From commerce to culture, software is digitizing every aspect of our lives. The undeniable tailwinds fueling the industry have also led to strong returns for SaaS stocks lately as they’ve gained 6.4% over the past six months. Investing here would have been wise - at the same time, the S&P 500 was flat.

Nevertheless, investors should tread carefully as AI will commoditize many software products, and backing the wrong horse could result in hefty losses. Taking that into account, here are two software stocks boasting durable advantages and one that may face trouble.

One Software Stock to Sell:

BigCommerce (BIGC)

Market Cap: $469.2 million

Founded in Sydney, Australia in 2009 by Mitchell Harper and Eddie Machaalani, BigCommerce (NASDAQ:BIGC) provides software for businesses to easily create online stores.

Why Are We Hesitant About BIGC?

1. Customers were hesitant to make long-term commitments to its platform as its 5.1% average ARR growth over the last year was sluggish
2. Estimated sales growth of 3.9% for the next 12 months implies demand will slow from its three-year trend
3. Poor expense management has led to operating losses

BigCommerce is trading at $5.80 per share, or 1.4x forward price-to-sales. Dive into our free research report to see why there are better opportunities than BIGC.

Two Software Stocks to Watch:

Workiva (WK)

Market Cap: $4.70 billion

Founded in 2010, Workiva (NYSE:WK) offers software as a service product that makes financial and compliance reporting easier, especially for publicly traded corporations.

Why Does WK Stand Out?

1. Ability to secure long-term commitments with customers is evident in its 19.5% ARR growth over the last year
2. Estimated revenue growth of 17.3% for the next 12 months implies better momentum than most peers
3. Prominent and differentiated software culminates in a premier gross margin of 76.7%

Workiva’s stock price of $83.91 implies a valuation ratio of 5.4x forward price-to-sales. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.

Confluent (CFLT)

Market Cap: $8.67 billion

Started in 2014 by the team of engineers at LinkedIn who originally built it as an internal tool, Confluent (NASDAQ:CFLT) provides infrastructure software for organizations that makes it easy and fast to collect and move large amounts of data between different systems.

Why Are We Positive On CFLT?

1. Winning new contracts that can potentially increase in value as its billings growth has averaged 26.4% over the last year
2. High switching costs and customer loyalty are evident in its net revenue retention rate of 119%
3. Estimated revenue growth of 20.8% for the next 12 months implies its momentum over the last three years will continue

At $25.96 per share, Confluent trades at 7.3x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.

Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.