According to analysts at Scotiabank, US-listed software developer Informatica is well-positioned to benefit from the rise of artificial intelligence. The California-based company last month unveiled CLAIRE GPT, an AI model designed to help companies leverage their data for generative AI applications. Generative AI (GenAI) is the technology behind the wildly popular chatbot ChatGPT and other similar products. It uses large amounts of data to create new content such as text and images, but relies heavily on well-managed, high-quality inputs to produce reliable results. “Fragmented and poor-quality data creates flawed generative AI, including unreliable insights, biases, reliability issues, hallucinations, and potential risks. [intellectual property] “Informatica has helped clients solve data management problems for 30 years, which makes it a well-positioned partner as companies embark on generative AI adoption,” Scotiabank analysts led by Patrick Colville said in a client note. The company said its AI models can answer clients' business queries by pulling data from multiple connected systems, including Salesforce, Tableau, Snowflake, Amazon's AWS and internal databases. The process can take engineers and analysts several days to complete. But Scotiabank cautioned that the financial benefits may not be immediate, noting that “Informatica's use for generative AI is still in its infancy” and likely won't be a big revenue driver in 2024. The investment bank expects the stock to rise to $33 over the next 12 months, suggesting a 15% upside. But Wall Street's bullish analysts are much more bullish elsewhere. The average price target of 16 analysts points to a 39% upside for the stock, according to FactSet. RBC Capital analysts expect the stock to rise 43% to $41 a share over the next 12 months. They suggest that competitors such as Salesforce, Snowflake and Microsoft also offer generative AI models, but Informatica has a unique advantage thanks to its flagship Intelligent Data Management Cloud product. “Informatica has access to an enterprise's entire data estate, unlike other tools that only look at a specific repository in a narrow way,” RBC analysts led by Matthew Hedberg said in a May 22 client note. “ClaireGPT has broader context and can provide more complete analysis to answer complex questions about an enterprise's data.” In early April, The Wall Street Journal reported that Salesforce had expressed interest in acquiring Informatica, valuing the company at about $10 billion, about 5% higher than its current market cap. However, subsequent reports have reportedly erased the possibility of this acquisition. Informatica shares have risen about 62% over the past 12 months.
