Vertex, Inc. (NASDAQ:VERX) is one of the 12 Best Beaten Down Technology Stocks to Buy According to Wall Street Analysts. Analyst Confidence Strong on Vertex (VERX) Following Fourth-Quarter Results As of February 18, 2026, more than half of covering analysts remain bullish on Vertex, Inc. (NASDAQ:VERX), indicating 53.97% upside potential with a consensus price target of $19.00. On February 12, 2026, Adam Hotchkiss, an analyst at Goldman Sachs, reduced Vertex, Inc. (NASDAQ:VERX)’s price target from $25 to ...

In this piece, we discuss the 12 Best Beaten Down Technology Stocks to Buy According to Wall Street Analysts.The topic is relevant in today’s macro backdrop, where investors are grappling with several challenges in 2026, including persistent inflation, volatile monetary policy, and the impact of ongoing advances in artificial intelligence (AI).JPMorgan’s 2026 outlook report (December 9, 2025) had highlighted that investors are facing multiple risks. The firm projected a 35% probability of a U.S. and global ...

Core Insights - Morgan Stanley analysts suggest that five software stocks could potentially double in value within the next 12 months if fears surrounding AI subsist and the stocks rebound to their fair value [1] Group 1: Market Overview - Software stocks have faced significant declines this year, with the iShares Expanded Tech-software Sector ETF (IGV) losing over 20% of its value since the beginning of the year, primarily driven by concerns regarding AI's impact on the industry [1] - Major companies like Intuit, ServiceNow, and Salesforce have seen substantial drops in their stock prices due to fears that AI-native startups will pressure profit margins and reduce corporate headcounts, limiting revenue growth [1] Group 2: Investment Opportunities - Morgan Stanley identifies that some software stocks are currently trading at more than a 50% discount to their fair value, creating potential buying opportunities for investors [1] - The five software stocks highlighted by Morgan Stanley include large caps Intuit and Salesforce, which have potential upsides of 101% and 109% respectively from their recent closing prices [1] - Mid-cap stocks such as ServiceTitan, CCC Intelligent Solutions, and Vertex are also expected to more than double in value according to the analysts [1] Group 3: Market Sentiment and Future Outlook - The uncertainty surrounding AI's development has led to volatility in the stock market, but historical trends show that investors have often rebounded from such concerns, driving stock prices higher [1] - Experts, including Nvidia's CEO, have expressed skepticism about the notion that AI will severely disrupt the software industry, suggesting that nimble software providers could leverage AI to their advantage [1] - The market for tech stocks is expected to remain turbulent as uncertainty continues to loom over the software sector, with Morgan Stanley indicating that disruption-related volatility is likely to persist [1]

Core Insights - Vertex reported fourth-quarter revenue of $194.7 million, reflecting a year-over-year increase of 9.1% and aligning with guidance, while adjusted EBITDA reached $42.5 million, exceeding expectations [4][7] - The company outlined a strategy to reaccelerate growth after experiencing slower entitlement expansion and higher attrition among smaller customers [4][9] Financial Performance - For the full year 2025, Vertex's revenue was $748.4 million, up 12.2% from 2024, with subscription revenue at $639.7 million, increasing by 12.8% [3][7] - Fourth-quarter subscription revenue rose 8.9% to $166.2 million, while services revenue grew 10.2% to $28.5 million [3] - Vertex's annual recurring revenue (ARR) was $671 million at the end of the quarter, up 11.3% year-over-year, with a net revenue retention (NRR) rate of 105% [8] Growth Initiatives - Vertex is accelerating AI initiatives, including Smart Categorization and Vertex Copilot, which have already generated significant early wins and partnerships [5][12] - The company is expanding its e-invoicing services across 39 countries, with cross-sells increasing ARR by approximately 20% for affected customers [5][16] Customer Retention and Attrition - Management noted that attrition was primarily driven by business factors such as M&A and bankruptcies, particularly affecting smaller accounts [9][10] - The company is enhancing customer success efforts and utilizing churn analytics to mitigate attrition risks [6][10] Future Guidance - For 2026, Vertex guided revenue between $823.5 million and $831.5 million, with a projected cloud revenue growth of 25% and adjusted EBITDA of $188 million to $192 million, implying a 23% margin [7][20] - The first quarter of 2026 is expected to generate revenue between $193.5 million and $196.5 million, with adjusted EBITDA of $40.5 million to $43.5 million [20]

