The software industry is expected to witness accelerated growth for an extended period owing to gradual tech integration in virtually every industry. However, with the tech space dominated by a handful of trillion-dollar businesses, we think fundamentally weak companies ironSource (IS), Support.com (SPRT), Exela Technologies (NASDAQ:XELA), and Marin Software (MRIN), with bleak growth prospects, are best avoided now. Let’s discuss.The software industry has been one of the biggest beneficiaries of the COVID-19 pandemic as the demand for software and cloud computing reached all-time highs amid remote work and entertainment lifestyles. Furthermore, the rapid digital transformation of virtually all sectors is expected to drive this industry’s growth over an extended period.
However, rising investor optimism surrounding the tech industry has resulted in multiple start-ups entering the space. Wells Fargo (NYSE:WFC) Securities’ Chris Harvey characterized the software industry as being crowded. Also, with tech giants dominating the software space with breakthrough innovations and cost-effective software offerings, several lesser-known companies have been unable to capitalize on the rapid tech integration.
Given this backdrop, we think fundamentally weak software stocks ironSource Ltd. (IS), Support.com, Inc. (SPRT), Exela Technologies, Inc. (XELA), and Marin Software Incorporated (MRIN), which gained popularity amid the pandemic, are best avoided now.