We recently compiled a list of the 7 cheap software stocks to invest in. In this article, we’ll take a look at where GigaCloud Technology (NASDAQ:GCT) stands compared to the other cheap software stocks.
Avoiding hype and focusing on downstream opportunities
Billionaire investor David Tepper, founder and president of Appaloosa Management, recently shared his thoughts on the market and investment strategies in a conversation on CNBC on September 26. Tepper started by discussing his views on technology stocks, specifically mentioning Meta and Google, which he owns. , and Nvidia, which he previously sold due to concerns about its high valuation.
Tepper also discussed energy, specifically the growing demand for power to support the development of new technologies such as artificial intelligence (AI). He emphasized the importance of natural gas to meet this demand and stated that it is necessary to stimulate the growth of AI. Tepper expressed skepticism about the feasibility of relying solely on renewable energy sources, citing the need for a more practical and realistic approach to meeting the country’s energy needs. He also said he has spoken with governors from both sides of the aisle and believes a collective effort is needed to meet the nation’s energy needs.
When asked about the upcoming elections, Tepper stated that he favors a split government, believing it is beneficial for the economy and markets. He expressed concern about the potential for a bipartisan sweep, citing the risks of populist and progressive policies that could lead to giveaways and increased government spending. Tepper emphasized that his views are purely from a market perspective and that he does not want either party to dominate the government. He believes a split government will prevent either side from pursuing extreme policies, which would benefit markets.
Regarding AI, Tepper acknowledged that it is a fast-growing field, but expressed caution about investing directly in AI companies. Instead, he prefers to invest in downstream companies that will benefit from the growth of AI. Tepper also said he is impressed by AI’s potential to drive growth and innovation, but is unsure about the long-term prospects of certain companies that rely heavily on AI.
In terms of his investment strategy, Tepper emphasized the importance of being cautious and not getting caught up in the hype surrounding certain stocks or trends. He noted that he has been successful in the past by being contrarian and taking a more nuanced approach to investing. Tepper also said he is not afraid to take a step back and reevaluate his investment decisions, citing the importance of adaptability in a rapidly changing market environment.
David Tepper’s insights on market and investment strategies provide valuable perspective on the current state of the economy and technology industry. His emphasis on prudence and adaptability in a rapidly changing market environment is a timely reminder for investors to remain vigilant and avoid getting caught up in the hype surrounding certain stocks or trends. With that in context, let’s take a look at the seven cheap software stocks to invest in.
Our Methodology
To create our list of the seven cheap software stocks to invest in, we used stock screeners from Finviz and Yahoo to find the 30 largest software companies with a price-to-earnings ratio of less than 20. Based on that list, we narrowed our picks to the seven stocks that analysts see the most upside in. The list is sorted in ascending order of analysts’ average upside potential, as of October 3. We’ve also added the hedge fund sentiment around each stock, which was pulled from our database of 912 elite hedge funds, as of Q2 2024. The list is sorted in ascending order of their average upside potential.
Why do we care what hedge funds do? The reason is simple: our research shows that we can outperform the market by imitating the best stock picks from the best hedge funds. Our quarterly newsletter strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating the benchmark by 150 percentage points (see more details here).
A medium-sized warehouse full of furniture and household appliances.
GigaCloud Technology (NASDAQ:GCT)
Future price-earnings ratio as of October 3: 9.08
Upside potential: 64.38%
Number of hedge fund holders: 5
GigaCloud Technology (NASDAQ:GCT) operates Giga B2B, a business-to-business (B2B) e-commerce platform specializing in the logistics and distribution of large parcel goods such as furniture, fitness equipment and home appliances. The company connects global buyers with manufacturers in international markets.
The global B2B e-commerce market is expected to grow at a 22.5% CAGR between 2023 and 2030. Digital channels are expected to account for 56% of sales by 2025. This expands the potential market and customer base for B2B e-commerce platforms like Giga B2B.
In the second quarter, GigaCloud Technology (NASDAQ:GCT) reported revenue of $310.87 million, up 103% from the prior year. However, the company’s earnings per share (EPS) growth has been slower, leading to a decline in its share price. Despite this, the company’s management believes the shares are attractively valued and has announced a $46 million share buyback program. The company is expected to increase its revenue by 58% year-over-year in the third quarter.
Shares of GigaCloud Technology (NASDAQ:GCT) are trading at a price-to-earnings ratio of 9.08, a 61% discount to the industry median of 17.06. Analysts expect the company to grow its earnings by 20.11% this year and are in agreement on the stock’s Buy rating, with the average price target at $51.37, representing 64.38% upside potential compared to the current level.
As of the second quarter, the shares are owned by five hedge funds and the stake is $14.68 million.
In short, GCT is in 2nd place on our list of cheap software stocks to invest in. While we recognize the potential of GCT as an investment, our belief lies in the belief that AI stocks hold greater promise for delivering higher returns in a shorter time frame. If you’re looking for an AI stock that’s more promising than GCT, but trades at less than five times earnings, check out our report on the cheapest AI stocks.
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Disclosure: None. This article was originally published on Insider Monkey.