The software industry has been one of the fastest-growing industries over the past year. But not all software stocks have been able to capitalize on the industry tailwinds and strengthen their fundamentals. So, given the current market volatility and strong competition in the industry, we think it could be wise to avoid MongoDB (NASDAQ:MDB), Monday .com (MNDY (NASDAQ:MNDY)), and Asana Inc. (ASANA) because they look overvalued at their current price levels. Let’s discuss.The software industry has generated huge momentum by capitalizing on the remote working culture and rapid digital transformation over the past year. The industry's strong growth prospects have fueled fierce competition among existing and new players. However, despite possessing weak fundamentals, many software stocks are currently trading at high valuations.
Given that there’s much uncertainty related to the market’s momentum in the coming weeks as investors eye the Fed’s forthcoming annual summit this week, focused on whether or not the central bank will detail its plan on tapering monetary stimulus, overvalued software stocks could retreat.
That said, investors must be cautious in picking software stocks. MongoDB Inc. (MDB), Monday.com Ltd (MNDY), and Asana Inc. (ASAN) look significantly overvalued at their current price levels. So, we think that these stocks are best avoided now.