These 2 Artificial Intelligence Stocks Are Poised For Strong Growth, Says Truist
Let’s talk about artificial intelligence. AI is a growing segment of the technology industry, finding uses in nearly every industry, especially those with autonomous systems. Self-driving cars, industrial robots, call center chatbots, even the smartphones in our pockets – all have a connection to AI and machine learning technology. It has already changed the face of the digital world, and its revolution is far from over.
Technology with such a deep and widespread impact will also be felt in stock markets – that’s for sure. Companies will set up shop, to use AI or to produce AI, or both, and their actions will open up many opportunities for investors. AI is not only an important new technology, it is also a driver of new investments and returns.
Top analysts at investment firm Truist have found a few AI stocks they believe are poised for further growth. According to TipRanks data, these are strong buys, with an upside potential of more than 40% for the coming months. Let’s take a closer look.
We’ll start with Five9, a technology company offering cloud-based AI software designed for use in the contact center niche. Five9 offers a suite of AI-powered cloud software solutions for call centers across a wide range of industries, including telemarketing, financial services, customer service, healthcare, retail and outsourcing. The company’s artificial intelligence products include intelligent virtual agents, workflow automation, interactive voice response, and reporting and analytics. Five9 has over 2,000 global enterprise customers and over 7 billion interactions per year.
In the last quarter reported, for 4Q21, Five9 reported $173.6 million in revenue, up 36% year-over-year to hit a company record. On a non-GAAP basis, EPS rose from 34 cents a year ago to 42 cents currently reported, a gain of 23%. For the full year, Five9 made over $609 million in total revenue for 2021, again a record for the company, compared to $434 reported in 2020. However, for 1Q22, the company said it expected to report non-GAAP earnings of 12 cents to 14 cents per share, well below the Wall Street consensus forecast of 21 cents.
Despite the shortfall for this quarter, 5-star Truist analyst Terry Tillman believes the overall upward trajectory bodes well for the company. He writes, “[Five9] said 2022 is set to have an even bigger international squad. On the product side, the company noted that the use of IVAs among FIVN customers has tripled year over year, with IVA accounting for 10% of corporate bookings in new logos in 2021. We believe that the company should continue to benefit from its position in AI. and its overall automation story with IVA, Agent Assist, and workflow automation capabilities.
These comments confirm Tillman’s Buy rating, and his price target of $150 suggests that Five9 has potential gains of around 61% ahead of him. (To see Tillman’s track record, Click here)
Overall, Five9’s Strong Buy rating reflects a bullish consensus. The 18 recent analyst analyzes include 16 buys, 1 hold and 1 sell; the shares are priced at $93.26 and the mid-price target of $150.59 is virtually the same as Tillman’s. (See FIVN stock forecast on TipRanks)
Nvidia Corporation (NVDA)
The second Truist recommendation we’ll be looking at is Nvidia. This semiconductor giant has built a strong reputation for quality graphics processors and memory chips that have been in high demand by avid gamers and professional designers. Specifically, for this article, this top-ten chipmaker’s products have found a niche in the AI industry, and GPUs have the computing power to power AI technology.
This is not the limit of Nvidia’s exposure to AI, however. The company also uses this technology in its own chip design and production lines. This is a case where AI is used to build better AI – literally, on the hardware side.
Nvidia posted 7 consecutive quarters of revenue growth, with the $7.64 billion reported in 4Q22 up 53% year-over-year and a quarterly record for the company. Revenue for fiscal 2022 rose 61% to $26.91 billion, also a record for the company. Earnings gains were also extreme, and non-GAAP EPS of $1.32 reported in the fourth quarter was up 69% year-on-year and 13% sequentially. Quarterly EPS was also 7% higher than expected.
In his coverage for Truist, 5-star analyst William Stein described Nvidia as “*the* AI company” and attributes this “in part to its high-performance GPUs which provide the necessary parallel computing capability”. He goes on, however, to note “NVDA’s culture of innovation, incumbent ecosystem, and significant investment in AI software tools and models. This creates a chasm that challenges new entrants and supports NVDA’s structural growth. Its investments in other aspects of parallel computing (especially graphics) strengthen its position in games/e-sports and professional visualization. These make NVDA a unique asset in the semis: a large-cap company with structural growth characteristics, justifying a premium multiple.
Stein’s buy rating on NVDA shares is consistent with his commentary, and his price target of $350 implies a roughly 43% year-over-year upside. (To see Stein’s track record, Click here)
Stein’s target is pretty much in line with the average street target, which currently stands at $352.65. The strong buy consensus rating for this stock is based on 21 recent reviews, which include 17 buys versus 4 takes. (See NVDA stock forecast on TipRanks)
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Warning: The opinions expressed in this article are solely those of the analysts featured. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.