Company Overview - Vertex Inc. (NASDAQ:VERX) is a provider of tax compliance software solutions for enterprises and mid-market companies, established in 1978 and located in King of Prussia, Pennsylvania [4]. Recent Developments - Piper Sandler downgraded Vertex's rating from Overweight to Neutral on February 3, cutting the target price by 37.5% to $20 from $32 due to concerns about seat compression related to artificial intelligence [1]. - The stock price of Vertex fell by 20.3% to $14.78 from $18.55 following the news, before slightly rebounding to $15.73 [3]. Market Context - The release of AI-related plugins by Anthropic on January 30 led to a significant market reaction, erasing $285 billion in market capitalization for software, financial services, and asset management stocks [3]. - Despite the downgrade and sell-off, analysts maintain a positive outlook on Vertex, with a median target price of $25.50, indicating a potential upside of 62.11% [3].

Core Viewpoint - ServiceTitan Inc. is identified as one of the best beaten down growth stocks to buy now, despite a recent target price cut by Piper Sandler [1][4]. Group 1: Stock Performance and Analyst Opinions - Piper Sandler reduced its target price on ServiceTitan by 14.3% to $120 from $140 but maintained an Overweight rating on the stock [1][2]. - Following the news, ServiceTitan's stock price fell 21.8% to $61.29 from $78.34, before slightly rebounding to $63.74 [4]. - Despite the decline, the median target price from analysts is $130.50, indicating a potential upside of 104.74% [4]. Group 2: Company Overview - ServiceTitan Inc. is a customer relationship management (CRM) software provider focused on trade persons and service contractors, founded in June 2008 in Glendale, California [5]. Group 3: Market Context - Concerns regarding seat compression due to artificial intelligence, particularly vibe coding, contributed to the target price cut for ServiceTitan [2]. - The launch of open-source plugins for generative AI tools by Anthropic has raised fears among investors about the potential for software replacement, leading to a significant market capitalization loss of $285 billion across software, financial services, and asset management sectors [3]. Group 4: Investment Considerations - While ServiceTitan is seen as a potential investment, some analysts suggest that other AI stocks may offer greater upside potential with less downside risk [6].

Core Insights - Paylocity (PCTY) reported quarterly earnings of $1.85 per share, exceeding the Zacks Consensus Estimate of $1.57 per share, and up from $1.52 per share a year ago [1] - The earnings surprise for this quarter was +18.05%, and the company has consistently surpassed consensus EPS estimates over the last four quarters [2] Financial Performance - Paylocity's revenues for the quarter ended December 2025 were $416.13 million, surpassing the Zacks Consensus Estimate by 1.78%, and an increase from $376.98 million year-over-year [3] - The company has also topped consensus revenue estimates in each of the last four quarters [3] Stock Performance and Outlook - Paylocity shares have declined approximately 17% since the beginning of the year, while the S&P 500 has gained 0.5% [4] - The company's future stock performance will largely depend on management's commentary during the earnings call and the earnings outlook [4][5] Earnings Estimates - The current consensus EPS estimate for the upcoming quarter is $2.44 on revenues of $483.82 million, and for the current fiscal year, it is $7.37 on revenues of $1.73 billion [8] - The estimate revisions trend for Paylocity was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [7] Industry Context - The Internet - Software industry, to which Paylocity belongs, is currently ranked in the top 38% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [9]

Group 1 - Piper Sandler downgraded ratings for three enterprise software stocks: Adobe, Freshworks, and Vertex, from "Overweight" to "Neutral" and significantly reduced their target prices to $330, $12, and $20 respectively [1] - The rationale for the bearish outlook includes concerns that AI-driven efficiency will suppress or reduce employee growth, negatively impacting software companies that charge per seat [1] - The report anticipates that 2026 will mark the fifth consecutive year of slowing growth in the software industry, leading to valuation downgrades for companies on their coverage list [1] Group 2 - Target prices were also lowered for several other companies including Amplitude, Asana, BlackLine, Braze, Figma, HubSpot, Salesforce, Oracle, Klaviyo, monday.com, ServiceTitan, and ZoomInfo [2] - Despite the overall pessimism in the software sector, Piper Sandler remains optimistic about Microsoft and ServiceTitan, naming them as top picks for 2026 [2] - The analysis suggests that Microsoft is potentially the best pure play in the current AI application space, with positive sentiment emerging from CIO surveys regarding Azure and Copilot activities [2]

