Everyone is talking about artificial intelligence (AI) right now- with many predicting that AI will lead the next wave of economic growth and productivity for the next couple of decades at least. AI refers to the use of data to simulate human intelligence processes including learning, reasoning and self-correction by machines. AI is making its way into almost every industry. With IDC predicting that worldwide spending on AI will be nearly $98 Billion in 2023, the implications of this technology are massive. And this has not been ignored by Wall Street.
The savvy investor keeps their eyes forward, toward the horizon. Right now, the sea of tech is the one to watch, and the ships coming into view are flying AI's flag. This is not a new development, it's been on course for several years – but as an investment sector, it's heating up. AI is the tech that will power our digital systems for years to come, everything from our smartphones to our cars to Elon Musk's Mars rockets. AI isn't just one technology, rather, it's a range of techs – and approaches to tech – including the data collection and analysis that feeds machine learning.
The COVID pandemic may be receding, but it has left a mark on across multiple aspects of our lives. From mask mandates to travel restrictions, we chafe at some of the changes – but in the business world the use of artificial intelligence (AI) systems has dramatically expanded in the past year. This was probably inevitable – but AI brought advantages in coping with the pandemic for companies that could make use of it, and the expansion accelerated. AI has found its place in a huge range of applications, at both the front and back end of businesses. It’s prevalent in software management and data systems, as well as in communications, where AI systems filter emails and conduct robochats. And this has not been ignored by Wall Street. Analysts say that plenty of compelling investments can be found within this space. With this in mind, we’ve opened up TipRanks’ database, and pulled two stocks which are stand to benefit from AI technology. Importantly, both have amassed enough bullish calls from analysts to be given “Strong Buy” consensus ratings. Nuance Communications (NUAN) We’ll start with Nuance, a company in the communications software niche. This Massachusetts-based company offers solutions for business clients in the healthcare and customer service industries, with products that enhance speech recognition, telephone call steering systems, automated phone directories, medical transcription, and optical character recognition. It’s a full range of AI-powered, cloud communications software, applied in real time. Nuance’s flagship product, the Dragon Ambient eXperience (DAX) is marketed to the healthcare industry, where it uses AI to automate the paperwork burdens on physician practices and hospitals. This streamlines operations allow doctors more time and resources to spend on patients, and provides greater satisfaction to health care providers and users. The applications of Nuance’s product and solution lines to the current environment is clear: when the pandemic locked down so many people at home, businesses still had to maintain their customer-facing systems, and software automation, based on AI tech, made that possible with fewer personnel. Since the pandemic started last winter, the company seen its shares grow tremendously, up 205% in the last 12 months, far outpacing the overall stock market. The most recent quarterly report, for fiscal Q1, showed quarterly revenues above the forecast at $81.4 million. EPS showed a net loss, as expected, but at 27 cents the loss was a 28% sequential improvement from Q3. The company’s balance sheet is strong, with zero debt, $256 million cash on hand, and a credit facility up to $50 million. The company’s most recent quarterly report, for fiscal Q1, beat the forecasts on both the top and bottom lines. Earnings beat expectations by 11%, coming in at 20 cents per share, while revenues of $345.8 million were a modest 2% above the estimates. As a result, operating cash flow grew 22% year-over-year, to $54.6 million for the quarter. Among the bulls is 5-star analyst Daniel Ives, of Wedbush, who rates NUAN shares an Outperform (i.e. Buy), and his $65 price target implies an upside potential of ~44%. (To watch Ives’ track record, click here) "We believe Nuance overall continues to be laser focused on building a global cloud healthcare and AI driven business with growing ARR and a sustainable revenue/ earnings stream going forward with larger deals in the field as more hospital- wide deployments shift to the cloud are playing out and gaining further momentum based on our checks," Ives opined. The analyst added, "From a valuation/ SOTP perspective, we believe over time the DAX business alone could be worth between $3 billion to $4 billion to NUAN's stock as this AI next generation platform represents a potential paradigm changer for hospitals/healthcare clinics/specialists over the coming years." Ives is no outlier on Nuance, as shown by the unanimous Strong Buy analyst consensus on the stock. Nuance has received 6 recent reviews, and all are to Buy. The shares are trading for $45.20, and the $59.67 average price target suggests a 32% one-year upside. (See NUAN stock analysis on TipRanks) Dynatrace, Inc. (DT) The second AI stock we’ll look at, Dynatrace, is another cloud software company – but Dynatrace’s products are designed to power business data. The company’s AI