REPORT: Someone Finally Noticed Software Stocks Are on Sale
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| By Gavin Magor |
For most of this year, Wall Street has priced software as if AI were about to put it out of a job.
Yesterday, a buyer with $22.6 billion disagreed.
Schneider Electric (SBGSY), the French energy and automation group, agreed to buy software maker PTC (PTC) for $205 per share in cash.
That's a 42.3% premium to Friday's close of $144.03.
PTC makes the software manufacturers use to design, build and service physical products.
Its shares closed yesterday at $192.26, up 33.5%.
The question for individual investors isn't whether PTC shareholders had a good Monday.
They did.
It's what the deal says about the price the market has been putting on software, and whether that price is wrong.
What Happened
The offer values PTC's equity at about $22.6 billion, or about $23.7 billion including debt.
It is Schneider's largest acquisition ever, topping its 2023 purchase of Aveva.
PTC's board backs the deal, which is expected to close by the third quarter of 2027, subject to a shareholder vote and regulatory approvals.
Investors in Paris were less impressed, sending Schneider's own shares down about 10% on the day.
Why the Price Matters
PTC shares had fallen about 17% this year before the announcement, as worries about AI's effect on software weighed on the stock.
Analysts at Jefferies said those fears let Schneider buy PTC at a decade-low valuation, according to Reuters.
That is not a bubble price.
It's a price for a business that earned an adjusted margin of roughly 40% last year, with revenue forecast to grow about 10% a year through 2029, according to the deal announcement.
And it comes from an industrial company that knows exactly how its customers use this software.
Code that runs factory floors, aircraft programs and car plants doesn't get swapped out for a chatbot over a long weekend.
Software Versus the Rest of Tech
The gap between software and the rest of technology this year is wide.
Through yesterday's close, the iShares Expanded Tech-Software Sector ETF (IGV) has returned 3.73% year to date.
The broader Technology Select Sector SPDR ETF (XLK) has returned 40.08%.
The software fund did bottom at $74.67 on April 10, and closed yesterday at $109.72, up about 47% from that low.
So, the recovery is already underway.
What it has lacked is proof that someone with real money will pay full price for these businesses.
Software megadeals have been rare in 2026, as AI uncertainty has kept buyers on the sidelines.
When a strategic buyer pays a large premium in cash, it sets a marker for how similar companies should be valued.
What It Means for Investors
I expect more of these deals, not fewer.
The likeliest targets are profitable, deeply embedded software companies whose share prices still reflect the AI scare rather than their earnings.
But buying a stock in the hope that someone else will buy it from you at a premium is a wish, not a strategy.
Instead, you should consult Weiss Ratings before getting into any new position. Here’s what those tell us right now …
PTC: Weiss rating “C-,” a HOLD.
The stock sits about $12 below the $205 offer, a gap of 5.9%.
That's what remains for a wait of up to a year, possibly longer, with a shareholder vote and regulators in between.
A French buyer also means a U.S. national security review by the Committee on Foreign Investment in the United States (CFIUS).
If regulators block the deal, the shares would likely head back toward Friday's $144.03.
Meanwhile, the 2-year Treasury Note ended yesterday at a 4.84% yield, which covers most of that gap without the deal risk.
If you own PTC, my view is to take the 94% of the offer that's on the table now and put the money to work elsewhere.
The iShares Expanded Tech-Software Sector ETF: Weiss rating “C+,” a HOLD.
It holds the whole software group, which spreads your money across the winners and the companies AI genuinely does disrupt.
It's a reasonable way to sit through a recovery, but not yet a BUY.
The Technology Select Sector SPDR ETF: Weiss rating “B-,” a BUY.
For investors who want to own software's recovery without betting the house on it, this is where I'd look.
It holds the big software names alongside the chipmakers that have led this year, so you don't have to pick a side in the rotation.
Key Items We're Watching
- Schneider's third-quarter revenue report on Oct. 16, its first chance to defend the price to its own shareholders.
- Any rival bid for PTC, which would reward holders who wait.
- The regulatory reviews, including CFIUS, the main risk between PTC's current price and $205.
- Third-quarter software earnings this month, where AI revenue needs to show up in the numbers rather than the slide decks.
- Whether other industrial companies follow Schneider into software.
Bottom Line
Whilst the market spent most of the year deciding software was finished, Schneider spent $22.6 billion deciding it wasn't.
I take that as a sign the worst of the AI discount is behind the better software companies.
If you own PTC, take the money on offer.
If you want software exposure, own it through the tech fund rather than guessing at the next target.
Cheers!
Gavin