Core Viewpoint - The recent selloff in IT stocks, particularly in India, is driven by fears that advancements in artificial intelligence (AI) could disrupt traditional software and IT services, leading to significant losses in profitability and market position for these companies [11][12]. Group 1: Market Impact - Persistent Systems shares dropped over 6%, while major IT stocks like Infosys, Mphasis, and HCL Tech fell between 4-6% [12]. - The Nifty IT index's market value decreased from ₹31.75 lakh crore to ₹30 lakh crore, reflecting a loss of ₹1.75 lakh crore [11][12]. - The tech-heavy Nasdaq in the U.S. fell 1.4%, with software stocks losing approximately $300 billion in market value [12]. Group 2: AI Disruption Concerns - Anthropic's release of a new tool to automate legal work heightened investor fears regarding AI's potential to disrupt software and IT services [5][12]. - The core concern is that AI could reshape the competitive landscape, increasing competition and pricing pressure, thereby eroding the profitability of traditional IT companies [6][10]. - Industries previously considered safe from AI disruption, such as legal services and customer support, are now viewed as vulnerable [7][10]. Group 3: Investor Sentiment and Reactions - The selloff indicates a shift in investor focus towards technology companies facing increased competition and margin pressure due to AI advancements [8][10]. - Piper Sandler downgraded several software firms, including Adobe Inc and Freshworks Inc, reflecting concerns about the impact of AI on their business models [8][10]. - The iShares Expanded Tech-Software Sector ETF fell 4.6%, marking its sixth consecutive day of declines, following a 15% drop in January, the worst monthly performance since 2008 [8][12]. Group 4: Valuation and Future Outlook - Analysts suggest that IT stock valuations remain high with limited fundamental support for a sustained rally, making the sector particularly susceptible to fears of AI-driven disruption [10]. - The selloff raises critical questions about whether traditional software and IT services companies are prepared for a future where AI can perform many of the tasks they currently charge for [10].

Summary of Conference Call Notes Industry Overview - **Industry**: Application Software, specifically focusing on Software as a Service (SaaS) in North America - **2025 Performance**: Application SaaS underperformed due to muted revenue growth, limited upward estimate revisions, and multiple compression driven by AI-related concerns. The valuation discount on application SaaS relative to broader software increased to approximately 37% from 20% a year ago [3][7][21]. Key Insights - **AI Concerns**: Peak AI fears were noted in 2025, leading to a shift in investor sentiment. Companies emphasized competitive advantages such as proprietary data and large installed bases but struggled to improve investor confidence [3][23]. - **Bull Case for 2026**: The bull case hinges on application software becoming the primary delivery mechanism for AI capabilities, potentially expanding the total addressable market and improving growth trajectories. However, the lack of clear growth inflection in 2025 left many vendors perceived as disrupted by AI [3][23][35]. - **CIO Survey Insights**: A survey indicated that 19% of CIOs operationalizing AI/ML technologies view application vendors as primary partners, an increase from 13% in the previous quarter. This suggests a shift in perception towards application software as a vehicle for AI functionalities [26][29]. Investment Recommendations - **Selective Approach**: A selective investment strategy is recommended, favoring companies with strong positioning in the "AI Success Framework" and idiosyncratic growth stories. Preferred companies include HUBS, KVYO, WIX, AMPL, BL, DSGX, and NAVN [2][7][52]. - **Price Target Adjustments**: Price targets for several companies were updated, reflecting changes in growth outlooks and market conditions. For example, HUBS was adjusted to $577, while KVYO was set at $42 [5][54]. Risks and Considerations - **AI Risks**: The report outlines three core areas of AI-related risks: DIY risk, start-up risk, and seat-based model risk. Evidence suggests that fears regarding these risks may be overstated, but ongoing monitoring is necessary [24][26][27]. - **Cyclical Headwinds**: The optimization cycle that began in 2022 is largely digested, with stabilization in key performance indicators like ARR and billings growth. However, broad-based positive spending revisions remain absent, necessitating a cautious approach [35][36]. - **2026 Spending Growth**: Software is expected to see modest growth in spending, projected at 3.8%, compared to declines in hardware and communications sectors. This indicates a relatively healthier positioning for software in IT spending plans [43][44]. Conclusion - **Outlook for 2026**: The outlook for application SaaS in 2026 is cautiously optimistic, with potential for improved sentiment as AI risks are reassessed and growth trajectories begin to stabilize. However, the absence of broad-based positive revisions in spending necessitates a selective investment approach [2][35][52].