Bank of America Says European Software Stocks Worth Buying After Selloff

Investing.com – U.S. bank analysts say European software stocks present highly attractive buying opportunities after experiencing significant sell-offs.

Since mid-2025, the sector has fallen 35%, amid concerns over the disruptive potential of generative AI and emerging macro risks from Middle East conflicts. However, analysts believe many companies have strong advantages in managing AI risks, and fundamentals remain resilient.

Q4 earnings season was mixed, with 36% of companies beating expectations and 36% missing. Software growth slowed from 9.6% in Q3 to 7.5% in Q4, while IT services remained stable.

U.S. banks believe core banking, enterprise resource planning, and product lifecycle management are less affected by AI disruption, whereas point solutions face higher risks.

SAP

SAP is one of U.S. bank’s top large-cap software picks for 2026, also among its 25 selected stocks for 2026.

Despite cloud computing bookings in Q4 slightly below expectations, analysts find the sustained growth in AI and business data cloud encouraging.

The stock’s P/E ratio is 23, with an estimated compound annual EPS growth rate of about 18% through 2028, trading at a significant discount compared to global peers.

In Q4, SAP announced a €10 billion share buyback, representing 5% of its market cap.

SAP also plans to distribute approximately €2.92 billion in dividends for 2025, with a proposed €2.50 per share dividend, up 6.4% from last year.

Temenos

Despite solid Q4 results and optimistic guidance for 2026 and 2028, Temenos stock has fallen nearly 9% year-to-date. Its 2026 guidance exceeds market expectations by 5-6% in EBITDA and free cash flow.

Analysts believe Temenos has the strongest resilience within its coverage against generative AI disruption risks. Its enterprise value to EBITDA ratio is 15.7, 25% below the 10-year average.

In recent updates, Temenos reported Q4 2025 results better than expected, with revenue and adjusted EBITDA surpassing forecasts by 5% and 21%, respectively.

Sage

Analysts expect Sage’s CAGR to be about 9% through 2028, with profit margins expanding by roughly 70 basis points annually.

AI-enhanced accounting premium pricing was raised by 25%, highlighting significant upside potential. Valuation is in line with European peers, with a free cash flow yield of 4.3%.

Sage Group reported a 10% increase in total revenue in Q1 2026, driven by a 24% surge in cloud-native revenue.

Planisware

U.S. bank states that Planisware has strong revenue and EBITDA growth prospects, with 2028 CAGR of 13% and 14%, respectively, outpacing the sector by 30%. Its complex integration and workflows provide protection against AI disruption.

Valuation is about 10% below peers.

Planisware announced a 10.2% revenue growth in H2 2025 at fixed exchange rates, reaching €198 million.

TeamViewer

Analysts believe the market underestimates TeamViewer’s expanding solution portfolio, including digital employee experience and autonomous endpoint management. With a free cash flow yield of 29%, the stock appears to discount a very short cash flow horizon.

Nemetschek

Primarily operating in the architecture, engineering, and construction markets, which involve highly technical workflows and strict regulatory requirements, these factors should limit disruption from pure AI entrants.

Capgemini

Q4 results exceeded expectations. The company announced its first Capital Markets Day since 2021, scheduled for May 27. Its stock is attractive, trading at a 40-50% discount to global peers.

Netcompany

Proprietary products and platforms in tax, customs, and defense give the company an advantage in digital transformation. Analysts forecast 2026-2028 organic CAGR of 8% in revenue, 12% in adjusted EBITDA, and 19% in free cash flow.

Sopra Steria

Management is confident in a 1-2% organic growth target for 2026, supported by recovery in France and growth in Italy and Spain. Valuation is highly attractive, with a 2026 P/E of 7.3, 30% below the 5-year median.

Adyen

Adyen is also among U.S. bank’s 2026 top 25 stocks. Despite slightly below expectations in Q4 and guidance for 2026, analysts see the 22% stock decline as an overreaction. Its enterprise value to EBITDA ratio and P/E are at historic lows, with a 2026 EBITDA multiple of 15.6.

Wise

U.S. bank reaffirmed a buy rating after Wise posted strong Q3 results. The bank views Wise as a structural leader in cross-border payments, with scalable infrastructure and modern tech architecture creating a competitive moat.

Target price raised by 7% to 1,125 pence, representing 35% upside, reflecting positive outlook and higher terminal EBITDA margins.

Wise’s valuation based on 2026 and 2027 enterprise value to adjusted EBITDA (including stock-based compensation) multiples is 21.3x and 15.5x, respectively.

Sabre

U.S. bank maintains a buy rating for Sabre. It expects Sabre to significantly outperform the global distribution system industry in airline bookings, forecasting 4.3% growth in FY2026, above the industry’s roughly 1.4%, driven by NDC scaling and improved corporate and U.S. market mix.

Analysts believe Sabre’s ability to normalize airline data and reliably process large-scale transactions is a key differentiator against AI-native competitors. Using an 8x EBITDA multiple for 2026, risk-reward appears skewed to the upside. The target price has been lowered from $2.9 to $2.4.

Beyond these companies, U.S. bank also reaffirms buy ratings for Kainos and HBX Group.

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