We recently compiled a list of 12 Best Software Stocks to Buy According to Analysts. In this article, we’ll take a look at where WEBTOON Entertainment Inc. (NASDAQ: WBTN) stacks up to other software stocks.
According to MCF Corporate Finance’s Q4 2024 Software Update Report, software company valuations have reached all-time highs due to the AI boom, particularly thanks to the innovations surrounding GenAI. Investors increasingly view strong AI roadmaps as critical to revenue and margin expansion, driving increased interest in software companies integrating advanced AI capabilities into their offers. According to the report, software companies are trading at 6.2 times the current median EV/NTM revenue estimate.
As the report highlights, another key reason for the increase in valuations is the high adoption rate of GenAI. GenAI usage at the enterprise level nearly doubled year-over-year in 2024 and around 65% of companies now use the technology. The report notes that organizations have now moved from the pilot testing phase to full-scale implementation of GenAI, improving workflows and customer experience while opening new revenue streams. Additionally, investments and funding from GenAI-based software companies have also increased sharply. According to the report, GenAI has raised approximately $56 billion in funding in 2024, led by a $10 billion round from DataBricks, a $6.6 billion round from OpenAI, and a $4 billion round from OpenAI. ‘Anthropic. Additionally, GenAI has also claimed over 40% of total AI funding in the United States, Europe, and Israel.
Talking about how AI has started to work in software’s favor, Jeff Richards, managing partner at Notable Capital, appeared in an interview on CNBC a month ago. He noted that AI is actively working for the software sector, indicating that the technology is not just a prospect but is already being used effectively in various applications within the industry. Richards pointed out that AI development, which started with semiconductor chips and then expanded to data centers and servers, is now at the software development stage, where software application companies are in high demand for integrating AI applications in various industries. Similar to the findings of the MCF Corporate Finance Report, Richards also highlighted that venture capital funds are heavily funding software startups over the past two to three years to ensure the effective application of GenAI, to which we are currently assisting.
Our methodology
To curate the list of 12 best software stocks to buy according to analysts, we used the Finviz Stock Screener and CNN. Using the filter, we first aggregated a list of software stocks with greater than 50% analyst upside potential. Next, we cross-referenced the analyst upside potential for each stock using CNN. Finally, we ranked these stocks in ascending order of analyst upside potential. We also added the number of hedge funds owning each stock, taken from Insider Monkey’s Q3 hedge fund database. Please note that the data was recorded on January 16, 2025.
