We recently compiled a list of the 10 Cheap Software Stocks to Buy According to Analysts. In this article, we are going to take a look at where GigaCloud Technology Inc. (NASDAQ:GCT) stands against the other cheap software stocks.
The software industry is changing at an unparalleled rate, with significant advances in programming languages, structures, frameworks, techniques, and other technologies. More specifically, the industry has benefited greatly from the growing need for digital transformation. Until recently, growth prospects have been attractive due to the rising use of Software-as-a-Service (SaaS), which offers a flexible and cost-effective distribution mechanism for apps. It also reduces deployment time compared to traditional systems. In that regard, the global SaaS industry was valued at around $3 trillion in 2022, marking the end of a decade of strong development, with McKinsey estimating that it might reach $10 trillion by 2030. However, McKinsey contends that the rapid emergence of generative AI (GenAI) has altered the software industry more drastically than the shift to SaaS. A notable example is ChatGPT’s introduction in late November 2022, which sparked a surge in investment. By 2023, large software firms had already invested over $15 billion in GenAI solutions, accounting for roughly 2% of the global corporate software industry. In contrast, it took SaaS spending four years to get the same market share.
At the same time, IT executives are turning to technology consolidation to address global economic concerns such as inflation, recession, and supply chain disruptions. According to Canalys’ IT Opportunity report, global IT investment would increase by 8.3% to $5.44 trillion in 2025. This builds on the rapid growth in 2024, which is expected to climb 7.7%, the fastest pace since the post-COVID technological boom of 2021. In that same vein, The Business Research Company predicts that the global software products market will rise from $1.8 trillion in 2024 to over $2.0 trillion in 2025, representing an 11.7% compound annual growth rate (CAGR).
While challenges exist on the path to growth, the bigger concern for the software industry at the moment is DeepSeek, a Chinese company that claims to produce artificial intelligence software at a fraction of the expense of large US software corporations. DeepSeek’s cheaper price should have forced US companies to reduce subscription costs and investments. However, this has had minimal effect on market sentiment towards American firms. In fact, AI income still accounts for a modest portion of their total revenues, and their supremacy remains largely intact. Furthermore, DeepSeek’s danger doesn’t seem to be immediate, as major US software companies have spent years improving and growing their corporate products.
Our Methodology
For our list of cheap software stocks to buy according to analysts, we used stock screeners to select firms with an average analyst upside potential of at least 20% greater than their current stock price. According to Wall Street experts, these equities are undervalued compared to their actual potential. All of these stocks have PE ratios below 25, as of March 7.
Why are we interested in 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A mid-sized warehouse filled with furniture and home appliances.
GigaCloud Technology Inc. (NASDAQ:GCT)
Forward P/E Ratio: 4.92
Analyst Upside: 86.48%
GigaCloud Technology Inc. (NASDAQ:GCT) is a pioneer in worldwide end-to-end B2B technology solutions for large parcels. The company’s B2B e-commerce platform, the GigaCloud Marketplace, unifies everything from discovery, payments, and logistical technologies into one simple platform.
GigaCloud Technology Inc. (NASDAQ:GCT) reported total revenues of $1.16 billion for 2024, a 65% increase over the previous year. Gross profit increased also by 51.2% to $285.2 million, while the company’s net income jumped 33.7% to $125.8 million. On the other hand, the company’s gross margin fell to 24.6% from 26.8% in 2023, and its net income margin dropped to 10.8% from 13.4% the previous year.
Moving forward, GigaCloud Technology Inc. (NASDAQ:GCT)’s management underlined the need for global diversity and operational efficiency in driving long-term success. Larry Wu, founder and CEO of GigaCloud, stated that gross merchandise value in Europe increased 155% year on year, highlighting the broad popularity of GigaCloud’s Supplier Fulfilled Retail (SFR) model.
Overall GCT ranks 1st on our list of the cheap software stocks to buy according to analysts. While we acknowledge the potential of GCT as an investment, our conviction lies in the belief that certain 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 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.