In this article, we will discuss the 10 Software Stocks Analysts Are Upgrading.
According to JPMorgan, the software sector remains a critical one for US venture investors, capturing ~60% of venture dollars in 2024, thanks to its scalability and high margins. Amidst subdued IPO activity since 2021, mergers and acquisitions have become a key exit strategy for startups. US-based companies dominated the broader M&A landscape, led by goals such as enhancing product offerings as well as expansion of market reach.
Current Trends in the Software Industry
As per JPMorgan, the valuation multiples for numerous public software companies have witnessed a decline from their peak in 2021. Due to the elevated interest rate environment, difficult geopolitical landscape, and sideways stock market performance, several public software companies have pivoted their focus on operational efficiency and profitability. They have moved away from growth.
The shift is evidenced by converging trajectories of EBITDA margins and growth rates in revenue. The concurrent decline in revenue multiples demonstrates the importance of high growth in a bid to justify elevated valuations. However, Ideal Market Research believes that the acceleration of digital transformation continues to amplify demand for software testing services, with companies scaling cloud-native applications, mobile-first platforms, and AI-driven solutions.
Amidst such trends, we will now have a look at the 10 Software Stocks Analysts Are Upgrading
A close-up of a server running a cloud-native platform, symbolizing the power of the software-as-a-service (SaaS) business area.
Our Methodology
To list the 10 Software Stocks Analysts Are Upgrading, we sifted through several online rankings to get an extensive list of stocks that have been upgraded by Wall Street analysts recently. Next, we chose the ones that are popular among hedge funds. Finally, the stocks have been arranged in ascending order of their hedge fund sentiments, as of Q1 2025.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Software Stocks Analysts Are Upgrading
10. SAP SE (NYSE:SAP)
Number of Hedge Fund Holders: 33
SAP SE (NYSE:SAP) is one of the 10 software stocks analysts are upgrading. On June 13, research firm Warburg Research upped the price objective on the company’s stock from €275 to €295, while maintaining a “Buy” rating. The firm’s analyst, Andreas Wolf, sees further cloud growth and margin improvements, which led to the increase in long-term estimates. Furthermore, the analyst opines that AI is expected to fuel growth further and make software development more efficient.
In Q1 2025, SAP SE (NYSE:SAP)’s current cloud backlog expanded 29% at constant currencies and the total revenue encountered a double-digit increase. With a share of more predictable revenue of 86%, the business model is resilient in uncertain times. Furthermore, SAP SE (NYSE:SAP)’s AI-powered portfolio allows companies to navigate supply chain disruptions in more than 130 countries. In Q1 2025, the company’s cloud and software revenue rose 14% to €7.94 billion, and was up 13% at constant currencies.
In January 2024, SAP SE (NYSE:SAP) announced a company-wide restructuring program, which was concluded in Q1 2025. The restructuring payouts came in at €2.5 billion for FY 2024 and €0.3 billion for Q1 2025. Furthermore, ~€0.4 billion is anticipated to be paid out in the balance of 2025.
SAP SE (NYSE:SAP) offers enterprise applications and business solutions.
