Software is rapidly reducing operating expenses for businesses. This secular theme has materialized in superior earnings growth and stock price performance for most SaaS companies, and over the last six months, the industry’s 39.7% return has topped the S&P 500 by 21.7 percentage points.
Although these businesses have produced results, only the best will survive over the long term as AI is eating into the profits of those with lower switching costs. Taking that into account, here is one software stock boasting a durable advantage and two that may face trouble.
Two Software Stocks to Sell:
DocuSign (DOCU)
Market Cap: $12.48 billion
Creating the digital equivalent of "sign on the dotted line" for over a billion users worldwide, DocuSign (NASDAQ: DOCU) provides an agreement management platform that enables businesses to electronically prepare, sign, and manage documents and contracts.
Why Do We Think DOCU Will Underperform?
- Customers were hesitant to make long-term commitments to its software as its 5.5% average ARR growth over the last year was sluggish
- Estimated sales growth of 8.1% for the next 12 months is soft and implies weaker demand
- Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
DocuSign is trading at $66.81 per share, or 3.6x forward price-to-sales. Dive into our free research report to see why there are better opportunities than DOCU.
American Express Global Business Travel (GBTG)
Market Cap: $4.94 billion
Originally spun off from American Express in 2014 but maintaining the Amex GBT brand, Global Business Travel Group (NYSE: GBTG) provides end-to-end business travel and expense management solutions, connecting corporate clients with travel suppliers and offering specialized software services.
Why Does GBTG Fall Short?
- Bad unit economics and steep infrastructure costs are reflected in its gross margin of 58.5%, one of the worst among software companies
- Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 1.5 percentage points
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 3.2% for the last year
At $9.47 per share, American Express Global Business Travel trades at 1.5x trailing 12-month price-to-sales. To fully understand why you should be careful with GBTG, check out our full research report (it’s free).
One Software Stock to Watch:
Nutanix (NTNX)
Market Cap: $18.74 billion
Originally pioneering hyperconverged infrastructure to break down traditional data center silos, Nutanix (NASDAQ: NTNX) provides a unified software platform that enables organizations to run applications and manage data across private, public, and hybrid cloud environments.
Why Could NTNX Be a Winner?
- Prominent and differentiated software leads to a best-in-class gross margin of 86.9%
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
- Robust free cash flow margin of 29.5% gives it many options for capital deployment
Nutanix’s stock price of $69.93 implies a valuation ratio of 6.4x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
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 Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
