Artificial Intelligence: Which Stocks to Invest In?
8 minutes for reading
Investors are always keeping an eye on the current market situation and look for opportunities to invest in the branches that have just started developing. If you manage to find the right company, he profitability if your investment may amount to thousands of percent.
However, at the very start, it is quite hard to detect the future leader; hence, investments become less risky when it is already clear which company may assume leadership. Money flows in the stocks of such companies abundantly, and the stock price sky-rockets, sometimes without a good reason.
In this article, we will discuss two companies working on the implementation of artificial intelligence that have become an intrinsic part of modern life. As a result, even small companies from this branch have a chance to become large corporations in several years.
The coronavirus and healthcare sector
In the first half of the year, the coronavirus got all the attention of investors, who hurried to detect the stocks of the company that would be the first one to invent the vaccine against the virus. As a result, the healthcare sector accumulated huge sums of money, which made the stocks in this sector grow rapidly. Investor bought all the stocks that were in some sense connected to COVID-19. Those were the securities of biothech companies, those producing antiseptics and means of protection, those producing test systems, etc. These circumstances increased volatility in the sector: the growth of certain stocks amounted to 1000%.
Hunting for electric cars producers
Step by step, investors switched to producers of electric cars. Here, we must pay credits o Elon Musk and his Tesla (NASDAQ: TSLA). In June, the price of one Tesla stock cost over 1000 USD, after which the stock price of other companies dealing with electric cars, sky-rocketed. Among such companies were NIO, WKHS, SOLO, NKLA.
5G is still at acute topic
For no obvious reason, everyone has forgotten about the development of 5G. It was quite long ago that I touched upon investing in companies dealing with the development of 5G networks.
Anyway, I must note that since the publication of the article about 5G, the stocks of the company mentioned there grew by 85% regardless of the crisis.
However, now, I would like to draw your attention to the development of artificial intelligence and the companies working with it. Nonetheless, do not forget about 5G companies, the list of which you may find in the article mentioned above.
Artificial intelligence
Artificial intelligence is becoming an essential part of our daily life, examples being Google or Yandex voice assistants or Tesla automatic pilot. However, AI is most demanded in business. In retail sales, AI technology transforms inventory systems letting track goods from stock rooms to shops.
Chat bots communicate with clients answering FAQs, which helps employees to serve more clients as they do not get distracted by same questions.
The income of companies that implement and maintain AI starts growing, pulling in tow the income of those businesses that use AI.
LivePerson, Inc.
The first company that I would like to draw your attention to is LivePerson (NASDAQ: LPSN).
LivePerson is a tech company that designs software for interactive commerce and artificial intelligence.
It is the leader of its segment, and chances are that in the realistic future no other company will outplay it.
If earlier the client-company communication was by phone, presently, the main flow of applications goes via messengers, social networking systems, and chats. So, to increase sales volumes, companies need new technology for processing clients’ applications.
In 2018, LivePerson presented a new platform that allows to create AI-based chat bots for answering clients’ questions. This platform already works on mobile devices, in social networks, and web browsers. AI helps to process FAQs so that a manager’s help is needed in some complicated cases.
The companies already using AI confirm that they process more applications, increasing conversion and, hence, income.
The income of LivePerson has been growing steadily since 2018. If in the second quarter of 2018 it amounted to 61.6 million USD, this sum has by now increased to 91.6 million USD.
The stocks of LPSN now cost 60 USD each, which is 400% more than 5 months ago. This might seem expensive, but compared to other companies with the same income, the stocks of LivePerson would seem cheap.
For example, the securities of Everbridge Inc (NASDAQ: EVBG), Five9 Inc (NASDAQ: FIVN), and Ringcentral Inc (NYSE: RNG), which are the rivals of LivePerson, cost over 100 USD.
The demand for LPSN services grows, which lets the company increase the prices for its services, augmenting its income. In the future, the company has all chance to develop an AI-based platform for answering calls – it already has enough data for analysis.
In the second quarter of 2020 only the platform by LivePerson used to process over 100 million messages each month. This means the company’s database is huge. And this, in its turn, is a colossal advantage that will sustain the company’s leadership in the market.
The management evaluates the market volume in its segment as 60 billion USD, while the annual revenue f the company has just neared 360 million USD. This means the perspectives for future growth are just huge.
Tech analysis of LivePerson stocks
LivePerson stocks are now trading in an uptrend. The financial results of the second quarter made the stocks grow steeply. As a result, after the report, the stocks opened with a gap 17 higher than the closing price of the previous day.
The support level is currently at 55 USD. From this level, we may watch the price and wait for a bounce, which should be interpreted as a signal for further growth.
As for the terms of investing in this company, count on a couple of years at least. The market of AI is growing, and LivePerson is a promising company with a large potential of income growth. For such investments, the entry price is not that important: fill your portfolio in a certain range starting right now. Of course, buying on corrections would be a perfect option.
Booz Allen Hamilton Holding Corporation
The other company that is worth your attention is Booz Allen Hamilton Holding Corporation (NYSE: BAH).
Booz Allen Hamilton Inc. supplies management, tech, consulting, and engineering services to the government in the spheres of defense, intelligence services, civil market, and global corporations.
The company receives most of orders directly from the US government, which is a big advantage. For business, the US government is a reliable, long-term, and wealthy client.
In 2018, the company presented an AI platform called Modzy.
Modzy is a platfrom with built-in security and management meant for safe implementation of artificial intelligence to enterprises. With its help, clients get access to the growing market of trained models of AI by leading companies in the sphere of machine learning. Currently, the company is working with federal clients on using AI for solving prblems connected to the coronavirus.
At Booz Allen, incomplete orders have been accumulating recently; also, it has long-term contracts with the US National Security Service.
The company needs to extend, and for this, it needs money, which it plans to gather by selling bonds for 500 million USD. Part of the money will be used for paying off previous bonds.
Having studied the company, the Moody’s agency forecasts that in 2021, the income of Booz Allen will be over 8 billion USD. To compare, in 2018, it was about 7.27 billion USD. The company may find yet another source of income in the US Ministry of Defense that has planned modernization in the next decade. Nowadays, modernization presumes the use of AI.
Tech analysis of Booz Allen Hamilton Holding Corporation
The quotations of Booz Allen stocks are trading in an uptrend and have reached their all-time highs. During the last 5 months, when the crisis reached its climax, the stocks grew by over 50%. The nearest support is at 85 USD, but the price is currently quite far away from the 200-days Moving Average, which indicates a possible correction to 80 USD per stock.
The price may keep growing without a correction only if it breaks away the level of 87 USD. Investors might have become optimistic after the latest quarterly report which shows 7% growth of income and 12% growth of revenue per stock compared to the same quarter last year.
Another important factor is the dividends payed every quarter, which have reached 31 cent per stock. During the crisis, many companies refused to pay dividends due to possible financial troubles after the pandemics. This is another reason to invest in this company in the long run.
Closing thoughts
The use of artificial intelligence is as inevitable as switching to electric cars. The technology is already present in our lives but the demand keeps growing. The stocks of companies working in this segment are rather expensive but the potential of growth is really huge. Such investments are long-term, the stocks should be held in the portfolio for no less than a year. Your passive revenue will be dividends.
