The software industry has been one of the fastest-growing industries over the past year. But not all software stocks have been able to benefit from the industry tailwinds and strengthen their fundamentals. Given the growing competition in the industry, we think it could be wise to avoid Coupa Software (NASDAQ:COUP) and Sumo Logic (SUMO), which analysts have recently downgraded. Read on.The software industry has reaped handsome benefits from the COVID-19 pandemic as the demand for software solutions has hit all-time highs amid the adoption of remote lifestyles globally. In addition, the rapid digital transformation of virtually all industries has added fuel to the industry's growth.
However, the software industry has become highly saturated, with many new companies entering the space to capitalize on its long-term growth prospects. With established companies dominating the market, smaller and fundamentally weak software companies are struggling to stay afloat.
Analysts have recently downgraded Coupa Software Incorporated (COUP) and Sumo Logic Inc. (SUMO). So, we think these stocks are best avoided now.