Legions of investors have rotated away from expensive tech stocks this year on concerns over rising inflation and to exploit the opportunity to capitalize on the economic recovery by betting on cyclical stocks. But the resulting decline in tech stock prices has created an opportunity to buy fundamentally strong software stocks at low prices. Given this industry’s massive growth potential, we think it could be wise to bet on Magic Software (MGIC), Brightcove (BCOV), and Immersion (NASDAQ:IMMR). All three names are currently trading at below $20 per share. Read on. Even though the majority of the software stocks generated massive returns last year on the back of an increased remote working trend amid the COVID-19 pandemic, investors have been rotating away from expensive tech stocks this year on concerns over rising inflation and to benefit from the strong upside potential of cyclical stocks amid the economic recovery. However, tech stocks’ price retreat has made the valuations of fundamentally strong software stocks reasonable now.
Because the hybrid working model is here to stay, the software industry should witness solid growth this year and beyond. It is also expected to benefit from the ongoing, global digital transformation and increasing automation of processes across several industries, including retail, manufacturing and healthcare. According to Grand View Research, the global business software and services market is expected to grow at an 11.3% CAGR over the next seven years.
Software companies Magic Software Enterprises Ltd. (NASDAQ:MGIC), Brightcove Inc. (BCOV), and Immersion Corporation (IMMR) have immense growth potential, but their stocks are currently trading below $20 per share. So, we think it could be wise to bet on them now.