Software is eating the world, and virtually no business is left untouched by it. The undeniable tailwinds fueling the industry have also led to strong returns for SaaS stocks lately as they’ve gained 30.3% over the past six months, outpacing the S&P 500’s 10.9% rise.
Nevertheless, investors should tread carefully as AI will commoditize many software products, and backing the wrong horse could result in hefty losses. Keeping that in mind, here is one software stock boasting a durable advantage and two we’re steering clear of.
Two Software Stocks to Sell:
Workday (WDAY)
Market Cap: $42.04 billion
Born from the vision of PeopleSoft founders after Oracle's hostile takeover of their previous company, Workday (NASDAQ:WDAY) provides cloud-based software for financial management, human resources, planning, and analytics to help organizations manage their business operations.
Why Are We Wary of WDAY?
- Revenue increased by 14.1% annually over the last two years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
- Estimated sales growth of 10.9% for the next 12 months implies demand will slow from its two-year trend
- Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient
Workday’s stock price of $172.41 implies a valuation ratio of 4x forward price-to-sales. Dive into our free research report to see why there are better opportunities than WDAY.
Qualys (QLYS)
Market Cap: $6.29 billion
Originally developed to address the growing complexity of IT security in the cloud era, Qualys (NASDAQ:QLYS) provides a cloud-based platform that helps organizations identify, manage, and protect their IT assets from cyber threats across on-premises, cloud, and mobile environments.
Why Are We Hesitant About QLYS?
- Average ARR growth of 10.3% over the last year has disappointed, suggesting it’s had a hard time winning long-term deals and renewals
- Estimated sales growth of 9% for the next 12 months is soft and implies weaker demand
- Operating margin expanded by 3.4 percentage points over the last year as it scaled and became more efficient
Qualys is trading at $183.57 per share, or 8.4x forward price-to-sales. Check out our free in-depth research report to learn more about why QLYS doesn’t pass our bar.
One Software Stock to Buy:
Snowflake (SNOW)
Market Cap: $110.2 billion
Named after the unique architecture of its data warehouse which resembles a snowflake pattern, Snowflake (NYSE:SNOW) provides a cloud-based data platform that enables organizations to consolidate, analyze, and share data across multiple cloud providers.
Why Are We Bullish on SNOW?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 31.4% over the last year
- Expected revenue growth of 28.5% for the next year suggests its market share will rise
- Software platform has product-market fit given the rapid recovery of its customer acquisition costs
At $319.78 per share, Snowflake trades at 16.9x forward price-to-sales. Is now a good time to buy? See for yourself in our full 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.
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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 Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.