AI (artificial intelligence) is stirring up the technology pot these days. With the release of ChatGPT and the explosion of AI-powered natural language online search, content creation, and even image editing, it has become clear that AI is the next frontier in technology.
There is always opportunity in this kind of sudden boom. New jobs and new products, of course, but also new opportunities in the stock market. AI-related companies will find or open new avenues, either directly or through connections with high-profile applications such as ChatGPT, and will seek investors.
However, investors need to choose carefully where to put their money. Some of his AI companies are more equal than others and should be carefully screened before being acquired. Introducing Smart Score, TipRanks’ AI-powered tool that collects and collates all the data on over 8,400 publicly traded companies. We value stocks and rate them according to eight factors that are highly correlated with future outperformance. Overall scores are given according to a simple linear scale from 1 to 10, with the ‘perfect 10’ clearly indicating stocks worthy of closer scrutiny.
Perfect 10’s combination of strong ties to AI/ChatGPT should be a solid starting point for today’s technology investments. Here are two of his stocks, along with comments from Wall Street analysts.
Perion Network (PERI)
We start with Perion Network, an innovative leader in the global digital advertising business. The company focuses on increasing client engagement through ad search, social media and video/CTV content, a potential market he estimates at over $300 billion. It’s not peanuts, so it’s a big opportunity for Perion.
The company already has strategic relationships with Microsoft and its Bing search engine that lead to a direct connection with AI. Microsoft has made it public that it is heavily committed to AI and ChatGPT as the foundation for Bing improvements and upgrades. Perion and Bing are collaborating in a strategic partnership for search engine advertising. In fact, Perion’s revenue shows a strong correlation with the number of Bing users, and the integration of ChatGPT into Bing has already had a significant impact on Perion’s financial results.
This was revealed in Perion’s final quarterly report for Q1 2023, the first quarter after ChatGPT’s release. The company’s total revenue increased 16% year-over-year, jumping from $125.3 million to $145.2 million. This total includes a 16% year-over-year increase in Display Ad Revenue and a 15% increase in Search Ad Revenue. Ultimately, Perion’s non-GAAP net income increased 44% year over year to $29.9 million. That brings EPS to his 60 cents per share, up 36% from 44 cents a year earlier.
In addition to strong year-over-year growth, the company’s performance also exceeded expectations. Perion’s total revenues were $3.8 million higher than expected and non-GAAP EPS was 10 cents higher than expected.
Video revenue was the bulk of Perion’s growth, up 26% year-over-year. Video revenue accounted for his 44% of total display ad revenue, up from 41% a year ago. This growth was underpinned by a 63% year-over-year increase in the number of video platform publishers.
If you look at PERI’s smart scores, you’ll see that Perion ticks almost every box. Stocks have healthy technical and fundamental factors, but the biggest boost comes from sentiment indicators. Financial bloggers are 100% positive for PERI, while the sector average is 67%. News sentiment is also 100% positive for him. The crowd wisdom on PERI has been recorded as “extremely positive,” with a private investor increasing his stock holdings by 42% over the past 30 days. And among hedge funds tracked by TipRanks, PERI’s holdings increased by more than 344,000 shares last quarter. Add it all up and you get a perfect 10.
Analysts at The Street are also bullish. Her Needham girlfriend Laura Martin, an expert in the tech space, summarizes Perion’s prospects: “Among all listed AdTech companies, PERI has the most near-term upside from ChatGPT because PERI distributes Bing (owned by Microsoft) to 60 countries. India, UK, etc. In Q1 2023, PERI reported nearly 30mm of searches were monetized out of a total of 150mm of searches per day. We’re getting a revenue share of advertising.In Q1 2023, PERI reported that 45% of its total revenue came from Bing search affiliates, up 15% year over year.”
