Software is eating the world, and virtually no business is left untouched by it. In the past, the undeniable tailwinds fueling SaaS companies led to lofty valuation multiples that made it easier to raise capital. But this was a double-edged sword as the high prices exposed them to big drawdowns, and unfortunately, the industry has tumbled by 4.6% over the last six months. This performance is a noticeable divergence from the S&P 500’s 10.8% return.
A cautious approach is imperative when dabbling in these businesses as the best will deliver robust earnings growth while the rest will be disrupted by competition and AI. Keeping that in mind, here are two resilient software stocks at the top of our wish list and one that may face trouble.
One Software Stock to Sell:
Strategy (MSTR)
Market Cap: $47.68 billion
Once a traditional business intelligence software provider, Strategy (NASDAQ: MSTR) develops AI-powered enterprise analytics software while also functioning as a major corporate holder of Bitcoin cryptocurrency.
Why Do We Pass on MSTR?
- MicroStrategy’s core analytics software has been eclipsed by its all-in Bitcoin strategy, leaving product innovation and enterprise deals starved for attention
- The company’s debt-financed Bitcoin buying ties shareholder fortunes to crypto swings and interest rates, amplifying downside risk and uncertainty
- On the bright side, its vast Bitcoin treasury gives Executive Chairman Michael Saylor a unique springboard to capture crypto upside and court investors seeking leveraged exposure to digital assets
At $165.27 per share, Strategy trades at 106.8x forward price-to-sales. If you’re considering MSTR for your portfolio, see our FREE research report to learn more.
Two Software Stocks to Watch:
HubSpot (HUBS)
Market Cap: $20.74 billion
Born from the idea that traditional interruptive marketing was becoming less effective, HubSpot (NYSE: HUBS) provides an integrated platform that helps businesses attract, engage, and manage customer relationships through marketing, sales, service, and content management tools.
Why Are We Fans of HUBS?
- Billings growth has averaged 19.8% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
- Forecasted revenue growth of 16.5% for the next 12 months indicates its momentum over the last two years is sustainable
- Software is difficult to replicate at scale and results in a premier gross margin of 84.1%
HubSpot is trading at $394.48 per share, or 5.7x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
Palo Alto Networks (PANW)
Market Cap: $129.5 billion
Founded in 2005 by security visionary Nir Zuk who sought to reimagine firewall technology, Palo Alto Networks (NASDAQ: PANW) provides AI-powered cybersecurity platforms that protect organizations' networks, clouds, and endpoints from sophisticated threats.
Why Could PANW Be a Winner?
- Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
- Excellent operating margin of 13.2% highlights the efficiency of its business model, and its rise over the last year was fueled by some leverage on its fixed costs
- Robust free cash flow margin of 38.6% gives it many options for capital deployment
Palo Alto Networks’s stock price of $185.87 implies a valuation ratio of 11.9x forward price-to-sales. Is now the time to initiate a position? See for yourself in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Check out the high-quality names we’ve flagged in our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
