CVO:CC - Beyond Automation: Discovering the Hidden Gems in AI Stocks
2023-06-15 14:00:00 ET
Artificial intelligence (AI) is the next frontier, whether people find it beneficial or a threat. This fastest-growing technology sector has applications in business across various sectors. It can perform functions such as planning and problem-solving with human intervention.
Investors keenly watch companies that can benefit from the industry’s blockbuster growth. The TSX has hidden gems like Docebo ( TSX:DCBO ) and Coveo Solutions Inc. ( TSX:CVO ), whose businesses provide AI and machine learning solutions. Both growth stocks have real potential to deliver colossal returns.
New disruptive innovation engine
Docebo has a solid start to 2023, as evidenced by the impressive first-quarter results. In the three months that ended March 31, 2023, total revenue and subscription revenue increased 29.3% and 33.4% year over year to US$41.4 million and US$38.8 million, respectively. Net income reached US$1.2 million compared to the US$6.9 million net loss in Q1 2022.
This $1.8 billion company from Toronto boasts an AI-powered learning platform and operates in North America, Europe, and Asia-Pacific. Docebo’s Learning Management System (LMS) trains internal and external workforces, partners, and customers.
Claudio Erba, Docebo’s Founder and CEO, said, “We are pleased to report strong revenue growth and improved profitability in Q1. While the macro environment may present challenges throughout the year, we are confident in our ability to capitalize on opportunities that provide sustainable, balanced growth over the long term.”
Notably, annual recurring revenue (ARR) rose 28% to US$164.9 million versus the same quarter last year. The highlight during the quarter was the new customer wins from around the globe. At the quarter’s end, the customer count is 3,506, an 18.9% growth from a year ago.
Management has a new growth driver following the acquisition of Edugo.AI., a generative AI-based learning technology provider. With this latest acquisition, Docebo enhanced its existing AI capabilities while adding new capabilities. It can now offer advanced Large Language Models (LLM) and algorithms to optimize learning paths and adapt to individual learner needs.
Erba said, “By integrating Edugo’s proprietary LearnChain technology and extensive engineering expertise into our solutions and product development organization, we are adding to the disruptive innovation engine.”
Docebo’s overall return in five years is a decent 213.4% (a 36.4% compound annual growth rate). If you invest today, the share price is $50.15 (+12.1 year to date). Market analysts have a 12-month average price target of $69.43 (+38.4%).
Market-leading AI platform
Coveo Solutions is worth adding to your watchlist following stellar revenue growth in 2022 and a vastly improving operating loss. This $879.3 million Quebec-based firm provides applied artificial intelligence (AI) solutions and has a cloud-native, multi-tenant software-as-a-service (SaaS) platform.
Management has strategic relationships with Salesforce , Adobe , and SAP . In fiscal 2023 (12 months ending March 31, 2023), total revenue and SaaS subscription revenue rose 14% and 17% year over year to US$29.1 million and $27.1 million, respectively. The net loss of US$7.2 million was 22.4% lower than in fiscal 2022.
Coveo is accelerating the path to profitability and continues to experience breakthroughs in large language models and applied AI. Its Relevance Cloud platform is a market-leading AI platform. The tech stock trades at $8.32 per share (-8.4% year to date).
Safer choices
The outlook for AI and its subset, machine learning, is bright. However, the rapidly changing and continued advancements in technology are potential risks. Docebo and Coveo are safer choices for their market-leading AI platforms.
The post Beyond Automation: Discovering the Hidden Gems in AI Stocks appeared first on The Motley Fool Canada .
Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Adobe, Docebo, and Salesforce. The Motley Fool has a disclosure policy .
2023