Machine learning stocks likely to get further support as industry multipliers grow
Machine learning stocks are experiencing impressive growth due to the increasing commercial use of advanced data analytics. In fact, the machine learning industry is expected to grow at 34.8% annually through 2030, demonstrating its systemic potential.
Considering the above, I decided to look for three undervalued machine learning stocks for which I believe the industry multiplier growth story is clear. Methodologically, my screening process focuses on fundamental aspects, valuation metrics, and market-driven events. Additionally, I also included technical analysis to overlay my analysis.
Machine learning stocks may not be for everyone, but if your risk tolerance aligns with my industry-based outlook, here are three machine learning stocks to consider.
Snowflake (SNOW)
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Snowflake (New York Stock Exchange:snow)'s exposure to machine learning comes from an integrated cloud platform that includes a wide range of languages such as Python and R. The company's cloud services leverage these languages for time series and cross-sectional analysis.
We like SNOW stock because it has a nice broad profile. Sure, Snowflake's machine learning stands out. But other factors could boost the stock in the short term. For example, the company recently suffered a data breach by hackers that compromised about 165 customer accounts. Morgan Stanley (New York Stock Exchange:MS) was quick to respond to the situation, suggesting that the intrusion was an isolated “incident.”
The above provides event-driven support for SNOW stock, which, coupled with an operating cash flow growth rate of 36.89%, could lead to higher share prices. Additionally, SNOW stock appears to be significantly undervalued, with a price-to-sales multiple of 14.89x and a cyclical discount rate of approximately 64.92%.
I am being very bullish here!
Oracle (ORCL)
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Oracle (New York Stock Exchange:Orks) is a household name that doesn't really need much of an introduction, but the company's machine learning efforts deserve a little highlighting.
The company has a presence in the cloud space, which provides integration opportunities. Oracle has a number of end market integrations, including Spark and data mining services. Importantly, machine learning enables non-linear statistical analysis, which is extremely valuable for a company like Oracle that has demanding data management and storage requirements. Therefore, I am bullish on the value-add of machine learning.
Additionally, Oracle's near-term variables are well aligned. For example, the company recently released its fourth quarter earnings report, revealing that cloud revenue grew 19.7% year over year, although it fell short of expectations. I know some will be pessimistic about Oracle's earnings report, but I believe cloud growth is the long-term driver and what we should be focusing on, not one-time missed revenue targets.
Finally, from a financial market perspective, Oracle is doing well. For example, ORCL stock has broken out of its 10-day, 50-day, 100-day, and 200-day moving averages, indicating a momentum trend is forming. Additionally, ORCL's forward price-to-earnings ratio of 23.12 is on the low side for a growth stock, leading us to conclude that ORCL is undervalued.
CrowdStrike (CRWD)
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CrowdStrike (Nasdaq:CRWD) stock is a hot asset. The stock has risen to prominence during the pandemic amid a surge in affordable cybersecurity products. Despite surging into perhaps overbought territory, I remain bullish on the outlook for CRWD stock. Here's why:
The company's foray into the machine learning space appears to be horizontal, leveraging machine learning to identify cyber threats individually rather than focusing solely on time series of events. The success of CrowdStrike's machine learning integration explains why the company recently surpassed $1 billion in sales through a single downstream sales channel to CrowdStrike, its partner for life. C.D.W. (Nasdaq:C.D.W.).
Additionally, CrowdStrike has received sensational support from financial markets: for example, the company's shares were included in the S&P 500 index five years after it went public, a remarkable achievement and a testament to the loyalty of CRWD stock's investor base.
Some may question the valuation of CRWD stock, which includes a price-to-earnings ratio of 107.94, but as I mentioned earlier, I am optimistic about the prospects for CRWD stock, and its exceptional growth should justify a higher price multiple and provide further gains.
On the date of publication, Steve Booyens did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author in accordance with InvestorPlace.com's Publishing Guidelines..
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