Episode summary
Software Stocks: Values or Traps?
Zacks Market Edge
· · Hosts: Tracey Ryniec, Mark Zinski, Neena Mishra, Ethan Feller, John Blank
Summary
The host revisited five software stocks after another selloff and argued that the group is still being pulled around by fear of AI disruption rather than by collapsing fundamentals. The stocks on the screen were ServiceNow, Salesforce, Palantir, Adobe, and AppLovin, and the host focused on charts, earnings revisions, and valuation to decide whether they are values or traps. The conclusion was that none of them looked like traps because earnings estimates were generally still rising, even if the market was turning more cautious again.
ServiceNow and Salesforce were framed as moving closer to value territory, with cheaper forward multiples and still-positive estimate trends, though the host wanted even better prices before buying. Adobe was described as a more classic value stock now, with a very low forward P/E and the market largely ignoring it, even though estimates were only slipping slightly. Palantir and AppLovin were still treated as growth names: expensive, but not broken, and still showing strong expected earnings growth. The host’s main message was to keep all five on a watch list and wait for further pullbacks rather than chase the post-earnings rallies.
Key takeaways
- The host said none of the five software names look like traps because earnings estimates are still generally rising.
- ServiceNow looks closer to value, with a forward P/E of 26.9 and estimate revisions still pointing higher.
- Salesforce is the clearest value-like case, with a forward P/E of 14.8 and a price-to-book near 3.
- Adobe is already behaving like a value stock, with a forward P/E of 10.5 even as the market keeps selling it.
- Palantir and AppLovin remain growth stocks, not classic values, but both still have strong earnings growth and no obvious estimate cuts.
Notable quotes
“Are they values or are they traps? We've gotten the earnings in on these stocks as well”
“the earnings did help the group. We had a lot of CEOs out there either buying the shares in in support”
“when I see a chart like that. It really is just, oh, these are software. They're at the enterprise level”
“I think we concluded on the last podcast I did on these stocks that while they had had the big sell-off”
“It is under 30, which I do find more attractive for a growth stock like this”
How the episode opens
Stocks, bonds, ETFs, straight out of downtown Chicago. This is Zach's Market Edge. Welcome to Zach's Market Edge, the podcast about investing in your life.
I'm your host, Tracy Reinik, and this week I'm going solo to talk about the software stocks once again. We did look at these stocks a couple of weeks ago, but before everything happened with the Iran war. So, I wanted to look at them again.
Are they values or are they traps? We've gotten the earnings in on these stocks as well. So, at least we have some guidance.
And the earnings did help the group. We had a lot of CEOs out there either buying the shares in in support or they were just giving interviews talking about how AI is not going to destroy their business. That seemed to have worked for a little while, but now that it's in the rearview mirror by a week or two or three, now we're starting to get some doubts creep back in.
We're starting to see a little bit of selling again in some of these names. So, I did want to take a closer look at the charts and look at what is going on with the earnings estimates because when we last looked before the recent earnings reports, it looked like these were values, not traps. The earnings were holding up.
So, what was the problem? just kind of a freakout by the stock market and traders and investors that the um earnings were not going to hold up at least in the longer period, you know, through the end of the year and into 2027. So, let's take a look.
Uh these are some of the stocks we've talked about in the past. I think I've added at least one new one because I was kind of curious what was going on with it.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- software stocks
- valuation vs risk
- buying opportunity
- stock selloff
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