3 Software Stocks We Find Risky

3 Software Stocks We Find Risky

Anthony Lee

Tue, February 17, 2026 at 1:31 PM GMT+9 3 min read

In this article:

ZM

-4.72%

RAMP

-2.46%

MANH

-1.14%

^GSPC

-0.89%

Software is eating the world, and virtually no business is left untouched by it. In the past, the undeniable tailwinds fueling SaaS companies led to lofty valuation multiples that made it easier to raise capital. But this was a double-edged sword as the high prices exposed them to big drawdowns, and unfortunately, the industry has tumbled by 20.2% over the last six months. This performance is a stark contrast from the S&P 500’s 6% gain.

Investors should tread carefully as only some businesses are worthy of their valuations because AI and competition will commoditize many products. Keeping that in mind, here are three software stocks we’re steering clear of.

Zoom (ZM)

Market Cap: $27.42 billion

Once the verb that defined remote work during the pandemic (“let’s Zoom later”), Zoom (NASDAQ:ZM) provides a cloud-based platform for video meetings, phone calls, team chat, and collaboration tools that helps businesses and individuals connect virtually.

Why Do We Think ZM Will Underperform?

Products, pricing, or go-to-market strategy may need some adjustments as its 3.9% average billings growth over the last year was weak

Net revenue retention rate of 98% shows it has a tough time retaining customers

Anticipated sales growth of 3.6% for the next year implies demand will be shaky

Zoom’s stock price of $92.75 implies a valuation ratio of 5.7x forward price-to-sales. If you’re considering ZM for your portfolio, see our FREE research report to learn more.

LiveRamp (RAMP)

Market Cap: $1.54 billion

Serving as the digital middleman in an increasingly privacy-conscious world, LiveRamp (NYSE:RAMP) provides technology that helps companies securely share and connect their customer data with trusted partners while maintaining privacy compliance.

Why Does RAMP Fall Short?

Underwhelming ARR growth of 6.8% over the last year suggests the company faced challenges in acquiring and retaining long-term customers

Customers generally do not adopt complementary products as its 104% net revenue retention rate lags behind the industry standard

Estimated sales growth of 9% for the next 12 months implies demand will slow from its two-year trend

LiveRamp is trading at $24.26 per share, or 1.8x forward price-to-sales. To fully understand why you should be careful with RAMP, check out our full research report (it’s free).

Manhattan Associates (MANH)

Market Cap: $8.41 billion

Built on a “versionless” cloud architecture that delivers quarterly updates to all customers, Manhattan Associates (NASDAQ:MANH) develops cloud-based software that helps retailers, wholesalers, and manufacturers manage their supply chains, inventory, and omnichannel operations.

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Why Are We Hesitant About MANH?

Average billings growth of 4.1% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand

Gross margin of 56.3% reflects its high servicing costs

Operating margin failed to increase over the last year, indicating the company couldn’t optimize its expenses

At $140.41 per share, Manhattan Associates trades at 7.4x forward price-to-sales. Dive into our free research report to see why there are better opportunities than MANH.

High-Quality Stocks for All Market Conditions

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Don’t wait for the next volatility shock. Check out our Top 9 Market-Beating Stocks. 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).

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