platform brings intelligent automation to network management and cloud monitoring. DT’s platform allows for cloud automation, business analytics, digital experience, application security, applications and microservices, and infrastructure monitoring. It’s sold as a one-stop-shop for network and system managers seeking an intelligent software agent. Dynatrace’s shares have been showing consistent growth over a long term. The stock is up a robust 133% in the past 12 months, and revenues have also been growing over that period. In the most recent report, for Q3 fiscal year 2021, the company showed $182.9 million in top-line revenue, beating the forecast by ~6% and growing 27% year-over-year. EPS came in at 6 cents, flat from Q2 and far better than the break-even reported for the year-ago quarter. Three key metrics stand out in the quarterly report, and both for the right reasons. Subscription revenue grew 33% year-over-year, to reach $170.3 million, and annual recurring revenue (ARR) – which is an important predictor of future performance – grew 35% yoy and came in at $722 million. At the same time, license revenue dropped by more than 93%, to just $300,000. Taken all together, these results point toward a strong shift toward recurring cloud customers – a common trend in the software space. Needham’s 5-star analyst Jack Andrews has been closely following Dynatrace, and he believes DT’s AI products may replace incumbent tools as customers expand to additional modules. “Embedded AIOps and automation creates a compelling value proposition… Compared to competitors in the market, DT's AI Engine is embedded within its core platform and can be levered across the portfolio to deliver answers from data. Moreover, its One Agent technology automatically discovers high-fidelity data from applications and thus can map the billions of dependencies in complex environments," Andrews said. The analyst summed up, "In our view, DT is well-positioned to serve as a single source of truth that can help users trace a line between written code and business outcomes (i.e. BizDevSecOps)." Andrews named Dynatrace as a top pick, and in line with this upbeat assessment, the analyst rates the stock a Buy along with a $66 price target. Ivestors stand to pocket ~28% gain should the analyst's thesis play out. (To watch Andrews’ track record, click here) Once again, we’re looking at a stock who strong performance has inspired unanimity from the Wall Street analysts. DT shares have 13 Buy reviews, for a Strong Buy consensus rating. The stock sells for $51.76 and its $59.69 average price target suggests ~15% upside from that level. (See DT stock analysis on TipRanks) To find good ideas for AI stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights. Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Artificial intelligence (AI) is a buzzword in tech these days. The term, which encompasses a range of technologies including machine learning and data analysis. The goal is to create systems that can perceive, learn, and reason in ways that mimic human capabilities. At its best, AI will allow machines to understand the gestalt of a situation and react accordingly, a capability that humans take for granted – but has tends to elude computer systems, which in their turn excel at analyzing minute details. A wide range of tech companies are working on AI systems; artificial intelligence holds the promise of real-time data analysis and situation monitoring, with the machines capable of handling routine decisions. While it hasn’t been achieved yet, the outlines of success are visible on the horizon. Every smart investor knows to keep his eyes on the horizon; that is, to plan every investment with long-range intentions. Just how long is up to the individual, but most investors agree that a move isn’t long-term unless it’s held for more than one year. Warren Buffett has famously said, “If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes.” With this in mind, we used TipRanks' database to identify three AI stocks that have been highlighted by some of Wall Street’s best tech sector analysts. These are analysts with 5-star ratings, standing above their peers in accuracy and average returns – and they’ve tapped Artificial Intelligence as a tech segment for the long run. Veritone, Inc. (VERI) We’ll start with Veritone. This media tech company offers a cloud-based operating system for AI that uses machine learning to turn data into useful intelligence. The software allows users to process audio and video in real time, enhance analytics and research apps, reduce content review times, and streamline time spent on ‘low-value, high-effort’ tasks. The value of the product to the customers can be seen in the quarterly earnings trends and the share appreciation. The last six months – covering the worst of the global pandemic and economic recessionary pressures – have seen VERI’s earnings steadily improve and the share price rise to its best level in over two years. Earlier this month, Veritone showed its confidence by adjusting its Q2 revenue guidance upwards. The guidance, of $13.1 to $13.3 million, is well above the previous upper guide of $12.2 million. The share price has tracked the gains in revenue and earnings. The stock has more than doubled since the February/March market collapse, rising from $3.03 to $10.83 now. Patrick Walravens, writing from JMP Securities, was impressed by Veritone’s new revenue guidance, and reiterated his Buy rating on the stock. In his