In the current bull market, a small number of technology companies dominate Wall Street movements. This group became known as the “Magnificent Seven”. In 2024, some of these seven names of his are behind. Today, the remaining resilient high flyers — Nvidia, Amazon, meta platformand microsoft –They are referred to by some as the “Fab Four.”
Now may not be the time to keep piling on the same few winners. After all, they are already making huge profits. Instead, his three Motley Fool contributors think you might consider shaking things up by introducing a fallen angel like this: tesla (NASDAQ:TSLA)Up-and-comers like cloud strike (NASDAQ:CRWD)or even lottery-like stocks such as: lemonade (NYSE:LMND).
AI could send beleaguered Tesla stock into overdrive
Will Healy (Tesla): One way to find affordable artificial intelligence (AI) stocks is to look for companies that have fallen out of favor for reasons other than their connection to AI. Tesla fits that description. The company's electric vehicle (EV) sales were about 11% lower than its production volume in the first quarter, and rumors that it had canceled plans for a low-priced Model 2 also weighed on the stock price.
In fact, EV sales may continue to be weak in the short term. However, Tesla has recently improved its AI-powered fully self-driving platform, and CEO Elon Musk announced on August 8 that it would unveil a robotaxi. Cathie Wood's Ark invested primarily in the prospects inherent in robotaxis. This is based on predictions that Tesla stock will reach $2,000 by 2027.
Ark Invest views Tesla as a robotics stock and believes robotaxis will drive both Tesla vehicle sales and the software-as-a-service platform that powers robotaxis. The investment management firm believes robotaxis will account for 67% of the company's projected enterprise value by 2027. This will dramatically change the company, as car sales will account for 85% of its revenue by 2023.
However, given that the company's goal is to increase its stock price more than 10 times by 2027, many investors are skeptical. However, it's worth noting that in 2018, Ark Invest predicted that Tesla stock would reach $267 per share by 2021. This prediction also increased almost 10x at the time, and it became a reality in the 2021 bull market. .
Even if Ark Invest's optimistic forecasts come true, investors have some cushion. Due to the recent decline in its stock price, Tesla's P/E ratio is about 40 times, which is near the lowest level ever for the stock.
Assuming a robust robotaxi platform significantly boosts revenue and revenue, its valuation should eventually rise. Therefore, Tesla is returning to investors' portfolios on its own and could experience a massive rebound.
CrowdStrike is on the cusp of greatness
Jake Larch (CrowdStrike): cloud strike is a leader in cybersecurity solutions. This field is becoming increasingly important given the seemingly endless number of cyber-attacks around the world. Just think of one thing. The Change Healthcare hack has left tens of thousands of healthcare providers unable to pay claims in recent weeks. Recognizing the high costs of falling victim to such cyber-attacks, many organizations are keen to strengthen their digital defenses.
CrowdStrike's software relies on machine learning to monitor client networks, identify suspicious objects before they cause damage, and rapidly acquire new clients.
In its most recent fiscal quarter (ending Jan. 31), CrowdStrike's revenue rose 33% year-over-year to $845 million. Further, 94% of that amount, or $796 million, was subscription revenue. This is important because subscription revenue occurs on a recurring basis. This means it's more predictable than traditional sales, which have many ups and downs.
Additionally, CrowdStrike has undergone significant changes in its lifecycle, increasing profitability. The company's net profit recently turned positive for the first time. The company generated net income of $89 million over the past 12 months. Additionally, free cash flow soared to $3.81 per share. This is especially true because free cash flow growth per share is cited by many as the ultimate financial metric for measuring the success of publicly traded companies, and is often correlated with long-term stock price appreciation. It's important.
So CrowdStrike is the best of both worlds. The company is a young company with increasing free cash flow and a transition to stable profitability. It is also riding on a long-term growth trend as more organizations upgrade and strengthen their cyber defenses in the face of increasing risks. For these reasons, it's a stock worth considering.
Lemonade's AI brings new ideas to insurance
Justin Pope (Lemonade): Insurance is an old industry and ripe for change. Established companies—the giant insurance companies you know, the ones whose commercials feature professional athletes, funny mascots, and famous spokespeople—are using AI to analyze data. However, they still sell insurance through an agency model, which gives Lemonade ample opportunity to enter the market. Lemonade uses AI chatbots to communicate with customers and process claims. These bots can complete tasks in just 90 seconds and receive insurance payments within 3 minutes. You may be held on hold longer than that waiting to speak with a representative from a traditional insurance company.
Lemonade's app-first experience attracts many customers. Customer count in the fourth quarter increased 12% year-over-year to more than 2 million. This increase suggests that people are leaving other insurance companies and switching to Lemonade. Although the company's product line is not as extensive as its older competitors, customers can purchase insurance policies for renters, homeowners, car, pet, life insurance, and more.
Insurance companies make a profit when the total amount of claims paid is less than the total amount of premiums paid by their customers. Lemonade is not yet profitable. However, non-GAAP EBITDA loss for the fourth quarter was $29 million, a 44% decrease in loss compared to the same period last year. Importantly, Lemonade has $945 million in cash on its books and generated positive cash flow in the second half of last year. This is a good sign of financial stability.
At this point, lemonade is a risky investment. For a company to thrive, it must continue to find ways to attract customers and make a profit. But with greater risk comes greater opportunity for higher rewards, and if Lemonade, with a market cap of $1.2 billion, can evolve into a major player in the insurance industry, it could be a portfolio-changer.
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Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool's board of directors. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. Jake Lerch has held positions at Amazon, CrowdStrike, Nvidia, and Tesla. Justin Pope has no position in any stocks mentioned. Will Healy has a position on his CrowdStrike. The Motley Fool has positions in and recommends Amazon, CrowdStrike, Lemonade, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
Forget the “Fab Four”: These three artificial intelligence (AI) stocks are great buys today.Originally published by The Motley Fool
