Jim Cramer Named 9 Software Stocks as Potential Undervalued Buys

7. ServiceNow, Inc. (NYSE:NOW)

Number of Hedge Fund Holders: 104

ServiceNow, Inc. (NYSE:NOW) is one of the software stocks that Jim Cramer named as potential undervalued buys. Cramer highlighted the company’s expected earnings growth during the episode, as he said:

ServiceNow, which we had on the show last week, is also starting to look good, down over 50% from its high. They’re expected to grow earnings by 19% this year. And though you’d have to still pay a slight premium with the stock selling for nearly 24 times this year’s numbers, that’s down from nearly 70 times forward earnings at the end of 2024. ServiceNow also announced a big buyback last week, including a $2 billion accelerated buyback. So you have to assume that they’ll be right there buying along with you.

ServiceNow, Inc. (NYSE:NOW) provides a cloud platform that supports digital workflows through AI, automation, low-code tools, analytics, and a suite of IT, security, customer service, and employee experience products. Cramer discussed the stock during the February 2 episode and commented:

ServiceNow was the fourth worst performer with an almost 24% pullback…  Now, I think ServiceNow really stands out as a poster child for what’s happening to the group. We just had chairman and CEO Bill McDermott on the show last Wednesday night after ServiceNow reported a very good quarter. That was a beat on every key line, mostly better than expected guidance for the current quarter and the full year. Now, honestly, I did think that the numbers would allow the stock to rebound. I thought it would at least get some lift, but I was wrong. Instead, it plunged 10% off the numbers, nearly 10%.

It was kind of amazing, frankly. Why did it happen? Because the numbers don’t matter when Wall Street doesn’t believe your industry has much of a future. All these beaten-down software companies are profitable. All of them have gotten cheaper on the way down. Doesn’t seem to matter… ServiceNow has gone from 64 times earnings to 28 times earnings.