TThe wise investor keeps his eyes ahead, towards the horizon. Right now, the sea of tech is the one to watch, and ships in sight fly the AI flag. This is not a new development, it has been going on for several years – but as an investment sector, it is heating up. AI is the technology that will power our digital systems for years to come, from our smartphones and cars to Elon Musk’s Martian rockets.
AI is not just a technology, rather it is a range of technologies – and approaches to technology – including the collection and analysis of data that powers machine learning. In the long term, the goal is to create software capable of analyzing systems and imitating human intuition; in the shorter term, AI should be able to analyze its environment – digital or physical – and decide how to react.
This does not mean that the machines will become us, but they will become more able to work. with us, instead of just for us. And when that happens, who can tell which doors will open? In the meantime, savvy investors can seize the opportunities that open up in the space. And we can use the TipRanks data platform to select three AI stocks that some Street analysts say are poised to make gains as the technology matures.
Let’s start with UiPath, an AI company specializing in robotic process automation, or RPA. It is a smart hill in the wider field of AI, using machine learning and AI to create robots – the automated software units that can handle the ordinary, boring, and repetitive tasks of the digital world. . Or, as the company says, they’re robots so people don’t have to be robots.
UiPath’s software robots offer customers a wide range of benefits, from precision to cost savings, to regulatory compliance for happier customers – and happier staff, with improved productivity. While bots receive a lot of negative press, especially for their misuse on social media, when used constructively, they serve an important role.
The company has been in business since 2005, but went public earlier this year, benefiting from rising stock prices when it went public. The action opened on the NYSE on April 21, during a larger IPO. The company issued 13 million shares and existing shareholders sold an additional 14.474 million shares. The initial price was set at $ 56, above the expected $ 43- $ 50 range. UiPath raised $ 728 million of the total of $ 1.34 billion raised; the company did not profit from the sale by existing shareholders. Since the event, PATH shares have fallen 36%. Despite this, the company has a market capitalization of over $ 22.76 billion.
UiPath will release its third quarterly results as a public entity on December 8, but we can check the latest quarter, the company’s 2Q22 tax report from September 7, to get a sense of where it stands. The company reported total revenue of $ 195.5 million, up 4.8% sequentially and 40% year-on-year. Annual recurring revenue, a measure of future business potential, reached $ 726.5 million, a gain of 60%, and the company ended its fiscal second quarter with $ 1.9 billion in liquid assets.
This firm’s strong product and clear revenue potential caught the attention of Credit Suisse analyst Phil Winslow, who wrote: Continue to drive strong new customer acquisition, solid customer expansion and attractive unit economy longer than Wall Street appreciates it. “
Winslow, a 5-star analyst, gave the stock an outperformance (buy) rating and a price target of $ 75 suggesting a 69% year-over-year increase. (To look at Winslow’s record, Click here.)
With UiPath, we are moving into action with an analyst buy rating. The 16 most recent reviews include 7 buys, 8 holds, and 1 sell, for an overall moderate buy consensus. The average price target is $ 70.43, indicating a growth potential of 59% against the stock price of $ 44.32. (See the analysis of UiPath’s shares on TipRanks.)
Stem, Inc. (STEM)
Then we have Stem, a company that uses AI technology to drive clean energy storage and monitoring systems. In short, this company has implemented an integrated system – software to solve the problems inherent in energy storage batteries and to maximize the production of renewable energy for a cleaner, more resilient energy grid. This is the dream of green energy boosters, and Stem’s AI is the heart of his system.
AI enables the company’s Athena software platform to enable Stem customers to achieve utility bill savings of 10-30%. The system is capable of machine learning and can learn when and how to switch from grid power to on-site production to battery power for maximum efficiency, energy savings and cost savings.
Stem, Inc. is an outright smart energy storage company, and the first of its kind to be publicly traded. The company entered the public markets through a PSPC transaction in April of this year; the tie-up, with Star Peak Energy Transition Corporation, was approved on April 27, and the STEM ticker debuted on April 29. Star Peak brought $ 383 million in cash to the combo, along with $ 225 million PIPE funding, for $ 608 million in new capital for Tige. The company has a current market cap of $ 2.57 billion, after the stock has slipped 34% since the completion of the SPAC.
