We recently compiled a list of the 10 Oversold Software Stocks to Buy According to Analysts. In this article, we are going to take a look at where Marqeta, Inc. (NASDAQ:MQ) stands against the other 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.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
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.
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).
A financial services team at work reviewing customer data on their digital bank.
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.
Overall MQ ranks 10th on our list of the oversold software stocks to buy according to analysts. While we acknowledge the potential of MQ 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 MQ 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.