Martin’s comments confirm her Buy rating for the stock, and her $42 price target indicates her confidence that the stock will rise 37% over the next 12 months. (To see her track record in Martin, click here. )
Perion has had five recent analyst reviews, with a 4-to-1 buy-over-hold consensus rating for the stock of “strong buy.” The stock is currently trading at $30.63, with an average target price of $40.20 suggesting 31% upside over the year. (look Perion stock price prediction)
NVIDIA Corporation (NVDA)
For the second stock on our list, we shift gears a bit and look at one of the world’s semiconductor chip industry leaders. Nvidia has built a solid reputation in the graphics processing unit (GPU) segment, holding around 70% market share in these high-end his chips. The high market share of GPUs has been a big boon to his Nvidia in recent years. GPUs are in high demand by both professional graphic designers and serious online gamers. Furthermore, the high computing power of GPUs is applied not only to AI and machine learning systems, but also to data processing, “smart” home and city technology, and IoT.
That’s good news. The bad news is that Nvidia’s gaming division suffered through most of his 2023 fiscal year after the pandemic, hurting the company’s revenue and profits. In its most recent quarter, the company reported a recovery in the gaming industry and, importantly, detailed an ongoing move into the AI space, with the company poised for lucrative earnings to benefit from this long-term trend. I am in a position to do so.
In fiscal year 2023, which ended January 29 of this calendar year, the company’s revenue was $26.97 billion, largely flat from $26.91 billion in fiscal 2022. NVIDIA’s revenue growth has slowed since its second fiscal quarter, and in its last reported quarter, the fourth quarter of fiscal 2023, the company’s all-time high of $6.05 billion was down 21% year over year. Ultimately, non-GAAP EPS was reported at 88 cents, compared with $1.32 in the year-ago quarter. However, it’s worth noting that both sales and bottom line earnings exceeded expectations.
On the AI front, Nvidia has partnered with major cloud software providers such as Microsoft and Google to make their AI platform available as a cloud product. AI chips have been prominently featured in his Nvidia data center business, which accounts for the majority of revenue, growing 11% year over year to $3.62 billion in the fourth quarter. Nvidia’s automotive and robotics segment of business, also AI-related and including cloud access, showed year-over-year growth, up 135% to $294 million from Q4 FY22 reached.
Investors have bought into NVDA AI’s story, with the stock up 114% year-to-date. This is in good agreement with the “Perfect 10” Smart’s strong emotional factor in his score. Nvidia scored high on Blogger Sentiment (71% positive), Crown Wiz (over the last 30 days he maintained 5.6%), and News Sentiment (97% positive) . Hedge added 2.5 million Nvidia shares last quarter, a clear sign of confidence.
So it’s no wonder the stock caught the attention of HSBC analyst Frank Lee, who is a little baffled by the opportunity in front of him. He wrote: “We are shocked by Nvidia’s pricing power over AI chips, driving upside earnings and rising valuations… Microsoft’s aggressive rollout of ChatGPT and other cloud service providers in the U.S. and China. Given AI initiatives, AI-powered GPUs are expected to contribute $5.2 billion and $11.1 billion in additional revenue in the fiscal years ending January 2024 and January 2025. We also acknowledge the potential for further ratings due to NVIDIA’s market power (over 80% market share) and the fact that it is the largest beneficiary of the AI trend.”
Lee also rated NVDA Buy and set a price target of $355, suggesting a 13% gain over the next few months. (To see Lee’s achievements, click here. )
Of the 37 recent analyst reviews registered with the NVDA, 29 are ‘Buy’ and 8 are ‘Pending’, with a consensus rating of ‘Strong Buy’. However, the rapid rally in stock prices this year has pushed trading prices above expected average prices. Nvidia is priced at $312.64, while analysts’ average price prediction is currently at $296.29. (look NVDA Stock Prediction)
Visit TipRanks to find good ideas for trading stocks at attractive valuations. Best Stocks to Buy is a newly launched tool that consolidates all TipRanks stock insights.
Disclaimer: The opinions expressed in this article are those of the featured analyst only. Content is used for informational purposes only. It is very important to do your own analysis before making any investment.
