The artificial intelligence (AI) market has experienced rapid growth, leading to significant gains for stocks like Nvidia, which soared 2, 760% in the last five years. While some investors may hesitate to pursue such gains, there are still undervalued AI stocks poised for future growth, such as Innodata, MicroStrategy, and Lumen Technologies. 1. **Innodata**: Once a slow-growth IT services firm, Innodata's stock skyrocketed from $1 in 2019 to $32 today due to increased demand for its AI tools. In 2023, revenue grew by 10%, but exploded by 83% in the first nine months of 2024, reaching $111 million, while adjusted EBITDA surged 266% to $20 million. Innodata anticipates 88%-92% revenue growth for the full year as its generative AI services gain popularity. Analysts project a compound annual growth rate (CAGR) of 25% for sales and 29% for adjusted EBITDA from 2024 to 2026, making its current valuation of 4 times next year's sales and 37 times its adjusted EBITDA appear promising. 2. **MicroStrategy**: Known for hoarding Bitcoin since 2020, MicroStrategy holds 252, 220 tokens valued at $19. 26 billion, a significant portion of its $59. 1 billion enterprise value. This strategy could pay off if Bitcoin's price surges.
In addition, MicroStrategy has entered the generative AI market, launching MicroStrategy AI last October to help companies enhance their data applications. While revenue is expected to grow at a muted 1% CAGR from 2023 to 2026 and the company remains unprofitable on a GAAP basis, its Bitcoin holdings and AI ventures could drive future growth. 3. **Lumen**: Formerly CenturyLink, Lumen has faced five years of declining revenue and halted dividends in 2022, dropping its stock below $1. Unlike competitors, it hasn't expanded into wireless services, instead focusing on wireline connections and business-related services. Despite setbacks, Lumen recently secured $5 billion in AI connectivity deals, including a partnership with Microsoft's Azure. These developments sparked a stock rally to about $9, yet its enterprise value remains less than twice its projected 2024 sales. Although revenue is expected to decline in 2024 and 2025, new AI contracts might surpass expectations, potentially boosting its stock further. These companies highlight the ongoing opportunities within the AI market, suggesting that careful investment in overlooked stocks may yield significant returns.
Undervalued AI Stocks Poised for Growth: Innodata, MicroStrategy, and Lumen
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