Behind the video
The Software Stock Bottom is IN: Is it TOO LATE to Buy?
Overall Thesis
Software stocks have bottomed and present significant upside opportunities despite recent rallies, with specific price targets suggesting 25-100% gains from current levels.
Narratives
Kevin notes Workday is recovering as part of the broader software sector rebound, though less strongly than some peers.
Key Arguments
- Described as 'recovering' alongside other software names post-Q3 bottom
AXONAxon EnterpriseKevin states Axon has bottomed as part of the broader software/tech recovery theme.
Key Arguments
- Described as having 'bottomed' alongside other recovering software names
Predictions (1)
"Axon has bottomed."
CRMSalesforceKevin argues Salesforce got unjustifiably cheap during the 'SaaS apocalypse,' pointing to a ~13% free cash flow yield and CEO Marc Benioff buying back stock at $191 as proof of undervaluation. He believes fair value is in the mid-$400s (he cites $458), roughly double the price he bought at, while acknowledging pricing power and growth risks.
Key Arguments
- Bought shares around $165 on a ~13% free cash flow yield and 0.9 PEG ratio
- CEO raised $26B in debt to buy back $25B of stock at ~$191, signaling undervaluation
- Operating margin beat (34.1% vs 33.6%) and AI/Data 360 revenue growing faster (20%) than core Agent Force apps (7.6%)
- Cash flow yield of ~7% currently, still 3.5% even at a $450 fair value
Risks acknowledged
- Pricing was not a significant driver of revenue growth, suggesting weaker pricing power
- Professional services revenue declined ~4% due to fewer large multi-year transformation deals
- RPO grew only 14%, a slight miss, and subscription/Q3 guidance beats were narrow
- Integration with Claude ('Claw Force') could eventually let customers bypass core Salesforce infrastructure
Predictions (1)
PATHUiPathKevin's valuation model shows UiPath fairly valued around $32 with 75% upside, but he personally believes the real target is higher, near $40-45, as software recovers from the Q3/Q4 bottom.
Key Arguments
- Model shows $32 fair value implying 75% upside from current levels
- Believes actual fair value is closer to $40-45
- Part of broader software sector recovery he has been calling since earlier in the year
Predictions (1)
PLTRPalantirKevin owns Palantir, bought around $118, and believes it remains undervalued using a PEG-based model that yields a ~$222 fair value, though he thinks even that figure understates true upside by 20-30%.
Key Arguments
- Bought shares around $118 before the Q3 rally
- PEG-based model (25 PEG) implies a $222 fair value
- Believes the $222 model output is 20-30% too conservative, implying more upside
NOWServiceNowKevin views ServiceNow positively but prefers Salesforce over it, without a strong bullish or bearish stance.
Key Arguments
- Considers it 'good' but not his favorite among software plays
- Explicitly says he is not bearish on it
Kevin mentions Monday.com as one of the software names showing a recovery during the broader sector rebound.
Key Arguments
- Cited among software stocks recovering in Q3
Hedges & Caveats
- Acknowledges the software bottom 'probably isn't in yet' and could be 'pretty aggressive' when it arrives
- Notes that some stocks like QuickBooks are still lagging in recovery
- Mentions red flags alongside green shoots for Salesforce that will be discussed
- Discusses token/AI integration costs impacting software company margins as a headwind
- Valuation estimates presented are author's opinion and subject to market conditions