Top 4 Software Stocks to BUY NOW (Huge Comebacks)

Added: 2026-05-30

[00:00:00]Ladies and gentlemen, it feels like the only discussion that is able to be had right now whenever talking about stocks is around artificial intelligence. But this is not true. There is a lot of areas of the stock market that are not directly related to artificial intelligence that have been getting sold off even though the companies continue to grow and get stronger. A lot of these are contrarian picks, but being a contrarian in a market that is so focused on one individual area is where you can find a lot of upside. So, starting with this video, let's talk about the top four software stocks that I'm wanting to buy right now with potentially a bonus stock in there as well. Let's start with Reddit, ticker symbol RDDT. Reddit is a social media platform where people come on to discuss a variety of different topics. Now, I'm not a super fan of Reddit. I don't really use it all that much. I find myself more on YouTube most days, but the growth speaks for itself, growing at almost a consistent 70 plus% rate or around that 70% mark, bringing up their total amount of revenue since June of 2023 at 183 million to now each quarter being roughly above $660 million in just a few years. During that exact same time frame, they've also been able to bring up their gross margin from 84% all the way up to 91.5%.

[00:01:14]Meaning that after the cost of goods, meaning to actually run the business and set up that technology, they're keeping roughly $67 million of those dollars.

[00:01:24]Yet, after all operating expenses, paying taxes, they're bringing home roughly $200 million a quarter. And yet, this growth continues to tick up. Now, this recent drop off quarter over-arter is not attributable to a lack of performance in the company, but just a normal amount of decrease that they would actually see seasonally because obviously December due to the holiday spend season advertising dollars, which is how Reddit makes their money, ends up decreasing after holiday and Christmas and all of this stuff. But the drop off that happened quarter over quarter was much less than what we've seen in the years prior where we've usually seen roughly a 10% drop off in this margin.

[00:02:03]this quarter is roughly three and a half%. Now, free cash flow, which many people look at as being the most important metric. This is actual cash that they are receiving on the other end of their business, is roughly $311 million, a brand new high, bringing their total margin up to 47% because although they do use AI in their operations, they're not the ones that are actually setting up the data centers. And it's extremely cheap for them to run their business by just paying for a couple of clawed subscriptions. rather than having to set up their own clusters and making that large expense going forward. But how they're using artificial intelligence is really important here as they're helping people choose products and selection on their app, which is essentially bringing up the monetization per user while also expanding into different user bases.

[00:02:50]They're now translating languages into 30 different languages, bringing on a large international user base. And then they're also using artificial intelligence to separate bots from humans. Although they use a lot of artificial intelligence on the back end, they want Reddit to be a very human place to be. And so they want to make sure that they can lower the amount of bots and make sure that there's no additional spam or people trying to promote terrible products on their app and that people are actually having conversations with other humans and that's working. All of this is leading to much larger user bases on their platform, specifically in international use cases. international exploding while United States users are still growing but definitely not as fast. They also have some pretty interesting advertising and monetization practices that have been going on like for example Reddit Max campaigns and their newest integration with Shopify that has been very good for dynamic product ads which is increasing their overall amount of revenue per user. So while their user base is growing the monetization per user is exploding. If we look back just the two slides ago, we only had roughly 50 million daily active users between US consumer and then international user bases. And then whenever we look at the monetization, those individual users were paying roughly $2.40 or roughly 46 not via them paying it out of their wallet but through advertising. Similar ways that Google has made a fortune, Meta, Amazon, these sort of ways. But as they've been able to scale this user base, it makes it even harder to scale the monetization. But yet, that hasn't stopped Reddit. They've brought up this monetization from $242 all the way up to $963 for a US consumer and then on international 46 up to $2.

[00:04:35]These are multiples higher while scaling overall user bases. This has led to their rule of 40, a metric tracking both their growth and their profitability together at over 109%.

[00:04:47]This is an unbelievable statistic and very few companies can pass that 100% mark. So you're looking at a company out of all of these publicly listed tech companies, there's only 21 of them that have had greater than 40% growth. Five of which have had 30% free cash flow margins. Three of which that have less than $15 million of capex in the full year of 2025 and only one of those out of this entire list that has gross margins above 90%. That company is Reddit. And even after all of these great statistics, you're buying into a company that is cash heavy. $1.4 billion almost on their balance sheet with only roughly $20 million in debt. Very, very cash heavy. And yet the most surprising thing of all is their actual earnings surprises. What this means is essentially Wall Street ends up guessing how much revenue or EPS that this company is going to make each and every quarter. And then whenever they actually show off that quarter, it's much higher than what we've seen every single quarter. So since they've been a public company to now, they have shown off extremely large beats on revenue and then even bigger beats on EPS. But I'm honestly most surprised about these revenue surprises because that's usually able to be checked because you can do advertising channel checks and the amount of users and you can see that traffic online or where credit cards are being spent on and so you can kind of guess where companies are going to come in terms of revenue. Most companies at this scale might end up beating by 2 3%.

