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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), Asana, Inc. (ASAN), and SecureWorks Corp. (SCWX) 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.
