With this year's sharp stock market rally fueled by technology, it's all but forgotten how different things looked at the start of 2023. After the 2022 bear market, Wedbush analyst Daniel Ives reminds investors that sentiment towards tech stocks has been “extremely” negative with a cloudy macro, Fed overhang, worries of a hard landing and weakening consumer/ Corporate demand, all creating a dark cloud over the technology sector.”
But in the face of this headwind, exactly the opposite happened in the first half of the year. Driven by the game-changing opportunities offered by developments in AI and led by the mega-corporations, the technology segment has advanced at a rapid pace. For example, the tech-heavy NASDAQ is up 30% so far in 2023.
But has the rally now come to an end? On the contrary, says Ives. “As we enter the second half of 2023, we see a much broader tech rally ahead as investors continue to digest the impact of this looming $800 billion AI spending wave and what it means for the software, chip , hardware and technology ecosystem in the next time means year.”
As for Ives, owning tech is a green light, and with that in mind, he directs investors to tech stocks, which he believes have scope to move forward in the second half of 2023. We checked two of their current recommendations through the TipRanks database to see what other experts had to say about those choices. Here are the facts.
When we talk about the impact of AI, it makes sense to start with one of this year's key beneficiaries of the AI boom.
C3.ai is a leading artificial intelligence (AI) enterprise software company specializing in providing scalable and innovative solutions for enterprises across diverse industries. Since its inception in 2009, the company has established itself as a trusted provider of AI-powered software applications. C3.ai provides a comprehensive and modular AI platform that enables organizations to harness the power of big data, advanced analytics and machine learning algorithms to drive digital transformation and achieve operational excellence.
It's a value proposition tailored for these times, which the company put to good use in the most recent reporting quarter, for the fourth fiscal quarter (April) of 2023.
Revenue of $72.41 million, while roughly in line with the same period last year, still beat consensus by $1.07 million. Additionally, adj. Earnings per share of -$0.13 outperformed last year's -$0.21 and stock market expectation of -$0.17.
However, the company's full-year revenue guidance failed to impress, averaging $307.5 million, below the $317.1 million Wall Street had been expecting.
Shares subsequently fell, but that didn't stop the stock from being one of the best performers of the year, gaining 200% year-to-date.
However, Ives believes there is still more potential. Coupled with an Outperform (ie, Buy) rating, its $50 price target leaves room for additional gains of 49% over the coming year. (To see Ives' track record, Click here)
Explaining his stance, Ives said: “Although it will be a bumpy road, we believe c3 has turned the tide and is now poised to embrace the $800 billion AI transformation opportunity over the next decade, with use cases growing in across the board and across the business.” in a unique position to help take the lead and monetize that for the next 12-18 months.”
“With the move to a consumption-based pricing model, this is proving to be a good long-term strategic move as the Generative AI suite can continue to be monetized as the demand and use cases in this space are growing day by day across all industries.” 5-star analyst further added.
Unlike Ives, most in the stock market seem to think stocks have risen too much at the moment. Assuming an average target of $26.16, the stock will change hands at a 22% discount in a year. All in all, the stock receives a consensus rating of hold based on 5 hold, 3 sell and 2 buy. (See AI Stock Forecast)
Now let's look at Alight, a technology company operating in a niche called BPaaS (Business Process as a Service). This refers to the outsourcing of various business processes to a cloud-based service provider and allows companies to streamline their operations and leverage specialized expertise.
Alight offers a wide range of HR and finance solutions that can be delivered via a cloud-based platform. The services are aimed at various industries and have a strong focus on wealth, human resources and health. These solutions include benefits administration, payroll, talent management and more. All are powered by the company's flagship worklife platform, which leverages data analytics and AI.
The company reached a key milestone in its latest guidance for Q1 2023, exceeding $1.5 billion in cumulative BPaaS bookings, nine months earlier than expected.
For the quarter, Alight had revenue of $831 million, up 14.6% year over year and beating analysts' forecast by $27.35 million. Ultimately adj. Earnings per share came in at $0.13, up $0.01 on the Street's call. And looking ahead, the company is forecasting full-year sales of between $3.47 billion and $3.51 billion (up 11% to 12%), better than the consensus of $3.48 billion at the midpoint -Dollar.
Although ALIT stock is up 9% year-to-date, that's actually a poor return compared to the NASDAQ's 30% gain. However, Ives believes the stock will benefit from the company's recent moves.
“Having launched its 2023 product roadmap and launching Alight Worklife, the company is in an excellent position to capitalize on current market opportunities while continually investing in its go-to-market strategy and future product developments to expand its global footprint.” and complete its transformation,” said Ives.
“With a TAM of $73 billion and an opportunity to double revenue in the installed base with all customers now working on one platform, as the company continues to see strong demand for its flagship worklife offerings, we believe “We aim to gain market share and become one of the top players in the ERP (Enterprise Resource Planning) landscape,” added the top analyst.
These comments support Ives' Outperform (ie, Buy) rating on ALIT, which is backed by a $14 price target. This suggests the stock will return 54% over the next 12 months.
Four other analysts recently joined ALIT's ratings and all agree with Ives that this is a stock to own, making the consensus view here a strong Buy. The forecast calls for a 47% one-year gain assuming the average target is $13.38. (See ALIT Stock Forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is for informational purposes only. It is very important to do your own analysis before investing.