Piper Sandler believes that generative AI is the next significant technology trend.
“We see Generative AI as the next major revolution in technology that could have far-reaching implications across both consumer and enterprise sectors,” Barron’s reported Piper Sandler’s comments from a 14 April report to clients. “The democratization of foundational LLMs [large language models] via APIs [application programming interfaces] suggest the rapid pace of innovation could occur at an unprecedented pace.”
It’s hard to argue with that assessment. I know I think about the subject every day. According to Piper’s research, AI-enabled search advertising has the potential to reach $47 billion in 2030 from almost nothing today.
At the end of March, Bankrate.com advertized five popular investment trends in Q2 2023. Not surprisingly, AI was number one. Again, it’s hard to argue with the logic.
Anyway, Piper recommended 12 artificial intelligence stocks that could benefit from this trend. I’ve selected the three that I believe are the best.
My wife owns a construction business, so I’m always interested in construction-related companies like Autodesk (NASDAQ:ADSK) that make software for architects, engineers, construction firms, and many other industries.
The company was launched in 1982 by John Walker and other people interested in developing design software. Their first product was AutoCad, which became the most-used design software worldwide. Walker stepped down as President of Autodesk, opting to become a programmer solely. He left the company entirely in 1994.
The company went public in 1985. That year, it had $29.5 million in revenue and $6.5 million in net income. In fiscal 2023 (January 2023 year-end), its revenues were $5.01 billion, while free cash flow was $2.03 billion, or 40.5% of revenue.
William Blair analyst Dylan Becker recently suggested in a note to clients initiating coverage of ADSK that it had significant growth ahead because of the construction industry’s digitization transition. In addition, the construction industry’s move to generative design and simulation will dramatically increase its total addressable market.
As a result, Becker initiated coverage with an outperform rating. Piper Sandler’s target price is $244, nearly 24% higher than where it’s currently trading. Of the 27 analysts that cover ADSK stock, 16 either rate it overweight or outright buy, with a median target price of $237.50, slightly lower than Piper Sandler’s, but solid nonetheless.
I will continue to follow Autodesk with interest. You might consider doing the same.
Trading down 19% from last July, if you do buy, you’ll be getting an excellent entry price. Up nearly 12% over the past month, it looks ready to go on a run.
Through the first nine months of fiscal 2023 (March year-end), the provider of a digital platform for medical professionals that helps them be more productive grew revenue by 23% year-over-year to $308.1 million. Additionally, its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $135.0 million, 22% higher than a year ago.
Although the company’s adjusted EBITDA margin through the first nine months was down 60 basis points from a year ago, it was still a healthy 43.8%. For 2024, it expects annual revenue of more than $500 million, with an EBITDA margin of 43% or higher.
Regarding ChatGPT, Doximity launched a beta version of a ChatGPT tool that will help doctors streamline their paperwork, called DocsGPT.com. It is a ChatGPT integration with Doximity’s free fax service for sending paperwork, such as letters to insurers for preauthorizations, and appeals.
“Like many others, we are very excited about the potential applications of generative AI in health care. We know how busy physicians are and recognize that administrative burden is a leading contributor to burnout,” Nate Gross, M.D., co-founder and chief strategy officer at Doximity, told Fierce Healthcare via email in February.
AI is a no-brainer for the healthcare industry. Piper Sandler currently has a $38 target price for DOCS.
Five9 (NASDAQ:FIVN) brings the contact center to the cloud. It sells cloud-based software for contact centers that eliminates the need for expensive legacy systems that lack portability.
“The Company’s purpose-built, highly scalable, and secure Virtual Contact Center, or VCC, cloud platform delivers a comprehensive suite of easy-to-use applications that allows simultaneous management and optimization of customer interactions across voice, chat, email, web, social media, and mobile channels, either directly or through application programming interface,” states its IR website.
Five9 states that it can plunk down a customer service agent with only a computer and headset anywhere in the world with a decent internet connection and get the job done.
By lowering the cost of call center operations, it’s easy to see why Five9 continues to grow its business.
In 2022, the company reported record revenue of $778.8 million, 28.8% higher than in 2021. Its non-GAAP net income was $106.7 million, 29.8% higher than a year earlier. In 2023, it expects revenue of $901.5 million at the midpoint of guidance. Its non-GAAP earnings per share should be $1.69, up from $1.50 in 2022. At the end of 2021, its outlook for 2022 non-GAAP earnings was $1.14 a share. The company beat that by 36 cents. I suspect that Five9’s earnings projections are conservative by nature. With luck, they could hit $2 in the year ahead.
Five9 already has several conversational AI chatbot solutions for its customers. As its clients become more comfortable using AI in online customer care, investors can expect sales in this area to accelerate in the years ahead.
No wonder Piper Sandler has an $89 target price. Of all 12 AI stocks in Barron’s list, Five9 will likely benefit the most from artificial intelligence.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.