A rare chance to buy US software growth stocks like Salesforce, Snowflake, and CrowdStrike cheaply?
US software growth stocks have been absolutely hammered recently. As a result, some of these stocks are now trading at all-time low price-to-earnings (P/E) and/or price-to-sales ratios.
Could there be a rare opportunity here for long-term investors? Letâs take a look at the landscape.
Are AI fears overblown?
The reason these shares have tanked recently is investors have grown concerned that artificial intelligence (AI) solutions from the likes of Anthropic (Claude) and OpenAI (ChatGPT) are going to destroy their business models. The theory here is that enterprises will be able to create their own software using AI and therefore wonât need to pay ongoing fees to companies like Salesforce, ServiceNow, Monday.com, and Snowflake (NYSE: SNOW).
Now, thereâs no doubt that AI will disrupt some software companies. But I think thereâs a level of panic (and offloading) in the market right now thatâs unwarranted.
I believe a lot of software companies will continue to do well in the AI era. So, there could potentially be an investment opportunity starting to emerge.
This stock looks oversold
One stock that I see as oversold right now is Snowflake. Itâs a data storage and analytics company that helps businesses store and structure their data so that they can apply AI to it.
It has fallen from $265 to $168 recently (a drop of almost 40%). After that drop, the companyâs price-to-sales ratio has slumped to 10 â an all-time low.
My belief is that this company â which has been growing at a prolific rate â will continue to have success in the AI era. Because itâs focusing on the one thing AI canât operate without â data.
Competition from rivals such as Databricks and Amazon is a risk. However, with a 4.6 rating on Gartner, Iâm optimistic that the company can continue to thrive, so I think itâs worth a look.
Other opportunities in software
Turning to Salesforce â one of the largest US software businesses â it also looks interesting, in my view.
Its customer relationship management (CRM) platform is potentially disruptable. However, enterprises all over the world depend on it and the cost of switching is high so I donât expect the companyâs revenues to suddenly fall off a cliff.
Meanwhile, the company is rolling out powerful AI agent solutions. So, it could end up doing well as businesses automate their operations.
As for its valuation, itâs currently trading on a price-to-earnings (P/E) ratio of 16 â another all time low. At that multiple, I think itâs definitely worth a look.
Zooming in on cybersecurity powerhouse CrowdStrike, Iâm not going to say that this is a âonce-in-a-decadeâ opportunity to buy as this stock has had some big drops in recent years. However, after plummeting from $550 to $395, I do think itâs worth a look.
In my view, AI is unlikely to reduce demand for cybersecurity software. If anything, AI should increase demand for cybersecurity because firms are going to have to protect themselves from a lot more threats.
Of course, cybersecurity is a dynamic industry so thereâs no guarantee that this company will continue to have success. But with the stock currently trading 30% below its recent highs at a much lower valuation, I see quite a bit of potential.
The post A rare chance to buy US software growth stocks like Salesforce, Snowflake, and CrowdStrike cheaply? appeared first on The Motley Fool UK.
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Edward Sheldon has positions in Amazon, CrowdStrike, Salesforce, and Snowflake. The Motley Fool UK has recommended Amazon, CrowdStrike, Salesforce, ServiceNow, and Snowflake. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
