IBD 50 Software AI Plays Near Buy Points As Sector Dominates Growth Stock List

The software sector dominated the IBD 50 Friday. Many of these growth stocks are building clear bases again after consolidating earlier rallies, and some are nearing buy points.


Of the 50 IBD 50 stocks, 18 were in the software sector Friday morning. That’s a sign of sector leadership. The enterprise software industry group has the most stocks in the list, and some are still forming bases. That’s an indication that the group has more to offer still.

Samsara (IOT) is in a cup base with a buy point of 32.41, according to IBD MarketSmith. Its Relative Strength Rating has risen to 98 from 14 a year ago. Earnings are due Thursday after the close.

Sales growth has been steady in the 43%-52% range over the past five quarters. The company made a profit of 1 cent per share in the fiscal third quarter, according to MarketSmith data. It posted multiple quarters of losses prior to that.

Samsara went public in December 2021. The company provides data connectivity for industries such as construction, manufacturing and logistics that depend on physical operations through its Connected Operations Cloud.

Datadog (DDOG) is approaching a buy point of 118.02 in a cup base, although 102 was a viable entry too. Shares gapped up on Nov. 7, in the strongest volume since the base was formed, after it announced earnings. The stock regained the 50-day moving average at that time. Sales grew 25% to $547.5 million while earnings of 45 cents per share rose 96%.

The company provides monitoring and security tools for the cloud. The software integrates with AWS, Google Cloud, Microsoft Azure, OpenAI and other platforms. Its Cloud Security Management product detects security threats, while its Application Security Management offers observation tools for code vulnerability. Datadog ranks first in the enterprise software group.

Growth Stocks WDAY, DT Near Buy Points

Also in enterprise software, Workday (WDAY) is in a cup base with a buy point of 252.72. The stock may offer a lower entry if a handle forms. Fiscal third-quarter results for the human resources software firm are due on Tuesday.

Dynatrace (DT) is forming a cup with handle with a buy point of 52.60. Shares rose in strong volume on Nov. 2, after sales and earnings grew 26% and 41%, respectively. Dynatrace provides analytics and automation tools to manage the complexity of business software.

ServiceNow (NOW) was one of the first software stocks to break out in the current market uptrend and is extended from a 614.36 buy point. Shares retook the 50-day moving average on Oct. 26 after third quarter results were announced, and have risen in strong upside volume since. ServiceNow expects fourth-quarter sales growth of 25%.

The ServiceNow platform provides workflow automation tools and has been adopting generative AI tools. Its Now Assist software helps organizations set up generative AI chat tools for customers and provide field services management tools. ServiceNow is also on the IBD Leaderboard. NOW has a perfect Composite Rating of 99.

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