Software is rapidly reducing operating expenses for businesses. The tailwinds undeniable fueling SaaS companies have led to lofty valuation multiples historically, but rich prices also make re-ratings harder and place a ceiling on returns - over the past six months, the industry was flat while the S&P 500 climbed by 13%.

Investors should tread carefully as only some businesses are worthy of their valuations, and luckily for you, we started StockStory to help you find them. Taking that into account, here is one resilient software stock at the top of our wish list and two we’re passing on.

Two Software Stocks to Sell:

ON24 (ONTF)

Market Cap: $236.8 million

Powering over 1,700 companies' virtual marketing efforts since 1998, ON24 (NYSE: ONTF) provides a cloud-based platform that enables businesses to create interactive digital experiences and capture actionable data from customer engagement.

Why Do We Think ONTF Will Underperform?

1. Customers had second thoughts about committing to its platform over the last year as its billings averaged 8.1% declines
2. Forecasted revenue decline of 5.1% for the upcoming 12 months implies demand will fall even further
3. Historical operating margin losses point to an inefficient cost structure

ON24 is trading at $5.60 per share, or 1.8x forward price-to-sales. Read our free research report to see why you should think twice about including ONTF in your portfolio.

Fastly (FSLY)

Market Cap: $1.68 billion

Taking its name from the core advantage it delivers to customers, Fastly (NYSE: FSLY) operates an edge cloud platform that processes, secures, and delivers web content as close to end users as possible, enabling faster digital experiences.

Why Is FSLY Risky?

1. Struggled to drive increased usage of its software, demonstrated by its subpar 103% net revenue retention rate
2. Gross margin of 55% is way below its competitors, leaving less money to invest in areas like marketing and R&D
3. Poor expense management has led to operating margin losses

At $11.26 per share, Fastly trades at 2.6x forward price-to-sales. To fully understand why you should be careful with FSLY, check out our full research report (it’s free for active Edge members).

One Software Stock to Watch:

Freshworks (FRSH)

Market Cap: $3.41 billion

Starting as a customer service solution before expanding into a comprehensive software suite, Freshworks (NASDAQ: FRSH) provides AI-powered software-as-a-service solutions that help companies manage customer service, IT support, sales, and marketing functions.

Why Could FRSH Be a Winner?

1. ARR growth averaged 19.1% over the last year, showing customers are willing to take multi-year bets on its software
2. Software is difficult to replicate at scale and leads to a stellar gross margin of 84.8%
3. Strong free cash flow margin of 25.7% enables it to reinvest or return capital consistently

Freshworks’s stock price of $12.13 implies a valuation ratio of 3.7x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.

High-Quality Stocks for All Market Conditions

The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in 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 244% over the last five years (as of June 30, 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

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