5 Software Stocks That Look Too Cheap to Ignore

Industry Overview - The rapid advancement of artificial intelligence (AI) has raised concerns among investors regarding the potential disruption of traditional software models, particularly Software-as-a-Service (SaaS) [2] - The software sector has transitioned from a bull market to a bear market, with the iShares Expanded Tech-Software Sector ETF (IGV) falling approximately 30% from its 52-week high and nearly 22% year-to-date [4] - Many high-quality software companies are now trading below their historical earnings multiples due to a significant selloff driven by fears surrounding AI [3][6] Company-Specific Insights Salesforce - Salesforce has experienced a decline of over 42% from its 52-week high and is down close to 29% year-to-date, raising concerns about its SaaS model in the AI era [8] - Despite the selloff, analysts maintain a Moderate Buy consensus for Salesforce, with a price target suggesting nearly 71% upside potential [9] - The introduction of Salesforce's Agentforce platform, which allows for the creation of AI-powered agents, is seen as a potential growth driver [10] Dropbox - Dropbox shares have decreased by 26% from their 52-week high and nearly 12% year-to-date, resulting in a forward P/E of just 8, indicating potential value [12] - The company is transitioning to an AI-powered platform for productivity and content intelligence, with products like Dropbox Dash and Dropbox AI [13] - Analyst sentiment remains neutral, but the consensus price target implies nearly 30% upside, suggesting the selloff may have been excessive [14] Adobe - Adobe's stock has fallen 43% from its 52-week high and nearly 25% year-to-date, primarily due to fears of competition from generative AI tools [15] - The company has responded by integrating AI deeply into its products, such as Photoshop and Illustrator, rather than treating it as a separate tool [16] - Analysts hold a neutral sentiment, with a consensus Hold rating, while Adobe's forward P/E of 10 positions it as an attractive value opportunity [16] Oracle - Oracle shares have dropped more than 53% from their 52-week high and are down nearly 18% year-to-date, amid concerns over debt-funded capital expenditures for AI infrastructure [17][18] - Despite the negative sentiment, Oracle continues to secure public-sector deals, indicating ongoing business activity [20] - Analysts remain bullish on Oracle, with a Moderate Buy consensus and a price target suggesting over 80% upside potential [21] Investment Opportunities - The iShares Expanded Tech-Software Sector ETF (IGV) offers diversified exposure to North American software companies, holding 114 stocks and trading at a P/E of 34 [22] - The current market correction may present opportunities for long-term investors, particularly for companies that effectively embrace AI and adapt to the changing landscape [24] - The key question for investors is which companies will successfully integrate AI to thrive in the next market cycle [25]