Last year, the software industry achieved solid growth due to a COVID-19 pandemic-led increased dependency on remote platforms. The trend has continued this year with an increasing adoption of advanced software in almost every…
industry as part of widespread digital transformation efforts. According to Grand View Research, the global business software and services market is expected to grow at an 11.3% CAGR between 2021 – 2028.
Investors’ interest in software stocks is evidenced by the SPDR S&P Software & Services ETF’s (XSW) 2.8% returns over the past month versus the SPDR S&P 500 Trust ETF’s (SPY) 0.8% loss. However, this has led to sky-high valuations for some software stocks that are not in sync with their growth prospects. In addition, the industry faces increasing cyber-security-related threats.
The valuations of Upstart Holdings, Inc. (UPST – Get Rating), Asana, Inc. (ASAN – Get Rating), and SecureWorks Corp. (SCWX – Get Rating) at their current price levels are not in sync with their fundamentals and growth prospects. Therefore, Wall Street analysts expect these stocks to decline in price in the near term.
UPST operates a cloud-based artificial intelligence (AI) lending platform that helps aggregate consumer demand for loans which it connects to its AI-enabled bank partners’ network. Its platform also connects consumers, banks, and institutional investors through a shared AI lending platform. UPST is based in San Mateo, Calif.
UPST’s revenue surged 1,018% year-over-year to $194 million for its fiscal second quarter, ended July 31, 2021. However, its operating expenses increased 448.5% year-over-year to $157.65 million, while its total liabilities came in at $188.49 million, representing a 6.5% year-over-year increase.
In terms of forward P/B, UPST’s 43.78x is 3,798.1% higher than the 1.12x industry average of 1.12x. Likewise, the stock’s 232.28x forward non-GAAP P/E is 2,074.7% higher than the 10.68x industry average.
UPST’s shares have gained 65.7% in price over the past month to close yesterday’s trading session at $336.34. However, Wall Street Analysts expect the stock to hit $261.29 in the near term, which indicates a potential 22.3% decline.
UPST’s POWR Ratings are consistent with this bleak outlook. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting. In addition, the stock has an F grade for Stability, and a D grade for Value.
San Francisco-based ASAN operates a work management platform for individuals, team leads, and executives internationally. The company provides a work management platform as software-as-a-service (SaaS) that enables individuals and teams to get work done faster while enhancing employee engagement.
ASAN’s revenue surged 72% year-over-year to $33.30 million for its fiscal second quarter, ended July 31, 2021. However…
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