Software stocks with Strong Buy ratings worth paying attention to

The Nasdaq 100 technology index has had a strong start to the year, rising 22% year-to-date, thanks to technology companies focused on artificial intelligence (AI). Unless you have a concentrated portfolio in leading semiconductor companies, however, you're probably lagging the Nasdaq 100. However, there's no need to chase semiconductor stocks after their euphoric growth, especially when there are software stocks with Strong Buy ratings and reasonable prices that have the potential to grow significantly.

Let's take a look at three software companies with Strong Buy ratings according to leading analyst firms - Intuit, Synopsys and MongoDB - that may still be overlooked.

Intuit $INTU

Shares of financial software firm Intuit have recovered quickly from the May correction, rising more than 14% in the past month as investors have rediscovered its potential for price appreciation through value-add. Accounting and recordkeeping could be an ideal job for artificial intelligence (AI), and as Intuit hones its AI capabilities, it's hard to be skeptical of its growth.

Last month, Intuit acquired technology and assets from Zendrive, a company specializing in insurance technology. Intuit is best known for its QuickBooks and Turbotax software, but its Credit Karma subsidiary has branched out into auto insurance through Karma Drive. With Zendrive's technology and talent, Karma Drive can take its insurance business to the next level by leveraging telematics and data analytics. This makes Intuit a data and AI-driven company, which increases its attractiveness to investors.

According to analysts, INTU stock is rated a Strong Buy with 19 buys and two holds in the last three months. The average target price for INTU stock is $733.28, suggesting 11.1% upside potential.

Synopsys $SNPS

Shares of chip design software maker Synopsys are once again hitting new highs after a 20% increase from April lows. Strong second-quarter results have lured investors back to the company, which is benefiting from the AI-driven semiconductor boom. Synopsys plans to close its acquisition of Ansys, which specializes in engineering simulation software, in the first half of next year, which will bolster its chip design and system design capabilities.

Despite the higher multiples, Synopsys is considered an attractive investment due to its portfolio of Synopsys.ai tools and analytics solutions that leverage the full potential of data. The average analyst target price for SNPS stock is $651.70.

MongoDB $MDB

Shares of MongoDB, a company specializing in database software, have seen significant pressure this year and are down 47% from 52-week highs and 31% year-to-date. Still, some major analysts see value in the stock after its recent decline. MongoDB isn't the only software company that's lagging, but it could be one of the first to catch up with the loss once industry conditions normalize.

Analysts at Citi consider MDB stock one of their top two picks in enterprise software. Citi sees several catalysts that could help MongoDB grow, including a resurgence in IT spending, lower interest rates and seasonal factors. MongoDB's AI Applications Program (MAAP) is emerging as an interesting platform for generative AI for enterprises, which could increase the company's attractiveness.

MDB stock has an average target price of $335.95, suggesting 26% upside potential.

Disclaimer: There is a lot of inspiration to be found on Bulios, but stock selection and portfolio construction is up to you, so always conduct a thorough analysis of your own.

Source: Yahoo Finance, CNBC.

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