It’s a new year, and good time to take a look at what lies ahead. Not in the short term, but on the longer horizon. So, here’s a number to think about: $126 billion. That’s the predicted size of the Artificial Intelligence (AI) technology market in 2025. AI, once the sole province of the more arcane branches of computer programming and coding, has become an essential part of the digital world we live in.
You can find AI everywhere. It’s in our factories, controlling assembly robots and inventory systems; it’s in cars, monitoring power systems and drive trains – and soon, perhaps, to drive the vehicles; its algorithms lie behind the success of all the online tech companies that have come to dominate our electronic social discourse and economy. AI is everywhere, and it’s here to stay.
Which makes it a fantastic sector to mine for investment opportunities. Against this backdrop, two of Wall Street’s top analysts have turned their gaze on AI, and recommended their picks in the sector.
We ran the two through TipRanks database to see what other Wall Street’s analysts have to say about them. The results are interesting.
C3.ai, Inc. (AI)
We’ll start with a company that is new to the public trading markets. C3ai is an enterprise AI firm, providing a suite of services designed to build enterprise-scale applications through a cost effective and efficient process. The C3 AI Suite brings configurable apps for customer engagement, energy management, fraud detection, predictive maintenance, and supply chain optimization – and all of that is only the beginning.
C3 went public in December 2020, hitting the markets on Dec 9. The company had priced the IPO at $42 per share, but closed its first day at a price of $92, for a 120% gain right out of the gate. C3’s shares went on to peak at $177 on Dec 22, and the stock is now trading at $133, for a net gain since the first day’s close of 44%. The company now boasts a market cap of $12.74 billion.
It’s not just the successful IPO that should grab investors’ attention here. C3’s customers include such high-profile names as Bank of America, AstraZeneca, and Koch Industries. The company also has a strategic partnership with Microsoft, using the Azure cloud platform to offer AI tech to the energy industry. And finally, C3 is an important contractor with the Pentagon, and counts the US Air Force, Army Aviation, and US StratCom in its user base.
Some Wall Street analysts see C3’s shares as fully valued, but others are bullish on the stock. Among the bulls is Daniel Ives, the 5-star tech sector expert from Wedbush, who rates AI and Outperform (i.e., a Buy). Ives also gives the stock a $200 price target that indicates room for a 51% upside in the next 12 months. (To watch Ives’ track record, click here)
In his comments on the stock, Ives explains his stance: “We view C3.ai as one of the more disruptive enterprise software vendors in the last decade with the company laser focused on the convergence of AI, big data, and cloud computing… We believe with a very successful IPO of $650 million completed in December, C3 now finds itself in clear “offensive mode” as its beefed-up distribution strategy (direct sales, MSFT, Baker Hughes) should put more fuel in its growth engine into 2021 and beyond.”
The bear-bull mix on AI is clear from the reviews on record for C3. The company has received 10 ratings, breaking down to 4 Buy, 4 Hold, and 2 Sell, making the analyst consensus a Hold. Meanwhile, the average price target stands at $144.89, suggesting room for 9% growth from current levels. (See AI stock analysis on TipRanks)
Liveperson is well-known as a designer of live chat platforms and chatbot AI systems, marketing these products as customer relations tools at the front end for companies of all sorts. Liveperson’s chat apps are available through web browsers, social media, and on mobile devices, and the company has produced a conversational AI that allows automated chatbots to streamline customer service center efficiency by handling routine communication tasks.
The AI chatbots are designed for use on Conversational Cloud, with one human operator overseeing multiple bots in a chat center. The AI handles initial contacts using filtering questions, and is capable of referring more involved issues to the human agent in the loop. Liveperson offers a choice for its customers: to use ready-made chatbots, or to use the platform and create a unique conversational system.
Like many tech companies involved in online marcom, Liveperson’s value has been put into sharper relief during this crazy ‘corona year.’ The stock finished 2020 with a gain of 65%.
Meanwhile, revenues have slightly increased sequentially since Q2, with the Q3 number of $94.8 million being up 3.4% from Q2 and 26% year-over-year.
Liveperson’s proven strength in its niche attracted the attention of Ryan Koontz, 5-star analyst with Rosenblatt.
“[We] expect LPSN to leverage its leading position in AI to disrupt the $60B contact center software and automated labor market. Despite facing new threats from larger and more established players in the enterprise market, including Salesforce.com, Twilio, and Oracle, we view the strong focus and 20+ years of experience of LPSN as key assets,” Koontz noted.
With this analysis, it’s not surprising that Koontz rates LPSN a Buy. His $73 price target implies a 14% upside from current levels. (To watch Koontz’s track record, click here)
It’s clear that Wall Street is in broad agreement with Koontz, as shown by the Strong Buy analyst consensus rating and the 8 recent reviews that include 7 Buys against a single Hold. The shares are selling for $63.97, and the $71.17 average price target suggests it has 11% room to grow. (See LPSN stock analysis on TipRanks)
To find good ideas for 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.