© Reuters. 3 Software Stocks That are a Better Buy Than Salesforce.com

In light of an ongoing Investigation regarding Salesforce.com’s (CRM) acquisition of Slack (WORK), and its premium valuation, we think CRM’s shares are best avoided for now. We also think that a bullish outlook for the software industry makes fundamentally-sound names Oracle (ORCL), SAP (SAP), and Workday (NASDAQ:) well-positioned to outperform CRM in the near term. Read on for details.Popular cloud-based software company Salesforce.com, Inc. (NYSE:) has seen solid demand for its solutions during the COVID-19 pandemic, due to widespread and ongoing digital transformation by businesses. However, the company’s acquisition of Slack Technologies, Inc. (NYSE:), which was announced on December 1, 2020, has lately led to trouble for the stock. This is because WeissLaw LLP is currently investigating an alleged breach in fiduciary duties and other violations by WORK’s board of directors in connection with the acquisition. Furthermore, CRM is relatively overvalued compared to its industry peers, as is evidenced by its 64.50 non-GAAP forward P/E multiple, which is 137.7% higher than the 27.13 industry average. Thus, we think the current investigations coupled with its overvaluation make CRM best avoided now.

However, the software industry is poised to grow substantially in the near term, bolstered by the rising adoption of hybrid work structures and the ongoing digital transformation. The global Enterprise Software Market is expected to grow at 4.1% CAGR to hit $46.72 billion by 2025.

Given this backdrop, we believe it is wise to invest in fundamentally-sound software stocks Oracle Corporation (NYSE:), SAP SE (DE:) (SAP), and Workday, Inc. (WDAY). They have the potential to outperform CRM in the near term.

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