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Welcome to Episode #429 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
The software stocks have been weak in 2026 on fears that AI could impact their business models. This week, the softness extended beyond companies like Salesforce and Adobe to fintech companies and even the online travel agencies.
All software or Internet-based companies seemed at risk from AI. Investors didn’t try and make sense out of it, they just sold.
A Deal or a Trap?
Tracey looked at five software and Internet stocks that have plunged to see if they are deals or traps. Some are not true value stocks, but they have gotten cheaper thanks to big sell offs. These are growth stocks, but they may be attractive to value investors.
Others have true value fundamentals such as low price-to-earnings (P/E) ratios.
Remember, a trap is usually a company that is not growing earnings year-over-year. You think you’re buying a “cheap” stock because it’s down 20% from its highs, but you’re probably still overpaying for falling earnings.
Software Stocks Sell-Off: Are They Deals or Traps?
Some of these companies are Internet based and not software companies, but they’ve been lumped in together this week, so Tracey lumped them in for this podcast.
ServiceNow reported fourth quarter 2025 earnings on Jan 28, 2026, and beat the Zacks Consensus Estimate again. It hasn’t missed in 5 years. But the Street didn’t care about earnings, or the company’s comments, as shares of ServiceNow fell 13.9% over the last week. It’s now down 34.2% year-to-date.
ServiceNow is now cheaper on a price-to-earnings (P/E) basis. It has a forward P/E of 24.9. Earnings are expected to rise 17.4% in 2026.
Is ServiceNow a deal or a trap after the sell off?
AppLovin hasn’t reported earnings yet, but it will do so on Feb 11, 2026. Shares of AppLovin were down 14% in the last week and are now down 39.6% year-to-date.
Earnings are still expected to jump another 62.5% in 2026. AppLovin now has a forward P/E of 24.8.
Is AppLovin a deal or a trap ahead of its earnings report?
Palantir reported fourth quarter 2025 earnings on Feb 2, 2026, and it beat on the Zacks Consensus for the thirteenth quarter in a row. But that wasn’t enough. Shares of Palantir still declined 7.3% over the last week and are down 23.5% year-to-date.
Analysts expect 2026 earnings to jump 78.7% after growing 82.9% in 2025. Palantir isn’t cheap, but it never has been. Recently, it was trading at 140x, but Palantir is now trading with a forward P/E of 97. It’s more attractive on a valuation basis.
PayPal Holdings, the fintech company, reported fourth quarter 2025 earnings on Feb 3, 2026, and missed on the Zacks Consensus Estimate. It also announced a management change with a new CEO expected to start on Mar 1, 2026.
Shares of PayPal fell 23.3% this week and are down 30.8% year-to-date. They’re also trading at 5-year lows.
Analysts cut earnings estimates for 2026 in the last week. 2026 earnings are still expected to rise, but just 4.3%. PayPal is cheap on a P/E basis, however. It trades with a forward P/E of just 7.2. A P/E under 10 is extremely cheap.
Expedia Group was one of those Internet companies that was lumped in with the software stocks this week. Shares of Expedia fell 10.6% this week and are down 16.4% year-to-date. Why did it sell off? No one knows.
Expedia hasn’t reported fourth quarter 2025 earnings yet but will do so on Feb 12, 2026. The cruise companies that have reported earnings already this year have seen strong demand for travel. Analysts expect Expedia’s 2026 earnings to rise 20.7%.
Expedia is cheap. It trades with a forward P/E of 12.6. A P/E under 15 is usually considered a value stock.
Is Expedia Group a deal or a trap on the sell-off?
What Else Should You Know About the Tech Stock Sell Off?
Tune into this week’s podcast to find out.
[In full disclosure, Tracey owns EXPE in Zacks Value Investor portfolio.]
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Software Stocks Sell-Off: Are They Deals or Traps?
Key Takeaways
Welcome to Episode #429 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
The software stocks have been weak in 2026 on fears that AI could impact their business models. This week, the softness extended beyond companies like Salesforce and Adobe to fintech companies and even the online travel agencies.