Even though the stock has gone down, Stem’s business is booming. 3Q21 revenue reached $ 39.8 million, up 334% (no other way to put it) from the same quarter last year. The company’s net income turned positive in the third quarter, going from a net loss of 47 cents per share a year ago to a net gain of 85 cents per share. In total dollars, this is a jump from a net loss of $ 18.8 million in 3Q20 to a net profit of $ 115.6 million in 3Q21.
Covering STEM for Wolfe Research, Steve Fleishman says, “Stem’s Athena software has long been the lifeblood of the business and generates over 80% margin on revenue on 10-20 year contracts. We also like that the company is hardware and battery independent. Both helped generate a strong margin profile today, one that we are seeing improving. Stem should also benefit from the rarity value of being one of the two pure-play drum cos.
Fleishman is bullish and gives stocks an outperformance (buy) rating. Its price target of $ 35 implies a 97% hike by the end of next year. (To see Fleishman’s record, Click here.)
While there are only 2 registered reviews for this stock, both agree – this is a buy offer. The average price target is $ 40.50 and the current stock price is $ 17.77, for up to 127% year-over-year potential. (See Stem’s stock analysis on TipRanks.)
Finally, we come to C3ai, a company in the enterprise AI sector. C3ai provides its customers with AI software designed to improve the efficiency and user experience of enterprise-wide applications. The systems allow customers to streamline their application development and customize their end-use applications.
This company is also relatively new to public markets, having gone public through an IPO last December. In the initial offering, 15.5 million AI shares were put on the market and the company raised $ 651 million in gross capital. However, the title has seen rough times since its debut and since the start of the year it has fallen 78% for a variety of reasons.
For starters, the pandemic put a damper on business earlier this year – but that was followed by some idiosyncratic issues. C3ai is currently in transition to a new CFO, a major change at the top that occurs with a reorganization of the sales team. And these two points can be more easily understood by looking at the company’s ‘remaining performance obligation’ or RPO, the contractually engaged activity that has not yet been delivered or paid for – and therefore is not recorded in books as turnover. It increased in the most recent quarter (the company’s fiscal 2Q22, released December 1) by an impressive 74% year-over-year.
However, most of this RPO comes from one customer, C3ai’s largest customer, the Baker Hughes Company. C3ai and BKR have extended their contract from 5 to 6 years and increased the dollar value by an order of magnitude, from $ 45 million to $ 495 million. This dominated the RPO figure and clouded the fact that C3ai’s remaining RPO – its future revenue stream – declined 16% year-on-year. This puts the business in an uncomfortable dependency on a customer.
This is the negative. On the bright side, revenue is so far strong, up 41% year-on-year to $ 58.26 million. Subscription revenue, which accounts for the lion’s share of the total, increased 32% year-on-year to $ 47.4 million. That was better than expected revenue of $ 57 million, and a needed boost, given that GAAP EPS loss widened year-on-year from 39 cents to 55 cents.
Needham analyst Jack Andrews, rated 5 stars by TipRanks, notes these points, including the extended relationship with Baker Hughes, and is optimistic. He is careful to note that C3ai has relationships with Microsoft and Google that have the long-term potential to overshadow the contract with Backer Hughes. Andrews writes, “The current outlook for the next four quarters is approximately $ 1.2 billion and approximately $ 800 million of these qualified opportunities exist in the second half of fiscal 22. Microsoft and Google Cloud are two notable drivers of this pipeline value, as they represent around 120 deals totaling around $ 140 million and over 90 deals totaling around $ 58 million, respectively.
Consistent with those comments, Andrews rates this stock as a buy, with a price target of $ 103 implying a very robust 246% rise for the coming year. (To see Andrews’ record, Click here.)
This AI stock has 8 opinions from Wall Street analysts, with a breakdown of 4 buy, 2 take and 2 sell, for a consensus rating of conservation. The shares are priced at $ 29.75 and their average target of $ 55.13 points to 85% growth over the next 12 months. (See the analysis of C3ai’s shares on TipRanks.)
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Disclaimer: The opinions expressed in this article are solely those of the analysts presented. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.