HomeBusiness1 Stealthy Artificial Intelligence (AI) stock that could be huge

1 Stealthy Artificial Intelligence (AI) stock that could be huge

There’s something special about seeing events live, whether you like sports, concerts or shows. I recently visited the T-Mobile Arena in Las Vegas to watch the Vegas Golden Knights take on the Detroit Red Wings, and there was something different about entering the arena. I’ll explain below.

A big part of any event is security. Unfortunately, mass shootings have increased dramatically over the past two decades. New York City has also seen a surge in subway violence, so it’s turning to this company to help keep people safe.

Whatever our personal experience, we are all at least indirectly affected by unfortunate incidents when going through tight security and long lines. However, traditional metal detector security has problems Evolv Technologies (NASDAQ: EVLV) is trying to solve this problem using artificial intelligence (AI) technology.

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What is Evolv Technologies?

Evolv Technologies designs and sells scanners that use artificial intelligence to detect guns and other weapons based on shape and other unique characteristics. The technology allows people to walk into a location without waiting to be scanned in one line. Wallets and keys do not set off the alarm like a metal detector. It also helps to decongest the huge crowds waiting to enter a venue, which could be targeted.

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This was my experience at T-Mobile Arena. There were security staff when we entered, but I walked through without emptying my pockets. I noticed the name on the device was a stock I own, Evolv. This is not a unique experience. By the end of 2023, more than 4,500 Evolv machines will be in use.

Graph showing the number of active Evolv units that has increased since 2021.

Data source: Evolv Technologies. Chart by author.

It works like this. Security keeps devices that resemble tablets on the sidelines of people entering. If a gun or other weapon is detected, the device will display it and indicate where it is located on the person (pocket, backpack, etc.). Security then asks the customer to step aside and perform the next steps. The devices are also used in schools and hospitals. Evolv reports that 40% of its revenue comes from schools, 10% to 15% from hospitals, 10% to 15% from professional sports, and the rest from amusement parks, tourist attractions, places of worship and workplaces.

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Is Evolv stock a buy?

Evolv is growing the number of customers rapidly. From 2021 to 2023, it went from 200 schools to 800, from 30 hospitals to 300, and from 10 professional sports teams to 40. New York City’s recent announcement that it would start using the devices could be a major catalyst for the stock. and other municipalities could follow suit.

The revenue model is partly recurring. After purchasing the machines, the customer pays for a subscription to the software. As shown below, revenues have skyrocketed due to increasing adoption.

EVLV Earnings Chart (TTM).EVLV Earnings Chart (TTM).

Revenue growth is excellent, but annual recurring revenue (ARR) will be essential for long-term success. ARR is important because it means Evolv will continue to make money once the market is saturated. The company reported impressive ARR growth of 120% in 2023, reaching $75 million.

This company has a lot to like. However, Evolv is still a relatively small company with a market cap of $700 million. It is in the high growth phase, so it is not profitable and carries increased risks. It is not a stock in which you can invest your entire portfolio. But in my opinion it is worth a speculative view.

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The stock trades at a price-to-sales ratio (P/S) of 9, which is reasonable for a growing technology company. It is a technology that is necessary and innovative, and a valuable tool that many are adopting as part of a comprehensive security plan. Nothing will solve the problem. It’s time for an ‘all on deck’ approach, and Evolv is one element.

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Bradley Guichard holds positions in Evolv Technologies. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

1 Stealthy Artificial Intelligence (AI) Stocks That Could Be Huge was originally published by The Motley Fool

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