The software industry is expected to grow, thanks to its consistent innovations and rising demand from several industries that are currently undergoing digital transformations. So, we think it could be wise to bet on quality software stocks Software Aktiengesellschaft (STWRY) and CSG Systems (CSGS), which look undervalued at their current price levels. Read on.Earlier this year, most investors avoided expensive tech stocks, including those from the software space, and instead bet on cyclical stocks to capitalize on the recovering economy. However, with the rapid spread of the highly contagious COVID-19 Delta variant, investors are regaining their interest in software stocks with an acceptance that remote working, if not here to stay, is here for at least an extended period.
Investors’ interest in the software stocks is evidenced by the SPDR S&P Software & Services ETF’s (XSW) 11.6% gains over the past three months versus the SPDR S&P 500 Trust ETF’s (SPY) 7.1% returns. Continuing digital transformation and product innovation should help the software industry grow in the coming months. Indeed, according to Statista, IT spending on enterprise software will likely amount to roughly $599 billion this year, representing a 13.2% year-over-year rise.
So, we think it could be wise to bet on fundamentally strong software stocks Software Aktiengesellschaft (STWRY) and CSG Systems International, Inc. (NASDAQ:CSGS). They look undervalued at their current price levels, and they have overall Strong Buy ratings in our proprietary POWR Ratings system along with B grades for Value.