter revenue of $257 million, indicating a 21% increase year-over-year. It is one of the best software stocks to buy according to analysts.
1. GigaCloud Technology Inc. (NASDAQ:GCT)
Stock Price: $19.79
Number of Hedge Fund Holders: 13
Analyst Upside Potential: 200.66%
GigaCloud Technology Inc. (NASDAQ:GCT) is a software company that provides B2B technology solutions for large parcel merchandise. It runs an online marketplace called GigaCloud Marketplace which helps businesses find products, make payments, and manage shipping all in one place. The company mainly targets the Asian market with resellers in regions such as the United States and Europe.
The company has been experiencing significant growth in its business. During the fiscal third quarter of 2024, the Gross Merchandise Volume (GMV) for GigaCloud Marketplace increased by over 80%, reaching approximately $1.23 billion for the trailing 12 months ending September 30, 2024. Moreover, the company also surpasses 1000 active third-party sellers, while growing its buyers by 85.5% year-over-year.
GigaCloud Technology Inc. (NASDAQ:GCT) has already seen substantial growth in Europe, with revenue increasing by 140% year-over-year in Q3 2024. Looking ahead management plans to enhance participation in its marketplace by expanding geographically and improving marketing efforts to attract more 3P sellers and buyers. They also plan to onboard brick-and-mortar retailers and enhance product categories to drive buyer engagement.
While we acknowledge the potential of GigaCloud Technology Inc. (NASDAQ:GCT) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GCT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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