It's May, and we're quickly approaching the halfway point of this year. Artificial intelligence (AI) remains a hot topic, but increased volatility has cooled some stocks. A famous Wall Street adage is “Sell in May and disappear.”.”
But that's not the case with me. In fact, some attractive AI stocks are ripe for selection. You just need to know where to look.
Here are the top three AI stocks investors should consider getting the scoop on this month.
1. Salesforce
They say seeing is believing.This is a beautiful graph to explain about enterprise software companies sales force (CRM 0.31%):
The software provider has significantly improved its operating margins and free cash flow generation over the past few years, and the stock is poised for first-quarter earnings in the coming weeks.
Salesforce is best known for its flagship customer relationship management (CRM) service, but through innovation and acquisition, the company has also built an ecosystem that helps companies track and strategize their customers, sales, operations, and marketing. Now you have a one-stop shop for your needs. Employee collaboration.
The company announced Einstein AI, a generative AI assistant that helps users get the most out of its product ecosystem.
Salesforce trades at a high but understandable multiple of 28 times forward earnings. This is a very high price tag, but one that is justified by the company's improving cash flow and profit margins.
Analysts expect the company to grow earnings by more than 17% per year on average over the next few years, making 28 times forward earnings a fair price for a proven winner.
Management began stock buybacks to reduce the number of shares and boost profit growth. I expect this to continue as cash flow grows, and the current share price to be at a high level that investors can rely on to get a reasonable price.
2.UiPath
When most people hear the phrase “AI will replace humans,” they think of robots in movies. The reality is likely to be more software-based.it is UiPath's (path 3.02%) Specialization as an expert in robotic process automation (RPA), where software learns to perform repetitive computer tasks on behalf of humans.
The financial benefits of RPA are clear for businesses. Software bots require no breaks or allowances and are less prone to mistakes.
Nearly 11,000 customers currently use UiPath. In many cases, it started with small trials and evolved into full-scale implementations when the software proved useful. That's the secret behind the company's strong dollar net revenue retention rate of 119%.
You'll see your business grow enough that your cash flow will skyrocket and your bottom line will start to follow suit. Analysts expect UiPath's annual earnings growth to average 22% over the next three to five years. The stock is currently trading at 34x forward earnings, making UiPath a potential bargain for long-term investors.
3. Super microcomputer
Over the past year, this stock has become a sensation and soared as people picked it. super microcomputer (SMCI -1.97%) To provide turnkey server systems for AI applications. The ride was unstable at times. The current stock price is $800, but over the past year the stock has traded as high as $1,200 and as low as $130. So what should we make of this vast scope? Pay attention to the basics.
Fortunately for bullish investors, supermicrocomputers are growing like weeds. Revenue growth in the AI era has accelerated to triple digits. Management believes this is due to AI tailwinds and customers overwhelmingly choosing Super Micro Computers over competitors, driving growth that outpaces the industry.
The numbers show that the stock is currently a very good buy. Analysts expect earnings to grow at a compound annual rate of 52% over the next few years, but the stock currently trades at a forward P/E ratio of “only” 35. If these growth numbers prove accurate, the stock could be a mind-boggling bargain in hindsight.
Remember, volatility is rampant with this stock. It recently fell nearly 20% as the company chose not to pre-announce its earnings. Investors who are bullish on supermicrocomputers may want to take a cautious approach and buy the stock slowly to avoid getting caught up in the noise. Otherwise, this stock looks ripe for value-focused growth investors.
Justin Pope has no position in any stocks mentioned. The Motley Fool has a position in and recommends Salesforce and his UiPath. The Motley Fool has a disclosure policy.