[00:06:18]By consistently beating by 8 9 17% 11%.

[00:06:23]These are unbelievable beats, which means that Reddit will continuously scale faster than what Wall Street is currently expecting, which usually leads to undervaluations. And we're seeing that here. The most important metric, free cash flow, is showing a 36 times trailing free cash flow. But whenever we look forward, we're only seeing 21 times their forward free cash flow rating, which is probably even low considering the fact that they always surprise to the upside. For the next stock, we have our bonus stock. This is SoFi Technologies. The reason why I'm including this as a bonus stock is that because they still are a financial technology company. They're a bank. It's not necessarily under the software names, but it is still software that is separating them from their peers. SoFi has consistently compounded on their overall amount of members on their platform, growing almost consistently at that 33 to 34% range, bringing total members up to 14.7 million. But each one of those customers has a certain amount of products. You're talking about a checking account, an investing account, a personal loan, home loan, the list goes on and on. But as this rate is continuing to grow and grow faster than members come online, that shows that they are cross buying members onto more and more products. So whenever a customer comes on to SoFi, they're not just getting a checking account. They'd be getting a checking account, a credit card, a student loan, and that continues to pile on to the overall amount of monetization that SoFi would see for one single customer. The reason this is so important is that SoFi only pays for that customer one time. They have a customer acquisition cost through their sales channels, whether that's traditional TV ads, YouTube ads, regular integrations that you end up seeing, but whenever they end up selecting multiple products, that ramps up the lifetime value of that customer and so they can pay back that customer much faster. This is a very important metric. This is what's allowed this company to multiply their overall amount of revenue going down to total contribution profit adjusted IBIDA all the way down to net income continuously climbing up quarter after quarter after quarter. This is a definition of a compounding business.

[00:08:24]And while they've been able to grow and compound these amount of users, the overall margin has been able to climb up as well. That is in part because there is more products per user and so you don't have to continuously pay for that new customer. Now that they're on the platform and doing more with SoFi, that's a better margin business than what we were doing previously. So these margins are expected to continue to climb up going forward. But to be fair, SoFi still is a bank and the market is pricing them as one. Right now, they're trading at roughly two times price to tangible book value. But whenever we look at their tangible book value, we're seeing this explode over time. Now Anthony notto the CEO has come out and said that they believe that tangible book value is going to continue to compound at roughly a 40% rate for the next 3 years. If that continues to happen and the market does not give them an additional multiple, we can still expect the stock to if it's going to be a two times tangible book value grow by 40% for the next 3 years comfortably beating the S&P 500 in most investments.

[00:09:24]And SoFi believes that they can compound at this rate because traditionally they have they have an extremely high rule of 40 meaning a high amount of growth rate but also continuously expanding those margins. You can see this dark sort of purple bar grow over time while maintaining this level of growth which has brought up this rule of 40 from the sort of 50 times rates into the 60 and 70 times rates. It's an unbelievable statistic for being a fintech. But that being said, a lot of this is going to have to come in part from feebased revenue. One of the things that gives bank stocks a bad look is the fact that a lot of their growth can come from riskbased revenue. meaning you're giving out a bunch of loans, but the fastest way to go bankrupt is that all those people decide to not pay their loans back. But if you charge feebased revenue, meaning subscriptions and payment for order flow and all of these different payment like revenue sources, those don't get clawed back. There's no risk in charging someone a payment. As long as they pay, they get their fee for service and then that's the end of the deal. So, as this continues to grow and they grow at the percentage of overall feebased revenue mix, the company should get a higher and higher multiple over time. That's what's leading SoFi to believe that they can compound revenue at a 30 plus% rate, but also bring on more adjusted earnings per share because of these things that we've shown off.

[00:10:43]The additional cross buy, the less amount of lending revenue, the more feebased revenue. All of this is leading to a better company over time. And yet, the company is at the cheapest valuation that we've seen in multiple years. For the next stock, we have Meta Platforms, ticker symbol MEA. Meta is the social media platform that allows people to get access to Facebook, Instagram, WhatsApp, the list goes on and on and on. Everyone knows Facebook, but the growth maybe some people are not paying attention to.

