- The software sector continues to offer unique investment opportunities, especially for companies flying under Wall Street’s radar.
- While big tech grabs headlines, these five non-consensus software stocks stand out as compelling opportunities for 2025.
- Each is poised to benefit from transformative technological advancements and offers substantial upside potential according to InvestingPro's Fair Value models.
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The software sector is brimming with opportunities as companies embrace artificial intelligence (AI), cloud computing, and advanced digital tools to drive growth.
Among the less-discussed yet promising names are Zoom Video Communications (NASDAQ:ZM), Teradata (NYSE:TDC), Dropbox (NASDAQ:DBX), DocuSign (NASDAQ:DOCU), and Twilio (NYSE:TWLO), which all stand out for their potential to capitalize on transformative trends like AI and cloud technology.
These companies not only have significant growth potential but are also rated highly on InvestingPro’s health scores. Furthermore, each stock boasts substantial upside potential, as determined by InvestingPro’s AI-powered quantitative models.
Here’s why these stocks deserve attention in 2025.
1. Zoom Video Communications
- Sector: Communication Technology
- Current Price: $80.45
- Fair Value Price Target: $118.55 (+47.4% Upside)
- Market Cap: $24.7 Billion
Core Business: Zoom is a global leader in video communications, offering a suite of collaboration tools for businesses and individuals. Known for its user-friendly platform, the San Jose, California-based video-conferencing specialist is synonymous with remote work and virtual meetings.
2025 Outlook: Zoom continues to expand beyond its traditional video conferencing domain, focusing on AI integration. Its strong brand recognition positions it to expand into adjacent markets.
The upcoming launch of Zoom’s AI Companion 2.0 is expected to boost user productivity and engagement, solidifying the company’s role as a leader in communication tools. Furthermore, its push into Contact Center-as-a-Service (CCaaS) and multi-product enterprise solutions offers significant new revenue streams.
A renewed emphasis on profitability, with operating margins revised upward, further bolsters Zoom’s bullish investment case.
Source: InvestingPro
As seen above, InvestingPro’s Fair Value models highlight a massive +47.4% upside potential, underscoring ZM stock’s undervalued status. Pro also points out that analysts at Jeffries recently upgraded the stock to a buy, citing ‘multiple reasons for optimism’.
2. Teradata
- Sector: Data Analytics and Cloud Computing
- Current Price: $31.29
- Fair Value Price Target: $41.31 (+32% Upside)
- Market Cap: $3 Billion
Core Business: Teradata specializes in enterprise data analytics and hybrid cloud solutions which enable businesses to derive insights from vast amounts of information. Its customers include numerous Fortune 500 companies that rely on advanced analytics to drive decisions.
2025 Outlook: Teradata is leveraging its expertise in data analytics, highlighted by partnerships with industry leaders like Nvidia (NASDAQ:NVDA) to remain at the forefront of AI innovation.
Despite strong cloud offerings and recurring revenue, the stock trades at a significant valuation discount to peers such as Snowflake (NYSE:SNOW) and Databricks, making it an attractive option.
The San Diego, California-based company’s realigned sales strategy, enhanced cost-cutting measures, and improved focus on recurring revenue signal its readiness for a turnaround. Analysts forecast substantial earnings leverage if the company accelerates top-line growth.
Source: InvestingPro
With a Fair Value of $41.31, TDC stock presents a sizable upside potential of +32% from its current price of $31.29. InvestingPro also mentions that Teradata’s management has been aggressively buying back shares recently, a testament to its promising growth prospects and cheap valuation.
3. Dropbox
- Sector: Cloud Storage and Collaboration
- Current Price: $29.58
- Fair Value Price Target: $37.04 (+25.2% Upside)
- Market Cap: $9.2 Billion
Core Business: Dropbox offers cloud-based storage and collaboration solutions for individuals and businesses to manage digital content effectively. Its platform, which has more than 18 million paying members, is widely recognized for its ease of use and robust file-sharing capabilities.
