Best Software Stocks To Buy In May

Key Insights

• Shares of software companies have been losing ground since the start of the year as traders moved out of high-PE stocks. 
• Some software stocks have already declined to reasonable valuation levels. 
• These stocks could gain solid upside momentum in case general market rebound continues. 

Software stocks have been under significant pressure in recent months together with other tech stocks. Such stocks often trade at high price-to-earnings levels, and traders are worried that they will underperform in the rising interest rate environment. As a result, some software stocks have declined to attractive valuation levels.

Autodesk

Autodesk enjoys a dominant market position. For many engineering jobs, strong knowledge of the company’s software is a requirement. However, the stock is down by more than 30% year-to-date.

The key problem of Autodesk shares this year was their rich valuation. The strong pullback has pushed them to more attractive levels. Currently, analysts expect that Autodesk will report earnings of $6.69 per share in the current year and earnings of $8.01 per share in the next year, so the stock is trading at 24 forward P/E.

It should be noted that analyst estimates haven been moving lower in recent months. However, Autodesk shares are already down by almost 45% from the peak that was reached back in 2021, so speculative traders may want to buy the dip.

Salesforce

Salesforce stock has also been under significant pressure in recent months. As a result, it moved from the all-time highs near the $310 level to the $160 level, losing almost 50% of its value.

Currently, the stock is trading at 28 forward P/E. Interestingly, analyst estimates have been mostly stable in recent months, but the stock was falling as traders were moving out of high-PE stocks.

At this point, Salesforce has reached reasonable valuation levels, which could be attractive for speculative traders who are willing to bet that software stocks are ready to rebound after a major sell-off.

To keep up with the latest earnings updates, visit our earnings calendar.