Are you an investor with an optimistic perspective on the AI revolution?
The future of artificial intelligence remains uncertain regarding its depth and impact. Nonetheless, certain companies are strategically positioned to reap the benefits of AI technology’s growth. These companies concentrate on advancing core AI technologies and innovative application of machine learning algorithms across diverse sectors like healthcare, finance, and automotive industries.
For investors seeking profitable opportunities, let’s explore three AI stocks worth considering for investment. These companies possess the potential for swift valuation changes due to their relatively small market capitalization, making timely action advisable.
Pegasystems (PEGA)
Pegasystems (NASDAQ: PEGA) specializes in customer engagement and business process management. Despite encountering challenges, investing in PEGA could prove to be a prudent choice given the macroeconomic and structural enhancements the company is enacting.
The company foresees a 12% growth in full-year average contract value, notwithstanding broader economic uncertainties and internal restructuring efforts that included a 4% reduction in workforce.
PEGA has demonstrated impressive revenue performance, surpassing expectations, particularly in its subscription license segment. Looking forward to 2024, the company’s revenue, earnings per share (EPS), and free cash flow projections have exceeded analyst forecasts.
Backed by a moderate buy rating from eight Wall Street analysts, Pegasystems maintains a consensus price target of $56, reinforcing the positive outlook for the stock.
Recursion Pharmaceuticals (RXRX)
Recursion Pharmaceuticals (NASDAQ: RXRX) specializes in drug discovery utilizing AI and machine learning algorithms.
The current year holds significant promise for RXRX, with two major data readouts expected in the latter half of the year. These include results from the phase 2 SYCAMORE trial for REC-994 and the phase 2⁄3 POPLAR study for REC-2282, targeting cerebral cavernous malformation and Neurofibromatosis Type 2 (NF2) with no approved treatments.
Despite a negative free cash flow of \(276 million over the past year, RXRX maintains a strong financial position with \)389.5 million in cash and cash equivalents. Strategic partnerships, such as a $50 million investment from Nvidia (NASDAQ: NVDA), further bolster the company’s stability.
Analysts have set an average price target of $16.8 for RXRX, indicating a potential 35.16% increase from the current price.
SoundHound AI (SOUN)
SoundHound AI (NASDAQ: SOUN) provides advanced capabilities in voice recognition and natural language understanding.
In the previous year, the company unveiled targeted restructuring initiatives aimed at expediting its path to profitability, with a heightened focus on its SaaS product, SoundHound for Restaurants. Notably, SOUN reported a robust 84% year-over-year revenue growth in Q4.
With a $160 billion total addressable market across core industries, SOUN aims to capitalize on opportunities this year. Strategic priorities include enhancing product offerings and leveraging a strong client base, particularly in the automotive sector.
Analysts view SOUN as a strong buy, with a projected 17.02% upside in stock price. Analysts like Scott Buck from HC Wainwright & Co. are even more optimistic, setting a price target of \(5, indicating a 32.98% upside. Additionally, next year’s forecasted revenue stands at \)72.24 million, with an anticipated increase in EPS.
Given the positive financial results and future projections, SOUN emerges as a compelling AI stock for investment.
Disclaimer: On the publication date, Matthew Farley did not hold any positions in the securities mentioned. The opinions expressed are solely those of the author, following the guidelines of InvestorPlace.com.
Matthew commenced his financial market coverage during the 2017 crypto boom and has since contributed to various fintech startups. His writings on Australian and U.S. equities have been featured in MarketBeat, FXStreet, Cryptoslate, Seeking Alpha, and New Scientist magazine, among others.
