We recently published a list of 10 Hot Software Stocks with High Upside Potential. In this article, we are going to take a look at where Similarweb Ltd. (NYSE:SMWB) stands against other hot software stocks with high upside potential.
As per MarkNtel Advisors, which is a leading consulting, data analytics, and market research firm, the US software market is expected to grow at a CAGR of ~7.17% over 2024 – 2030. Possessing a strong legacy of innovation and entrepreneurship, the US has been categorized as a world leader in software development, housing a thriving environment of startups, software corporations, and academic institutions. With businesses using technology to fuel creativity, productivity, and competitiveness, the broader US software market continues to move towards digital transformation throughout all industries.
In a bid to be more flexible, responsive to market demands, and scalable, it’s important to modernize legacy systems, procedures, and infrastructure apart from implementing cutting-edge technologies, says MarkNtel Advisors.
Emerging Trends in Software Industry in 2025
With software development evolving at a significant pace (thanks to technological innovation and dynamic business demands), businesses are required to stay ahead in a bid to remain competitive and deliver ground-breaking software solutions, says Datafortune. The rise of AI-powered development and low-code/no-code platforms, integration of DevSecOps practices, and sustainable software engineering are some of the key trends likely to shape software development in 2025.
AI-powered coding assistants, automation of tools, and intelligent debugging tools continue to transform the working infrastructure of developers. Datafortune believes that businesses are increasingly leveraging AI to automate workflows, accelerate software development, and enhance code quality.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Low-Code/No-Code Platforms and Sustainable Software Engineering
As per Datafortune, the demand for rapid application development continues to drive the adoption of low-code and no-code platforms. Such platforms allow business users and developers to develop applications with minimal or no coding, which makes software development more accessible. The firm believes that, by 2025, most of the enterprise applications are expected to be created using these platforms, which will reduce the requirement for traditional software development cycles and allow firms to innovate rapidly.
Sustainability continues to become a trend in software development. With companies actively optimizing their apps, green coding, optimal algorithms, and cloud optimization are being adopted as best practices, says Datafortune. Notably, the companies are also prioritizing sustainability in their software development services through the removal of redundant code and minimizing energy consumption in the data centers.
Overall, the broader software industry in 2025 will be characterized by innovations in AI, sustainability, security, and advanced and ground-breaking technologies like quantum computing.
Our Methodology
To list the 10 Hot Software Stocks with High Upside Potential, we used a screener to find software stocks. We chose the stocks which have increased significantly over the past 6 months, and that analysts still see 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).
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Similarweb Ltd. (NYSE:SMWB)
% Gain Over Past 6 Months: ~32.6%
Average Upside Potential: ~48.7%
Number of Hedge Fund Holders: 19
Similarweb Ltd. (NYSE:SMWB) is engaged in providing cloud-based digital intelligence solutions in the United States, Europe, the Asia Pacific, the United Kingdom, Israel, and internationally. Citi upped the price target on the company’s stock to $22 from $14, keeping a “Buy” rating as part of a December quarter preview associated with the front-office application software group. Citi remains optimistic for front-office software budgets in 2025 in comparison to 2024 as sentiments have been improved among ecosystem partners post the US elections.
Similarweb Ltd. (NYSE:SMWB) released its financial results for Q4 ended December 31, 2024. The company’s focus on disciplined execution led to the first full year of non-GAAP operating profit and FCF, showcasing the company’s ability to accelerate growth while generating profit. Jefferies analyst Surinder Thind believes that demand from AI companies remains an incremental near-term tailwind. In 2024, customers started to train LLMs with Similarweb Ltd. (NYSE:SMWB)’s data, and the company is extensively engaging with brands focused on leveraging its unique data to understand the evolving digital world.
In a bid to capitalize on the opportunity, Similarweb Ltd. (NYSE:SMWB) decided to increase its investment in sales and R&D for 2025. For the year, the company expects to post a non-GAAP operating profit of between $1.0 million – $4.0 million.
Overall, SMWB ranks 6th on our list of hot software stocks with high upside potential. While we acknowledge the potential of SMWB as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than SMWB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.