Black Friday weekend isn’t just for discounts on appliances and clothing. Analysts at Baird also see an opportunity to search for cheap software stocks.

In the lagging software sector, they’ve certainly found options. As the S&P 500 SPX has advanced 16.5% so far in 2025, the iShares Expanded Tech Software ETF has risen only about 4%, reflecting a mixture of concerns around artificial-intelligence disruption and interest-rate uncertainty, plus a preference for semiconductor stocks seen as clearer financial beneficiaries of AI spending.

Bargain hunters, though, may be willing to look past those worries, even in a sector where growth tends to drive the conversation.

In the cloud-software sector, Baird’s Will Power points to shares of Axon Enterprise, which makes Taser devices as well as software for law enforcement. The stock was a 2024 standout, nearly tripling, but it’s down 10% in 2025.

Is a stock with a 71.7x forward price-to-earnings multiple considered inexpensive? Usually not. But Power is looking past conventional multiples.

“While it doesn’t screen ‘cheap’ based on traditional metrics, its fundamentals (~30%+ growth and ~25%+ margins) continue to stack up well, warranting a premium to the high-growth software group,” he wrote in a Friday note. “That’s one we’d be buying on sale.”

He also highlighted shares of Zoom Communications, which makes software for virtual meetings, and Twilio, which makes software for customer communications. Power picked these names after looking at all the stocks he rates at outperform and then focusing on those with the lowest free-cash-flow multiples. Zoom’s stock trades at about 9 times estimated free cash flow for 2027, while Twilio’s stock trades at roughly 18 times.

“We believe improving growth could drive heightened interest into 2026,” Power wrote of Zoom and Twilio.

His colleague Shrenik Kothari noted that cybersecurity stocks have “actually taken the brunt of the de-rating” in the software sector this year, meaning their multiples have come down significantly.

Kothari advises that investors “stay anchored in high-quality large-caps,” such as Zscaler and Palo Alto Networks, as well as smaller players like Rubrik and Okta that offer “valuation support.” Rubrik and Okta are among the best values in the cybersecurity sector, he noted. Rubrik shares trade at about 6.8x enterprise value to estimated 2027 sales, while Okta shares trade at about 3.7x.

“Across the board, multiples have re-based to levels that historically precede multi-quarter forward outperformance for the sector,” he wrote in a related note on Tuesday.

Meanwhile, Rob Oliver discussed the debate over the “death” of software-as-a-service companies. Investors have worried that AI will make it easier for companies to replicate the functions of SaaS companies on the cheap, and while Oliver is getting more questions on the subsector, “there is no consensus on what will change the bearish narrative.”

Nonetheless, he sees “the most dislocation” in shares of Klaviyo, which makes marketing software, Monday.com, which makes project-management tools, ServiceNow, a juggernaut that makes business-workflow software, Atlassian, which makes collaboration offerings, and Tyler Technologies, which sells software to the public sector.

“Our industry checks continue to show that enterprise adoption of AI is very early,” he wrote.

Finally, Baird’s Joe Vruwink did an analysis of software names focused on specific verticals. “We don’t view valuation alone as a catalyst,” he wrote, while noting that stocks with both compelling valuations and ”favorable” trends in fundamentals offer promising risk/reward balances.

So where to look? He suggested stocks whose estimates are marching higher, including Autodesk, which makes software for manufacturing and design, Q2 Holdings, which makes financial-technology software, Procore Technologies, which sells construction software, and Veeva Systems, which focuses on the healthcare sector.