2025 Outlook: Dropbox’s investments in Generative AI (GenAI) promise to transform how users interact with their content. Tools like Dropbox Dash, a universal search solution, aim to address growing challenges in managing information overload.
With the potential to become a central hub for productivity, Dropbox is well-positioned to capitalize on evolving enterprise needs for information management.
Coupled with strong free cash flow generation and its undervalued status, Dropbox represents a high-potential investment for the future.
Source: InvestingPro
Trading substantially below its Fair Value target of $37.04, DBX stock offers a +25.2% upside potential, highlighting its undervaluation and growth potential. As per InvestingPro, the San Francisco, California-based cloud storage firm has an above-average Financial Health score of 4.0 out of 5.0.
4. DocuSign
- Sector: Digital Transactions and Identity Management
- Current Price: $88.26
- Fair Value Price Target: $109.42 (+24% Upside)
- Market Cap: $17.8 Billion
Core Business: DocuSign, the market leader in e-signature solutions with 1.6 million paying customers, offers innovative technology for secure document signing, identity verification, and workflow automation.
2025 Outlook: DocuSign’s expanding Identity and Access Management (IAM) platform is driving growth by enhancing customer retention and average revenue per user.
With a massive $50 billion total addressable market, the San Francisco-based digital signature software specialist has significant room to grow. International expansion and consistent share buybacks highlight management’s confidence in its future.
Additionally, DocuSign’s improved customer net retention rates and positioning as a potential acquisition target further add to the bull case for this undervalued stock.
Source: InvestingPro
Not surprisingly, DOCU stock’s Fair Value estimate of $109.42 signals +24% upside potential, making it a compelling candidate for growth in 2025. Demonstrating the strength of its business, DocuSign’s growing net profit, attractive valuation and robust balance sheet metrics earn it a noteworthy Pro Financial Health score of 4.0 out of 5.0.
5. Twilio
- Sector: Communication Platforms and AI
- Current Price: $109.82
- Fair Value Price Target: $130.62 (+18.9% Upside)
- Market Cap: $16.8 Billion
Core Business: Twilio provides cloud-based communication infrastructure tools for integrating messaging, voice, and video capabilities into applications. It is widely considered as one of the leading names in the communication platform-as-a-service (CPaaS) sector and counts big names like Uber (NYSE:UBER), Airbnb, DoorDash (NASDAQ:DASH), eBay (NASDAQ:EBAY), and Reddit as customers.
2025 Outlook: Twilio’s groundbreaking collaboration with OpenAI and focus on AI-powered communication tools is expected to drive growth and improve margins while enabling scalability and operational efficiencies.
The San Francisco-based company’s expanding Independent (LON:IOG) Software (ETR:SOWGn) Vendor (ISV) partnerships have created higher-margin revenue streams and unlocked new market opportunities.
A strong Q3 2024 performance and raised annual guidance set the stage for Twilio to thrive in 2025, with analysts forecasting significant market share gains.
Source: InvestingPro
With a Fair Value price target of $130.62, TWLO offers an +18.9% upside potential, underscoring its dominant market presence and cheap valuation. As noted above, InvestingPro points out Twilio management's proactive share buyback initiatives in recent months.
Conclusion
These five software companies—Zoom, Teradata, Dropbox, DocuSign, and Twilio—stand out for their innovative strategies, AI integration, and strong fundamentals.
With significant upside potential as per InvestingPro’s AI-powered models, all five are significantly undervalued, providing an attractive entry point for investors seeking exposure to the software sector’s next wave of growth.
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Disclosure: At the time of writing, I am long on the S&P 500, and the Nasdaq 100 via the SPDR® S&P 500 ETF (SPY), and the Invesco QQQ Trust ETF (QQQ). I am also long on the Invesco Top QQQ ETF (QBIG), Invesco S&P 500 Equal Weight ETF (RSP), and VanEck Vectors Semiconductor ETF (SMH).
I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies' financials.
The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.
Follow Jesse Cohen on X/Twitter @JesseCohenInv for more stock market analysis and insight.