[00:11:11]This company's overall growth rate has skyrocketed recently, hitting another new high of 33% year-over-year, and they expect to continue to grow at this rate, even though they're at their highest level of overall revenue that they've been doing in company history. They're also doing this extremely profitably, bringing on the most amount of profit that they've ever seen at 47.5% net income margins while also accelerating their growth rates, which are the two S-curves that you want to see growing at the same time, profitability and revenue growth. But yet, the one thing that people have a problem with is the fact that quarter over-arter, they've shown just a recent user decline. even though they've clearly stated that the reason that this happened was because of internet disruptions in Iran as well as restrictions on access to WhatsApp in Russia. So without these two geopolitical conflicts, we actually would have grown quarter over quarter.

[00:12:02]And they did see new users come on the platform, but just a large area of Iran and in Russia just completely come offline overnight. Now although Meta saw a decrease in users quarter over quarter, revenue still grew at some of the fastest levels that we've ever seen.

[00:12:17]This is because their ability to actually generate new advertising demand while charging more for that demand has been incredible. Not only are they serving more loans, but the dollars per loans is also going up because their conversion on those loans is increasing.

[00:12:32]And this has to do with their spend on artificial intelligence. They are spending a ton of money. 20 plus billion dollars a quarter is what it's going to end up looking like into the future because they're setting up data centers to help create models to then make the advertising even better. Now, the biggest concern is that they're going to be spending too much money setting up data centers that they start to become unprofitable. But once you end up taking a look at their free cash flow, you realize that things are still profitable at Meta. They're just generating sort of a similar amount of what they were generating before, even though growth has accelerated. But those data centers stay around for a long time. So if they wanted to stop spending that money, they would still have the asset and the overall amount of revenue growth, new customers, new model efficiencies, all of these things. And so the expense is more temporary than I think people are giving it credit for. The next thing that we just recently heard from Mark Zuckerberg, and this just became true the other day, is that as they are scaling their new models like Muse Spark, they can start charging for this.

[00:13:31]And Meta just created their first version of their subscription revenue, which is now charging people to get access to really highMP compute versions of Meta's new Muse Spark product. This directly competes with companies like Enthropic, OpenAI, Grock, or Gemini if you wanted to use Meta Platforms version for potentially much cheaper costs. And the reason why they're starting to do this is because they believe that they can help out businesses and entrepreneurs use tools that are on Meta, be able to scale things like helping them generate new advertisements, understand their customer better, tie in all of the efficiencies of artificial intelligence with all of the IP that Meta actually has. So they can not only charge a subscription model to then make money there, but then that could potentially tell the customer to then use more meta products in other areas. And yet the valuation of Meta is completely depressed with a 20 times PE ratio and a forward PE ratio of 17 times for one of the largest companies in the entire world with over 3.5 billion total daily active people on their platform. And it's not just Facebook. They're constantly innovating and trying new things. whether that's AR, VR, things like Threads or MetaForums, which are not their biggest apps, but they still are profitable and hopefully going to continue to expand those. For our next stock, we have Wix.com, ticker symbol WIX. This is a website builder that helps entrepreneurs create their first platforms online, but lately, they've been actually getting into a new business, and we'll talk about that here in a second. Whether or not you want to create businesses via artificial intelligence or the normal dragandrop solution that helps customize your websites directly for your customers, Wix wants to offer both of these solutions using artificial intelligence.

[00:15:12]One of the ways that they're doing this is by acquiring a company called Base 44, one of the fastest growing online AI tools that they acquired back in June of 2025 that is already scaled to roughly $150 million of ARR and they're taking a ton of market share right now over the last couple of months. You can see the dots on where to look since Wix has acquired this company and they're really starting to take market share and this is only back since February. If we were to look forward, everything that I'm seeing is showing a continuous increase in their overall amount of monetization versus companies like lovable.dev, for example. If you take a look at this valuation comparison of all of the main AI tools and base 44, you can see how much ARR they're making potentially.

[00:15:56]Cursor is rumored to be at 6 billion.

[00:15:58]Cognitive is roughly to be at 150.

[00:16:01]Replet 265. Lovable anywhere between 200 and 300 is what I saw. Bolt $40 million.

[00:16:07]Yet the valuations are so much different than where base 44 is at $2.25 billion valuation. Loveable at 6 billion. Okay, so roughly three times higher. Yet the overall amount of ARR is slightly more than base 44 alone, let alone Wix itself, is also generating roughly 1.75 billion of profit. Yet, people don't want to look at that as being a profitable business because they believe that Wix, the actual regular site, is being threatened by the tools that they're making. Essentially, Base 44 is going to cannibalize Wix's own business.

[00:16:41]This means that the market cap for Wix is now $2.2 billion. Yet, they have $310 million users, generating roughly $2 billion of annualized recurring revenue.

