Small businesses are the lifeblood of American commerce, as pretty much anyone who’s seen a campaign ad in the last 10 years or so is fully aware of it to the point of nausea. But those small businesses, in turn, provide fodder to a lot of publicly traded businesses, and right now, several software stocks are down as reports that the mom-and-pop shops out there are cutting their spending to the bone as economic conditions sour. That’s sent several software stocks down in Thursday afternoon’s trading. HubSpot (NYSE:HUBS) got off light, dropping fractionally, but Bill.com (NYSE:BILL) lost just over 1%, while Paycom (NYSE:PAYC) lost over 1.5%. The clear loser in the session was ZoomInfo (NASDAQ:ZI), down nearly 2.5% at one point in the session.
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Basically, small businesses are seeing consumers pulling in their wallets all over. Prices are rising on virtually everything thanks to soaring inflation. Thus, small businesses are out to save money, and one place that looks like an attractive target is software. Skipping an upgrade, paring back to a cheaper version, or even hunting for freeware that can do the same job are all increasingly possible to the little guys eager to husband cash to keep employees paid until times look brighter
Even Walmart is Feeling It
Small business software subscriptions are on the decline, and several companies are feeling it. But one stock that’s proving a bellwether of mom-and-pop shops’ overall sentiment is what may have been the biggest mom-and-pop killer of all: Walmart (NYSE:WMT). Walmart revealed earlier today—to its substantial detriment, costing it nearly 8% of its share price at one point—that consumers are getting tight-fisted going into the holiday shopping season, the biggest shopping time of all. The combination of rising interest rates and declining household savings makes the consumer nervous and, thus, less likely to spend, Walmart brass noted.
Which Software Stocks are a Good Buy Right Now?
So, while many software stocks are taking it on the chin right now, some are better propositions than others. For instance, Hold-rated PAYC stock is the laggard in the field right now, as its $204.71 average price target offers investors 17.55% upside potential. Meanwhile, Moderate Buy BILL stock offers investors 57.6% upside potential, thanks to its average price target of $92.95.
