Written by Norman Isaac Mwambazi

Analysts give these two AI stocks Buy ratings

Working the stock market is a data game. Getting the best information, in a timely way, and knowing how to …

Working the stock market is a data game. Getting the best information, in a timely way, and knowing how to use it, are keys to success. According to industry market research, Artificial Intelligence (AI) companies and products are on the verge of explosive growth. The AI market was valued at $9.5 billion in 2018, over $27 billion in 2019, and is projected to exceed $250 billion in 2027.

AI refers to the use of data to simulate human intelligence processes including learning, reasoning, and self-correction by machines. AI is making its way into almost every industry. Data collection and collation, automation systems from factories to self-driving cars, even online shopping site – they all benefit from AI applications.

And this has not been ignored by Wall Street. Analysts say that plenty of compelling investments can be found within this space. We have found two AI stocks that have been approved by 5-star analysts, stock pros rated among the top 3% of their peers, and here is why they are recommended.

Veritone Inc. (VERI)

Analysts give these two AI stocks Buy ratings

Veritone is a software company whose flagship product is aiWARE, an AI-powered operating system (OS). It allows the user to coordinate machine-learning models and integrate disparate data sources including audio and visual into actionable intelligence results. The system boasts an open architecture and has been applied in the entertainment, government, legal, and media sectors.

The company released its Q4 FY2020 earnings report showing record quarterly revenue at $16.8 million, a year-over-year (y-o-y) gain of 35%. The gain was a result of y-o-y sales gains in aiWARE SaaS, which was up 53%, and advertising, which was up 50%.

Despite these strong financials, investors are worried about the company’s future guidance and this was evidenced by the 49% fall in Veritone’s stock from the peak value it hit in February.

Management is predicting a non-GAAP net loss in the range of $3.9 million to $4.4 million in Q1 FY2021, and while that represents a 38% improvement at the mid-point from Q1 FY2021, investors want to see a profit.

On the bright side, Roth Capital’s 5-star analyst Darren Aftahi, thinks this new, lower stock price could offer new investors an opportunity to get its stock on the cheap. Aftahi sees this stock as a well-positioned AI growth story.

Aftahi noted:

“VERI put up better Q4 results, but more importantly, accelerating top-line growth in both AI SaaS and Advertising (both over 50%). If our assumption about its Content and Licensing business returning to 2019 levels (with modest growth) is correct in 2021, it implies its 2021 guide (which was much better by the way) for advertising and AI SaaS is north of 40% growth (~30% for Advertising and ~low 60%s for AI). Most importantly, its AI SaaS line was guided to 60-65% growth, showing a doubling of growth y/y.”

In line with his comments, Aftahi rates the stock a Buy, and his $50 price target implies growth of 104% in the year ahead.

All in all, with a share price of $24.53, market capitalisation of $792.29 million and a consensus average price target of $38.75, VERI shares offer investors a chance for 58% share growth this year. The analyst consensus rating, a Moderate Buy, is based on three Buy reviews and one Sell.

Verint Systems (VRNT)

Analysts give these two AI stocks Buy ratings

Verint stock has appreciated 107% over the last 12 months, with a large part of that gain coming in a 31% jump at the beginning of February 2021.

That jump came in reaction to the company’s split into two entities: Cognyte, the spin-off, took on the parent’s intelligence and cyber operations, while Verint continued as a pure-play, AI-powered customer engagement service.

The company uses its combination of market experience and AI and analytic products to enable customers to optimize their automation, knowledge, and workforce.

Verint’s FY2021 ended on January 31, 2021, the day before the split, and the company reported its Q4 FY2020 and full year results last week. Those results beat expectations for the quarter, with $349 million in total revenue – a 3% year-over-year gain.

For the full year, however, the $1.27 billion in revenue was a few millions below the $1.3 billion reported in FY2019.

The Q4 data bodes for the Verint in its pure-play customer engagement incarnation, as those AI cloud sectors grew more than 30% year-over-year in that quarter.

Calling Verint a “unique AI engagement company,” Oppenheimer’s 5-star analyst Timothy Horan sees the new Verint in a strong position to move forward.

Horan noted:

“VRNT reported solid Q4 FY2020 earnings and is now a pure-play customer engagement AI company following its split. VRNT is successfully executing its transition to a SaaS/Cloud model. New perpetual license bookings (PLE) was up 15% this quarter. The transition away from licensed sales is difficult but largely behind it as revenue growth should accelerate from this quarter onward. Cloud demand has seen a healthy 50/50 split between existing and new customers. It exited the year with strong momentum in cloud and bookings. We think it can continue to sign large cloud deals across contact centre and other verticals.”

These are upbeat comments, and Horan backs them with a Buy rating, and a $60 price target indicating room for approximately 32% growth in the next 12 months.

Overall, there is broad agreement on Wall Street that Verint is a stock to Buy, as shown by the unanimous Strong Buy analyst consensus rating. This is based on six recent positive reviews. The shares have an average price target of $59.33, suggesting ~30% upside potential from the current trading price of $45.50.

They say AI is the future.

PS: Stock prices quoted in this article can change any time.