[00:16:52]They're growing the company at double digits, dealing with more payments. free cash flow positive 21% free cash flow margin. The company continues to add more users, healthy amount of growth.

[00:17:03]The new users that are coming on the platform have higher amount of monetization right out the gate because base 44 costs more than Wix. And yet even older users on the platform continue to scale over time. It's just a very interesting valuation for a company that has beat their overall plans. They wanted to essentially achieve a 40% free cash flow margin. They did that a year earlier and actually continued to exceed that. And yet on a forward price to earnings for this business, we're looking at 9.5 times. It's getting extremely cheap and almost looking at acquisition territory for a company like Shopify to potentially step in and buy this entire business. Or look at them on a price to sales base right now because B 44 is so unprofitable. A lot of these companies like Lovable, Cursor, all these companies that are unprofitable because they're growing so much, spending a lot on marketing, they're being judged on price to sales because all the other metrics are not working out. But Wix is trading at a one times price to sales. There's no premium here.

[00:18:02]They're saying, "Hey, the price we're willing to pay for this company is the exact same amount that they're bringing on for revenue this year." But for my last stock, and certainly not least, is DLO Limited, ticker symbol DLO. DLO is a payments company in emerging markets. So we're talking about Latin America, Asia, Africa, Europe, these sort of areas where they're really trying to dominate.

[00:18:24]They service 60 different markets and offer a thousand local payment methods while doing roughly 47 billion in US currency per year. They only do this under one API, essentially meaning that it's all one software stack. Extremely easy to integrate while growing that payment stack by roughly 88%. compounded annual growth rates from 2016 all the way up to 2025. They're seeing extremely strong engagement among some of their biggest customers which are rumored to be customers like Shopify for example or Uber. We don't know this 100% but it fits into the exact category that we believe that these companies are using DLO for. Uber for example if this is who they say they are has 5xed their overall amount of usage of DLO in just the past couple of years. or this SAS internet company merchant had 6xed their overall usage or potentially Shopify if that's who we are to believe it is has 94xed their total payment volume over just the last 3 years because they're realizing how cheap it is and how efficient it is to use DLO's payment services is not looking to try to compete with the same large companies like Aden or Stripe in major areas like the United States and in the UK and Europe and places like this they're trying to operate in the areas in which there's not a lot of competition, where payment flows are really broken up, diverse, expensive.

[00:19:48]They want to bring this all under one API and dominate these markets. And they are. They're loved by the largest companies in the world to expand into these areas like Amazon, Shopify, Microsoft, Google, Spotify, Uber, Tencent. The list goes on and on. And this has allowed their revenue to skyrocket essentially growing into the 50 plus percentage marks. Now DLO gets a lot of hate because there was a period where this company was not growing.

[00:20:13]There was actually some fraud cases as well and you know the company was being poorly managed. That management team was completely thrown out and a new team was put in that were ex Micardo Libre executives and now it's being run extremely efficiently but yet this company still holds that essentially pain or reputation hurt from those previous times. I'm talking about investors hurting their reputation, not their customers. Their customers have really strengthened their relationship with DLO and they have not faced any problems there. This has also allowed their net dollar retention to be above 150% for the last two quarters. This means that customers are not just staying with DLO, but they're actually continuously using them for more and more of their services. This has allowed them to be extremely profitable, bringing on more and more net income while also expanding their total addressable market or their overall market share of those markets in every single category across travel, advertising, streaming, SAS, remittances, ride hailing, financial services, ondemand delivery, and e-commerce. And yet, you're able to get this company for a very cheap valuation, even though they're growing TPV by 88%.

[00:21:20]They're growing revenue by 50 plus percentages at only a 20 times PE ratio and a forward times because they're expected to have so much more growth next year at only 13 times forward PE.

[00:21:34]This is what I said at the beginning of the video. There are software companies right now that are just completely unloved by the markets. But yet the companies continue to execute quarter after quarter, bringing on more users, bringing on more profit, expanding their businesses, becoming stronger organizations, but yet the market just finds no love for them in their portfolios. As investors, we need to seek out those investments where other people have turned their back on. It's time to look to these companies to potentially to start investing in them.

[00:22:03]That way, whenever the market does see them, you're the one with the lowest average share price out of all these other investors who have chased into that investment after they've been loved by the markets. Are these investments going to do better than the pure AI plays? That's up for you to decide. I don't know the future, but it's definitely worth looking at. Keep an eye on in your watch list. Ladies and gentlemen, if you guys like this sort of content, want to see more from the software space, subscribe down below.

[00:22:27]Until next time. Bye for now.