comments, he said, “Veritone seems to be gaining traction in its Government, Legal, and Compliance verticals as it experienced record bookings in the quarter… we believe the company is moving its cost structure in the right direction with recent cost-reduction initiatives and upgrades…” With his $17 price target, Walravens shows his own confidence that VERI will see 57% growth in the year ahead. (To watch Walravens’ track record, click here) Overall, VERI’s Moderate Buy analyst consensus rating is based on 4 Buys and just a single Sell. The stock’s current price is $11.80, and the average price target $16.25 suggests it has a 50% upside potential. Note that even the low-ball target estimate, of $15, is well above the current price. (See Veritone stock analysis on TipRanks) ZoomInfo Technologies (ZI) Next up is ZoomInfo, a marketing tech company. ZI offers the usual features and services that customers expect in digital marketing intelligence, including account management, data management, demand generation, and lead prospecting. The company’s AI cloud software is specifically designed to improve efficiency in these tasks, letting sellers get to the business of selling. ZoomInfo is a newly public company, having held its IPO just this past June. The opening was a success, with share prices almost doubling on the first day and nearly tripling in the first few trading sessions. Even now, after nearly two months during which the initial excitement waned and the glow came off the rose, the stock is still trading 88% above its initial price of $21. The strong IPO prompted SunTrust Robinson analyst Terry Tillman – who is rated in the top 10 of the TipRanks analyst database – to initiate coverage of the stock with a Buy rating. Tillman wrote of ZoomInfo, “We believe ZoomInfo represents a rare combination of strong top-line growth and best-in-class profitability. Its go-to-market (GTM) sales intelligence platform drives positive outcomes for B2B sales and marketing organizations - increasing leads, customers and revenue. Premium valuation justified owing to accelerating demand for GTM intelligence and company-specific drivers leading to significant revenue and profit upside.” Tillman’s Buy rating comes with a $60 price target, implying an impressive 51% upside potential. (To watch Tillman’s track record, click here) ZoomInfo holds a Moderate Buy rating from the analyst consensus. This is based on 16 reviews, including 7 Buys and 9 Holds. The stock’s $55.07 average price target suggests it has room for 32% growth from the $41.66 trading price this year. (See ZoomInfo stock analysis on TipRanks) CareDx (CDNA) Last on today’s list is a tech company in the health care sector. CareDx develops and delivers diagnostic surveillance systems for heart transplant patients. The company’s AI-powered software monitors patient progress in real time, allowing both the patient and the doctors to respond to any rapidly changing health issues in time to ensure a more successful outcome. The result is a novel development in long-term care. While CareDx’s products were originally designed to monitor heart transplants, the company has expanded. Its products now monitor most human organ transplants – including kidneys, an important niche, as the first successful organ transplant was conducted with a kidney, and this procedure is still among the most common of transplants. CareDx also has cloud-based AI systems to monitor lab results, and to connect digital implants with remote monitors. The company’s earnings have proven mostly immune to recent economic instability, as medical transplant patients and doctors cannot simply stop using the monitoring systems. And with a firm user base, the stock recovered well from the late-winter market crash. CDNA is up over 130% since bottoming out in March. Covering the stock for Piper Sandler, analyst Steven Mah wrote, “We believe CareDx has the broadest transplant care platform in the industry and we remain confident that it is well-positioned to protect and extend its first-mover advantage in both pre- and post-transplant patient management to drive long-term growth. In addition, we are encouraged by the resiliency of its essential tests and ability to operate in a COVID-19 environment.” Mah gives CDNA a Buy rating, along with a $54 price target that implies an upside of 66% for the next 12 months. (To watch Mah’s track record, click here) All in all, with 4 recent reviews on record, all Buys, CareDx has a unanimous Strong Buy rating from the analyst consensus. The stock is currently selling for $32.59, and the average price target, at $42.75, suggests a one-year upside of 31%. (See CareDx stock-price forecast on TipRanks) To find good ideas for tech stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Artificial intelligence (AI) is a buzzword in tech these days. The term, which encompasses a range of technologies including machine learning and data analysis. The goal is to create systems that can perceive, learn, and reason in ways that mimic human capabilities. At its best, AI will allow machines to understand the gestalt of a situation and react accordingly, a capability that humans take for granted – but has tends to elude computer systems, which in their turn excel at analyzing minute details. A wide range of tech companies are working on AI systems; artificial intelligence holds the promise of real-time data analysis and situation monitoring, with the machines capable of handling routine decisions.