We recently compiled a list of the 10 Worst Performing Software Stocks to Buy According to Analysts. In this article, we are going to take a look at where Ibotta, Inc. (NYSE:IBTA) stands against the other software stocks.
Gartner projects that global software spending will rise by 14.2% in 2025 to $1.25 trillion, making it one of the fastest-growing segments in technology, second only to the data center sector’s expected 23.2% growth. This surge highlights the software market’s crucial role in driving innovation and operational efficiency across industries. The sector’s sustained expansion is largely fuelled by the rapid adoption of artificial intelligence (AI) and other advanced technologies, which are reshaping business operations and unlocking new investment opportunities.
Over the past 15 years, a significant factor behind this growth has been the widespread transition to cloud computing and Software-as-a-Service (SaaS) models. These advancements have made software more accessible, scalable, and cost-effective, further accelerating its adoption across industries. As the software market continues to evolve, it remains at the forefront of technological progress, offering lucrative opportunities for investors while shaping the digital transformation of multiple sectors.
According to Forrester’s February 11 report, “Global Tech Market Forecast”, global technology spending is expected to increase by 5.6% in 2025, reaching $4.9 trillion. This growth will be primarily driven by key areas such as cybersecurity, cloud computing, generative AI, and the expanding digital economy. Notably, financial services, government, and media will account for 46% of global tech spending in 2024. However, Forrester estimates that by 2029, 70% of all tech spending will be concentrated in software and IT services, reinforcing software’s growing dominance within the industry.
Further emphasizing this trend, The Business Research Company’s January 2025 report forecasts that the global software products market will expand from $1.8 trillion in 2024 to approximately $2.0 trillion in 2025, reflecting a compound annual growth rate (CAGR) of 11.7%. Looking further ahead, the market is projected to reach $3.0 trillion by 2029, maintaining a strong CAGR of 11.3%.
With software becoming increasingly integrated into daily life and business operations, demand is surging at a robust rate. As a result, the software market remains one of the most attractive investment opportunities, supported by continued technological advancements and a rapidly expanding digital economy.
Our Methodology
To identify the 10 worst-performing software stocks to buy according to analysts, we first screened all U.S.-listed software companies with a market capitalization above $300 million and a stock price over $10, excluding smaller and more volatile stocks. We then narrowed the selection to companies that had experienced a year-to-date (YTD) share price decline of at least 20%, further refining the list to include only those with a potential upside of 10% or more. Finally, we ranked the bottom 10 stocks based on YTD returns, placing the worst-performing stocks at the top. Additionally, we included data on hedge fund holdings in these companies as of Q4 2024 to provide further insight into investor interest.
Note: All pricing data is as of market close on February 28.
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 computer programmer working on a holographic digital twin technology software solution.
Ibotta, Inc. (NYSE:IBTA)
YTD returns: -49%
Potential Upside: 62%
Number of Hedge Fund Holders: 15
Ibotta, Inc. (NYSE:IBTA) is a consumer e-commerce technology firm that focuses on offering cashback and digital rewards for everyday purchases. Utilizing its mobile app and browser extension, the company partners with retailers, brands, and e-commerce platforms to provide cashback deals on a variety of items such as groceries, apparel, electronics, and more.
On Thursday, February 27, Ibotta, Inc. (NYSE:IBTA) saw its shares drop sharply by 46%, which contributed to a year-to-date decline of 49%, primarily due to disappointing quarterly performance. In Q4 2024, the company reported total revenue of $98.4 million, a 1% decrease year-over-year and below its own guidance of $100–$106 million. Additionally, adjusted EBITDA came in at $27.8 million, falling short of its guided range of $30–$34 million.
The guidance for Q1 2025 raised further concerns. The company expects revenue to be between $80 and $84 million, indicating no growth compared to Q3 2023 figures, at the mid-point of the range. Moreover, the projected EBITDA margin is just 15%, a significant drop from its usual 28%–30%, which implies that costs are rising faster than revenue. Management also pointed to near-term supply constraints—specifically, a shortage of available offers for redeemers—that could negatively impact revenue. Consequently, the focus is now on reducing costs and enhancing sales execution to rekindle growth.
In light of these results, analysts have revised their earnings estimates and lowered their price targets on Ibotta, Inc. (NYSE:IBTA). However, the consensus one-year median price target still suggests a potential upside of 62% from current levels. For instance, an analyst at Evercore ISI reduced his price target from $97 to $56 while maintaining an Outperform rating.
Overall IBTA ranks 1st on our list of worst performing software stocks to buy according to analysts. While we acknowledge the potential of IBTA as an investment, 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 IBTA 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.
Disclosure: None. This article is originally published at Insider Monkey.