1 Software Stock Worth Your Attention and 2 We Avoid

1 Software Stock Worth Your Attention and 2 We Avoid

Adam Hejl

Tue, February 24, 2026 at 1:32 PM GMT+9 4 min read

In this article:

•                                       StockStory Top Pick 
  

  NET

  -9.57%

 ORCL  

 -4.57%  

 

 

 ^GSPC  

 -1.04%  

 

 

 SEMR  

 -0.17%  

Software is eating the world, and virtually no business is left untouched by it. Companies bringing it to life have been rewarded with high valuation multiples that make fundraising easier, but they have weighed on the returns lately as the industry has pulled back by 26.4% over the past six months. This drop is a far cry from the S&P 500’s 7.3% ascent.

However, some businesses can support their premium valuations with superior earnings growth, and our mission at StockStory is to help you find them. Keeping that in mind, here is one software stock boasting a durable advantage and two that may face trouble.

Two Software Stocks to Sell:

Semrush (SEMR)

Market Cap: $1.79 billion

Born from the need to make sense of the complex digital marketing landscape, Semrush (NYSE:SEMR) is a software-as-a-service platform that helps companies improve their online visibility, analyze digital marketing efforts, and optimize content across search engines and social media.

Why Is SEMR Not Exciting?

Net revenue retention rate of 106% trails the industry benchmark of 110%+ and shows it has a tough time increasing customer spending

Operating margin declined by 4.3 percentage points over the last year as it scaled

Poor free cash flow margin of 9.7% for the last year limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends

Semrush is trading at $11.81 per share, or 3.6x forward price-to-sales. If you’re considering SEMR for your portfolio, see our FREE research report to learn more.

Oracle (ORCL)

Market Cap: $406.1 billion

Starting as a database company in 1977 and now powering mission-critical systems across the globe, Oracle (NYSE:ORCL) provides enterprise software and hardware products and services that help businesses manage their information technology needs.

Why Do We Avoid ORCL?

Customers had second thoughts about committing to its platform over the last year as its average billings growth of 10.4% underwhelmed

Free cash flow margin is forecasted to shrink by 10.8 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors

Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution

Oracle’s stock price of $140.25 implies a valuation ratio of 5.7x forward price-to-sales. Dive into our free research report to see why there are better opportunities than ORCL.

One Software Stock to Buy:

Cloudflare (NET)

Market Cap: $56.37 billion

With a massive network spanning more than 310 cities in over 120 countries, Cloudflare (NYSE:NET) provides a global network that delivers security, performance and reliability services to protect websites, applications, and corporate networks.

Story Continues  

Why Will NET Beat the Market?

Billings have averaged 33% growth over the last year, showing it’s securing new contracts that could potentially increase in value over time

Expected revenue growth of 28.8% for the next year suggests its market share will rise

User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs

At $161.03 per share, Cloudflare trades at 22.3x forward price-to-sales. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

High-Quality Stocks for All Market Conditions

The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.

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