We recently published a list of 12 AI Stocks on Wall Street’s Radar Today. In this article, we are going to take a look at where Confluent, Inc. (NASDAQ:CFLT) stands against other AI stocks that are on Wall Street’s radar today.
According to a new L.E.K. Consulting report, investor sentiment today heavily ties a company’s enterprise value to how well they develop and execute their artificial intelligence (AI) strategies for growth. The report reveals that a company that executes its AI transformation well can expect a valuation gain of up to 19%.
On the contrary, a poor, or poorly executed, AI transformation can lead to a 9% loss of value. This is according to an L.E.K. analysis based on S&P 500 profit and loss data and results of an L.E.K. survey of executives. It is to be noted that the 28% change is the average shift in a company’s value due to its use of AI, while the impact could be even bigger for some.
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“The old ways of delivering on strategy and innovation will no longer satisfy investor expectations because AI advancements have raised the bar on what’s possible. AI strategies require targeted investment and careful implementation. Doing it right will lead to growth. But if a company swings and misses with AI, fails to swing enough or swings too much — or not at all — the value destruction could be significant.”
-L.E.K. Managing Director and Head of the Digital Transformation practice Darren Perry.
The key, however, lies in implementing a framework with which companies can bridge the AI gap toward success. They can do this by creating and implementing an AI transformation strategy that builds value.
“Winning companies will strategically deploy AI across all potential value-creation levers. In our experience, too many companies are just focusing on AI’s potential related to productivity gains. To maximize upside potential — and ultimately avoid value erosion — leaders must plan and execute AI holistically so the strategy encompasses performance, competition and unique opportunities.”
-Darren Perry.
According to the report, companies must discover their true differentiators and use AI to augment them further. For instance, Shopify used AI-powered features to enhance the product exploration experience for merchants and customers. As a result, the company saw a 15% jump in sales.
Likewise, AI can help companies find new revenue streams by synthesizing data to create new insights, develop new business models to monetize data and even lead to unique opportunities.
For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds. The hedge fund data is as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A team of consultants in suits, discussing the importance of stream governance for real-time data.
Confluent, Inc. (NASDAQ:CFLT)
Number of Hedge Fund Holders: 49
Confluent, Inc. (NASDAQ:CFLT) operates a data streaming platform in the United States and internationally that allows organizations to continuously stream, connect, process, and manage data in real-time across various systems. On March 10, Citizens JMP analyst Patrick Walravens reiterated a “Market Outperform” rating and $40.00 price target on the stock. The firm believes that Confluent is poised to tap into a significant total addressable market, anticipated to reach $100 billion by 2025.
The company’s partnership with Databricks is particularly notable as it is expected to open up additional sales avenues in the AI sector. Its recent developments like Tableflow, a major component of the Databricks collaboration, and bring your own cloud (BYOC) product, reflect on its innovation capabilities. The firm is also optimistic about Confluent’s management team led by CEO Jay Kreps. All of these factors contribute to a positive outlook for the stock.
Overall, CFLT ranks 9th on our list of AI stocks that are on Wall Street’s radar today. While we acknowledge the potential of CFLT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CFLT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
