We recently compiled a list of the 12 Best Artificial Intelligence Stocks Under $50 According to Analysts. In this article, we are going to take a look at where Samsara Inc. (NYSE:IOT) stands against the other AI stocks under $50.
Franklin Mutual’s Katrina Dudley appeared on CNBC on December 31 to discuss whether the sectors that powered the market’s gains in 2024 will continue to lead the way in 2025, particularly AI within the tech and communications sectors. Companies in these sectors, especially the MAG7 stocks, have experienced remarkable performance over the past year. She pointed out that alongside traditional tech stocks, companies providing essential infrastructure are crucial for supporting the rapid expansion of AI technologies. She expressed strong optimism about AI’s continued influence, stating that it represents a secular theme likely to propel the tech sector forward in the coming year.
When addressing concerns about market valuations, Dudley reiterated that high valuations, such as the S&P 500 trading at ~22 times earnings, should not deter investors. Instead, she argued that these valuations reflect robust earnings growth among technology companies, distinguishing this phase from past market bubbles. The network effects inherent in AI-driven companies contribute to their returns, suggesting that if these firms can exceed earnings expectations, their valuations could become more favorable over time. However, she cautioned that consistent performance is critical. Any failure to deliver on earnings growth could pose risks in a high-valuation environment.
Turning her attention to lagging sectors, Dudley discussed healthcare as an area ripe for AI-driven transformation. She noted that while healthcare has significant upside potential due to demographic trends, some healthcare service providers faced challenges in 2024 due to rising costs and consumer pushback against high pricing. The increased focus on transparency in healthcare pricing may benefit consumers but could complicate profitability for companies. She suggested that advancements in AI technology are enhancing productivity within pharmaceutical research and development. Although immediate benefits may not be visible, she believes that AI’s long-term impact on productivity will make healthcare an increasingly attractive sector for investment.
Dudley’s insights underscore the transformative potential of AI across both tech and healthcare sectors.
Methodology
We first sifted through internet lists to compile a list of the top AI stocks under $50. We then selected the 12 stocks with high analysts’ upside potential and that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of analysts’ upside potential (at least 10%), as of January 2. We’ve also added the hedge fund sentiment for each stock which was sourced from Insider Monkey’s database.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A data analyst wearing virtual reality goggles while analyzing on-board telematics.
Samsara Inc. (NYSE:IOT)
Share Price as of January 5: $45.91
Average Upside Potential as of January 5: 20.89%
Number of Hedge Fund Holders: 30
Samsara Inc. (NYSE:IOT) provides Connected Operations Cloud solutions that use AI and IoT to empower businesses in transportation, construction, and logistics for enhanced efficiency and safety. By connecting physical assets to the cloud, it collects and analyzes real-time data and enables data-driven decisions and predictive insights to optimize operations.
The company’s AI-driven platform delivers significant ROI (return on investment) for customers, with an average estimated savings of $2 million per customer per year, translating to over 8x ROI. This includes reduced insurance costs, improved fuel efficiency, and enhanced worker safety. The company’s ARR surged 35% year-over-year to reach $1.35 billion, driven by increased new customers, with 170+ companies joining the company with an ARR exceeding $100,000.
Furthermore, Samsara Inc. (NYSE:IOT) has introduced Samsara Intelligence, a new suite of AI offerings. This includes tools such as Samsara Assistant, which provides real-time insights and guidance, and Intelligent Experiences, which seamlessly integrates AI recommendations directly within the platform. This AI is built upon a massive dataset exceeding 10 trillion data points annually. This allows the company to develop sophisticated AI models that address varying challenges faced by businesses.
It uses AI to analyze massive datasets from connected devices, enabling customers to optimize operations, making it a compelling investment opportunity. For this reason, Baron Fifth Avenue Growth Fund stated the following regarding Samsara Inc. (NYSE:IOT) in its Q3 2024 investor letter:
“Lastly, we initiated a position in Samsara Inc. (NYSE:IOT), which provides a cloud software platform for commercial vehicle telematics, video-based driver safety, driver workflow automation, and industrial equipment monitoring. Its software collects and analyzes data from sensors and cameras installed in its customers’ commercial trucks, construction equipment, warehouses, and other assets, helping companies visualize and improve the state of their operations. More than 17,500 customers in the transportation, field services, construction, utilities, and other industries have adopted Samsara, and last year the company became one of the fastest software companies ever to reach $1 billion in annual recurring revenue (ARR).
Samsara has been winning share from competitors in the $51 billion connected fleet software market due to its superior cloud native architecture, ability to address multiple use cases in a single platform, and its rapid product release cycle. Importantly, as Samsara continues to expand its connected asset base, it is building an unmatched data asset that it is using to drive better outcomes for its customers relative to competitors. Capturing more than 10 trillion data points from over 70 billion miles driven, Samsara uses AI to help companies optimize their vehicle routes, prevent accidents, improve asset utilization, reduce fuel expenses, and lower insurance premiums. In 2023, across its customer base, the company prevented 200,000 accidents and reduced carbon emissions by 2.3 billion pounds. Seeing a fast and tangible return on investment, customers have renewed and expanded their Samsara subscriptions at a healthy rate.
We see a long runway for growth as Samsara expands in existing accounts and wins new logos. Samsara is less than 50% penetrated in its existing customers’ vehicle fleets and has a significant opportunity to cross-sell newer non-vehicle products into its base. As it has scaled, Samsara has delivered healthy operating leverage, and we think free cash flow can expand to more than 20% longer term.”
Overall IOT ranks 5th on our list of the best AI stocks under $50 according to analysts. While we acknowledge the potential of IOT as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than IOT 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.
