Software is rapidly reducing operating expenses for businesses. This secular theme has materialized in superior earnings growth and stock price performance for most SaaS companies, and over the last six months, the industry’s 13.5% return has topped the S&P 500 by 8.6 percentage points.
Although these businesses have produced results, only the best will survive over the long term as AI is eating into the profits of those with lower switching costs. Taking that into account, here is one software stock poised to generate sustainable market-beating returns and two we would avoid.
Two Software Stocks to Sell:
Salesforce (CRM)
Market Cap: $148 billion
With its cloud-based platform named after its stock ticker symbol CRM (Customer Relationship Management), Salesforce (NYSE: CRM) provides customer relationship management software that helps businesses connect with their customers across sales, service, marketing, and commerce.
Why Are We Hesitant About CRM?
- Average billings growth of 10.5% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
- Projected sales growth of 10% for the next 12 months suggests sluggish demand
- Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage
At $180.40 per share, Salesforce trades at 3.5x forward price-to-sales. To fully understand why you should be careful with CRM, check out our full research report (it’s free).
Okta (OKTA)
Market Cap: $24.41 billion
Named after the meteorological measurement for cloud cover, Okta (NASDAQ: OKTA) provides cloud-based identity management solutions that help organizations securely connect their employees, partners, and customers to the right applications and services.
Why Are We Cautious About OKTA?
- Offerings struggled to generate meaningful interest as its average billings growth of 10.8% over the last year did not impress
- Estimated sales growth of 9.1% for the next 12 months implies demand will slow from its two-year trend
- Operating margin expanded by 5.1 percentage points over the last year as it scaled and became more efficient
Okta is trading at $141.92 per share, or 7.4x forward price-to-sales. Read our free research report to see why you should think twice about including OKTA in your portfolio.
One Software Stock to Buy:
Upstart (UPST)
Market Cap: $2.59 billion
Using over 2,500 data variables and trained on nearly 82 million repayment events, Upstart (NASDAQ: UPST) is an AI-powered lending platform that uses machine learning to help banks and credit unions more accurately assess borrower risk for personal loans, auto loans, and home equity lines of credit.
Why Is UPST a Top Pick?
- Loan originations on its platform are soaring as they averaged 56.6% growth over the last year, enabling the company to collect more fees and expand into new markets like credit cards.
- Revenue outlook for the upcoming 12 months is outstanding and shows it’s on track to gain market share
- Poised to generate positive free cash flow next year, indicating the company is at a pivotal stage in its life
Upstart’s stock price of $27.13 implies a valuation ratio of 1.7x forward price-to-sales. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
