Laser Focus World is an industry bedrock—first published in 1965 and still going strong. We publish original articles about cutting-edge advances in lasers, optics, photonics, sensors, and quantum technologies, as well as test and measurement, and the shift currently underway to usher in the photonic integrated circuits, optical interconnects, and copackaged electronics and photonics to deliver the speed and efficiency essential for data centers of the future.

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Editorial Advisory Board

  • Professor Andrea M. Armani, University of Southern California
  • Ruti Ben-Shlomi, Ph.D., LightSolver
  • James Butler, Ph.D., Hamamatsu
  • Natalie Fardian-Melamed, Ph.D., Columbia University
  • Justin Sigley, Ph.D., AmeriCOM
  • Professor Birgit Stiller, Max Planck Institute for the Science of Light, and Leibniz University of Hannover
  • Professor Stephen Sweeney, University of Glasgow
  • Mohan Wang, Ph.D., University of Oxford
  • Professor Xuchen Wang, Harbin Engineering University
  • Professor Stefan Witte, Delft University of Technology

3 Software Stocks in the Penalty Box

JAMF Cover Image

From commerce to culture, software is digitizing every aspect of our lives. This secular theme has materialized in superior earnings growth and stock price performance for most SaaS companies, and over the last six months, the industry’s 42.4% return has topped the S&P 500 by 26.5 percentage points.

Although these businesses have produced superior results, only the best will survive over the long term as AI is eating into the profits of those with lower switching costs. With that said, here are three software stocks we’re passing on.

Jamf (JAMF)

Market Cap: $1.98 billion

Founded in 2002 by Zach Halmstad and Chip Pearson, right around the time when Apple began to dominate the personal computing market, Jamf (NASDAQ: JAMF) provides software for companies to manage Apple devices such as Macs, iPads, and iPhones.

Why Are We Hesitant About JAMF?

  1. Products, pricing, or go-to-market strategy may need some adjustments as its 9.9% average billings growth is weak
  2. Persistent operating losses suggest the business manages its expenses poorly
  3. Low free cash flow margin of 4.9% for the last year gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders

At $15.30 per share, Jamf trades at 2.9x forward price-to-sales. If you’re considering JAMF for your portfolio, see our FREE research report to learn more.

DocuSign (DOCU)

Market Cap: $19.57 billion

Founded by Seattle-based entrepreneur Tom Gonser, DocuSign (NASDAQ: DOCU) is the pioneer of e-signature and offers software as a service that allows people and organisations to sign legally binding documents electronically.

Why Are We Cautious About DOCU?

  1. Offerings struggled to generate meaningful interest as its average billings growth of 7.1% has underwhelmed
  2. Software platform has low switching costs as its net revenue retention rate of 99% demonstrates high turnover
  3. Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment

DocuSign’s stock price of $96.94 implies a valuation ratio of 6.5x forward price-to-sales. To fully understand why you should be careful with DOCU, check out our full research report (it’s free).

RingCentral (RNG)

Market Cap: $3.15 billion

Founded in 1999 during the dot-com era, RingCentral (NYSE: RNG) provides software as a service that unifies phone, text, fax, video calls and chat in one platform.

Why Do We Think Twice About RNG?

  1. Average billings growth of 9.6% was subpar, suggesting it’s struggled to push its software and might have to lower prices to stimulate demand
  2. Customers churn often due to the commoditized nature of its software, as reflected in its 99.1% net revenue retention rate
  3. Estimated sales growth of 7.1% for the next 12 months implies demand will slow from its three-year trend

RingCentral is trading at $34.97 per share, or 1.3x forward price-to-sales. If you’re considering RNG for your portfolio, see our FREE research report to learn more.

Stocks We Like More

The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.

Take advantage of the rebound by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.

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