We recently compiled a list of the 7 Cheap Software Stocks to Invest In. In this article, we are going to take a look at where GigaCloud Technology (NASDAQ:GCT) stands against 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 began by discussing his views on tech stocks, specifically mentioning Meta and Google, which he owns, and Nvidia, which he had previously sold due to concerns about its high valuation.

Tepper also touched on energy, particularly the growing demand for power to support the development of new technologies such as artificial intelligence (AI). He emphasized the importance of natural gas in meeting this demand, stating that it is necessary for powering AI's growth. 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 mentioned that he has spoken to governors from both sides of the aisle and believes that a collective effort is needed to address the country's energy requirements.

When asked about the upcoming election, Tepper stated that he is a proponent of a split government, believing that it is beneficial for the economy and the markets. He expressed concern about the potential for a sweep by either party, 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 to see either party dominate the government. He believes that a split government will prevent either party from implementing extreme policies, which would be beneficial for the markets.

Regarding AI, Tepper acknowledged that it is a rapidly 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 mentioned that he is impressed by the potential of AI to drive growth and innovation, but is uncertain about the long-term prospects of certain companies, which are heavily reliant 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 mentioned that he is not afraid to take a step back and re-evaluate his investment decisions, citing the importance of being adaptable in a rapidly changing market environment.

David Tepper's insights on the market and investment strategies offer a valuable perspective on the current state of the economy and the tech industry. His emphasis on being cautious and adaptable 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 7 cheap software stocks to invest in.

Our Methodology

To compile our list of the 7 cheap software stocks to invest in, we used Finviz and Yahoo stock screeners to find the 30 largest software companies with a PE ratio of less than 20. From that list, we narrowed our choices to the 7 stocks that analysts see the most upside to. The list is sorted in ascending order of analysts’ average upside potential, as of October 3. We also added the hedge fund sentiment around each stock, which was taken from our database of 912 elite hedge funds, as of Q2 of 2024. The list is sorted in ascending order of their average upside potential.

Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

A mid-sized warehouse filled with furniture and home appliances.

GigaCloud Technology (NASDAQ:GCT)  

Forward P/E Ratio as of October 3: 9.08  

Upside Potential: 64.38%

Number of Hedge Fund Holders: 5

GigaCloud Technology (NASDAQ:GCT) runs Giga B2B, a business-to-business (B2B) e-commerce platform specializing in the logistics and distribution of large parcel merchandise, such as furniture, exercise equipment, and home appliances. The company connects global buyers with manufacturers in international markets.

The global B2B e-commerce market is expected to grow by 22.5% CAGR between 2023-2030. Digital channels are expected to contribute 56% of revenue by 2025. This increases the potential market and customer base for B2B e-commerce platforms such as Giga B2B.

In Q2, GigaCloud Technology (NASDAQ:GCT) reported a revenue of $310.87 million, a 103% increase compared to the previous year. However, the company's earnings per share (EPS) growth has been slower, which has led to a decline in the stock price. Despite this, the company's management believes the stock is attractively valued and has announced a $46 million share buyback program. The company is expected to increase its revenue by 58% YoY in Q3.

GigaCloud Technology’s (NASDAQ:GCT) stock is trading at a forward PE of 9.08, a 61% discount to its sector median of 17.06. Analysts expect the company to increase its earnings by 20.11% this year and have a consensus on the stock’s Buy rating, setting an average share price target at $51.37, which represents a 64.38% upside potential from its current level.

As of the second quarter, the stock is held by 5 hedge funds, and the stakes amount to $14.68 million.

Overall GCT ranks 2nd on our list of cheap software stocks to invest in. While we acknowledge the potential of GCT as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GCT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.