All software or Internet-based companies seemed at risk from AI. Investors didn’t try and make sense out of it, they just sold.
A Deal or a Trap?
Tracey looked at five software and Internet stocks that have plunged to see if they are deals or traps. Some are not true value stocks, but they have gotten cheaper thanks to big sell offs. These are growth stocks, but they may be attractive to value investors.
Others have true value fundamentals such as low price-to-earnings (P/E) ratios.
Remember, a trap is usually a company that is not growing earnings year-over-year. You think you’re buying a “cheap” stock because it’s down 20% from its highs, but you’re probably still overpaying for falling earnings.
Software Stocks Sell-Off: Are They Deals or Traps?
Some of these companies are Internet based and not software companies, but they’ve been lumped in together this week, so Tracey lumped them in for this podcast.
1. ServiceNow, Inc. (NOW - Free Report)
ServiceNow reported fourth quarter 2025 earnings on Jan 28, 2026, and beat the Zacks Consensus Estimate again. It hasn’t missed in 5 years. But the Street didn’t care about earnings, or the company’s comments, as shares of ServiceNow fell 13.9% over the last week. It’s now down 34.2% year-to-date.
ServiceNow is now cheaper on a price-to-earnings (P/E) basis. It has a forward P/E of 24.9. Earnings are expected to rise 17.4% in 2026.
Is ServiceNow a deal or a trap after the sell off?
2. AppLovin Corp. (APP - Free Report)
AppLovin hasn’t reported earnings yet, but it will do so on Feb 11, 2026. Shares of AppLovin were down 14% in the last week and are now down 39.6% year-to-date.
Earnings are still expected to jump another 62.5% in 2026. AppLovin now has a forward P/E of 24.8.
Is AppLovin a deal or a trap ahead of its earnings report?
3. Palantir Technologies Inc. (PLTR - Free Report)
Palantir reported fourth quarter 2025 earnings on Feb 2, 2026, and it beat on the Zacks Consensus for the thirteenth quarter in a row. But that wasn’t enough. Shares of Palantir still declined 7.3% over the last week and are down 23.5% year-to-date.
Analysts expect 2026 earnings to jump 78.7% after growing 82.9% in 2025. Palantir isn’t cheap, but it never has been. Recently, it was trading at 140x, but Palantir is now trading with a forward P/E of 97. It’s more attractive on a valuation basis.
Is Palantir a deal or a trap on this sell off?
4. PayPal Holdings, Inc. (PYPL - Free Report)
PayPal Holdings, the fintech company, reported fourth quarter 2025 earnings on Feb 3, 2026, and missed on the Zacks Consensus Estimate. It also announced a management change with a new CEO expected to start on Mar 1, 2026.
Shares of PayPal fell 23.3% this week and are down 30.8% year-to-date. They’re also trading at 5-year lows.
Analysts cut earnings estimates for 2026 in the last week. 2026 earnings are still expected to rise, but just 4.3%. PayPal is cheap on a P/E basis, however. It trades with a forward P/E of just 7.2. A P/E under 10 is extremely cheap.
Is PayPal a deal or a trap as it hits new lows?
5. Expedia Group, Inc. (EXPE - Free Report)
Expedia Group was one of those Internet companies that was lumped in with the software stocks this week. Shares of Expedia fell 10.6% this week and are down 16.4% year-to-date. Why did it sell off? No one knows.
Expedia hasn’t reported fourth quarter 2025 earnings yet but will do so on Feb 12, 2026. The cruise companies that have reported earnings already this year have seen strong demand for travel. Analysts expect Expedia’s 2026 earnings to rise 20.7%.
Expedia is cheap. It trades with a forward P/E of 12.6. A P/E under 15 is usually considered a value stock.
Is Expedia Group a deal or a trap on the sell-off?
What Else Should You Know About the Tech Stock Sell Off?
Tune into this week’s podcast to find out.
[In full disclosure, Tracey owns EXPE in Zacks Value Investor portfolio.]