HomeBusinessThese three artificial intelligence (AI) stocks are great buys today

These three artificial intelligence (AI) stocks are great buys today

In today’s bull market, a handful of tech companies are dominating the action on Wall Street. This group became known as the ‘Magnificent Seven’. In 2024, some of those seven names will fall behind. Today, the remaining resilient high flyers are — Nvidia, Amazon, MetaplatformsAnd Microsoft – are called by some the ‘Fab Four’.

This may not be the time to continue collecting those same few winners. After all, they have already made huge profits. Instead, three Motley Fool contributors think you might want to consider shaking things up with one such fallen angel Tesla (NASDAQ: TSLA)a newcomer like CrowdStrike (NASDAQ: CRWD)or even a lottery letter-like stock like Lemonade (NYSE:LMND).

AI could send beleaguered Tesla shares into overdrive

Will Healy (Tesla): One way to find affordable artificial intelligence (AI) stocks is to look for companies that have fallen out of favor for reasons other than their AI connections. Tesla fits that description. The company sold about 11% fewer electric vehicles (EVs) than it built in the first quarter, and rumors that it had canceled its plans for a cheaper Model 2 also weighed on the stock.

In fact, electric vehicle sales could continue to suffer in the short term. However, Tesla has recently made improvements to its AI-powered, fully self-driving platform, and CEO Elon Musk has announced that it will unveil its robotaxi on August 8. It was primarily on the prospects inherent in this robotaxi that Cathie Woods Ark Invest based its prediction that Tesla shares will reach $2,000 by 2027.

Ark Invest views Tesla as a robotics stock and believes the robotaxi will boost sales of Tesla vehicles as well as the software-as-a-service platform that powers the robotaxi. The investment management firm believes robotaxis will account for 67% of the company’s expected enterprise value by 2027. That would dramatically transform the company, as car sales would account for 85% of revenue by 2023.

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But since the target is a more than tenfold increase in the stock price by 2027, many investors are skeptical. However, it’s worth noting that in 2018, Ark Invest predicted that Tesla shares would reach $267 per share in 2021. That prediction at the time also assumed an almost tenfold increase – and became reality in the bull market of 2021. .

Even if Ark Invest’s optimistic forecast falls short, investors still have some support. After the recent sell-off, Tesla’s price-to-earnings ratio is around 40 – near a record low for the stock.

Ultimately, that valuation should rise, assuming a robust robotaxi platform will significantly increase sales and profits. Therefore, Tesla could experience a huge rebound as it itself makes its way back into investors’ portfolios.

CrowdStrike is on the cusp of great things

Jake Lerch (CrowdStrike): CrowdStrike is a leader in cybersecurity solutions – an area that is becoming increasingly important given the seemingly endless number of cyber attacks the world continues to witness. Take just one: the Change Healthcare hack, which crippled claims payments for tens of thousands of healthcare providers in recent weeks. Many organizations recognize the high costs associated with falling victim to such cyber attacks and are eager to strengthen their digital defenses.

CrowdStrike, whose software relies on machine learning to monitor client networks and identify suspicious networks before damage is done, is rapidly gaining new customers.

In its most recent fiscal quarter (ending January 31), CrowdStrike’s revenue rose 33% year over year to $845 million. Additionally, $796 million of that, or 94%, was subscription revenue. That’s important because subscription revenue is recurring, meaning it’s more predictable than traditional sales, which tend to have bigger ups and downs.

Furthermore, CrowdStrike is making an important transition in its life cycle: it is becoming profitable. The net result recently became positive for the first time. The company has generated $89 million in net profit over the past twelve months. In addition, free cash flow increased to $3.81 per share. That’s critical, as rising free cash flow per share is cited by many as the ultimate financial measure of success for a publicly traded company – and is often correlated with long-term stock price gains.

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CRWD Net Income (TTM) Chart

CRWD Net Income (TTM) Chart

In short, CrowdStrike is the best of both worlds. It is a young company with growing free cash flow that is transitioning to consistent profitability. It is also part of a secular growth trend, as more organizations upgrade and strengthen their cyber defenses in the face of increasing danger. For these reasons, it’s a stock worth considering.

Lemonade’s AI offers a new twist on insurance

Justin Pope (lemonade): Insurance is an age-old industry that is ripe for disruption. The incumbents – the giant insurance companies whose names you know, the ones making all the commercials with professional athletes, funny mascots and recognizable spokespeople – are using AI to analyze data. However, they still sell policies through an agent model, which has given Lemonade plenty of opportunity to break into the market. Lemonade uses AI chatbots to communicate with customers and process claims. These bots can complete tasks in just 90 seconds and get a claim paid in three minutes. You may find yourself on hold longer, waiting to speak with an agent at a traditional insurance company.

Lemonade’s first app experience convinced many customers. Customer numbers grew 12% year over year in the fourth quarter to more than 2 million, a growth rate that suggests some people are leaving other insurers for Lemonade. Its product line is not yet as fully developed as those of its longer-standing competitors, but customers can buy renters, homeowners, auto, pet and life insurance policies from it.

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Insurance companies make a profit when they pay out fewer total claims than customers pay in total premiums. Lemonade is not yet profitable. However, non-GAAP EBITDA losses in the fourth quarter were $29 million, a loss 44% smaller than the prior year period. Importantly, Lemonade has $945 million in cash on hand, and it generated positive cash flow in the second half of last year. That’s a good sign that it’s financially stable.

Lemonade is a risky investment right now; If the company wants to thrive, it still needs to continue to acquire customers and find a way to become profitable. However, more risk means more opportunity for higher rewards, and Lemonade, with a market cap of $1.2 billion, could be a portfolio changer if it can develop into a major player in the insurance industry.

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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jake Lerch has positions in Amazon, CrowdStrike, Nvidia and Tesla. Justin Pope has no position in any of the stocks mentioned. Will Healy holds positions in CrowdStrike. The Motley Fool holds positions in and recommends Amazon, CrowdStrike, Lemonade, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.

Forget the “Fab Four”: These 3 Artificial Intelligence (AI) Stocks Are Great Buys Today was originally published by The Motley Fool

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