We recently compiled a list of the 10 Most Popular AI Penny Stocks Under $1. In this article, we are going to take a look at where LivePerson, Inc. (NASDAQ:LPSN) stands against the other popular AI penny stocks.
Into the AI Market:
The stock market is rapidly catching on to the apparent artificial intelligence trend during the last year or two. Many businesses are incorporating Artificial Intelligence technologies into their core business models to save costs, improve performance, and flourish in both current markets and emerging ones. Once, venture entrepreneur Marc Andreessen observed that “software is eating the world” by automating entire industries. It is anticipated that artificial intelligence will similarly change software. According to recent research by MIT, the United States is unequally adopting artificial intelligence, with the majority of its application occurring in big businesses and sectors like manufacturing and healthcare.
As per Grand View Research, the global artificial intelligence industry was estimated to be worth $196.63 billion in 2023, and it is predicted to grow at a CAGR of 36.6% between 2024 and 2030.
OpenAI, a private AI startup, has rapidly evolved into a prominent player in this booming market, with its valuation tripling to almost $80 billion in less than ten months following an agreement with Thrive Capital. The AI startup is recognized globally for its cutting-edge AI models, such as ChatGPT, which received a significant 1.806 billion visits in April 2024 as per SimilarWeb, DALL-E, an image-generating model, and Whisper AI for speech recognition. To lead the way in AI technology, OpenAI unveiled GPT-4o, a new AI model, in May 2024. It can engage with text and graphics and have realistic voice conversations. Macquarie’s Fred Havemeyer commended GPT-4o for its “emotional intelligence.” OpenAI’s approach to the AI revolution is unique because it collaborates with tech titans rather than competing against them. OpenAI represents a generation of AI companies linked with the giants due to the computer capacity as well as the massive financing necessary to advance artificial intelligence learning. According to CNBC Disruptor 50 companies, artificial intelligence plays a crucial role in over half of their revenue, with 34 of them describing AI as critically important to more than half of their revenue. 13 companies claimed that generative AI, specifically, is key to the majority of sales. Chairman of Sinovation Ventures, Kai-Fu Lee, expressed his belief that OpenAI would soar to the exceptional heights that a few mega-cap businesses with solid business models can achieve. “OpenAI will likely be a trillion-dollar company in the not-too-distant future.” ”This is by far the most advanced and most amazing technology, compared to anything, by a factor of 10,” Lee stated.
Methodology:
In this article, we first used a stock screener, Finviz, to list down all AI stocks trading under $1 (as of the writing of this article) with a high average trading volume of 500k to 10M. From the resultant dataset, we chose 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 920 hedge funds in Q1 2024 to gauge hedge fund sentiment for stocks. We have used the stock’s Revenue Growth Rate (year-over-year) as a tie-breaker in case two or more stocks have the same number of hedge funds invested.
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 close-up of a mobile device with a conversation in progress.
LivePerson, Inc. (NASDAQ:LPSN)
Number of Hedge Fund Investors: 11
On May 8, LivePerson, Inc.’s first-quarter results saw a 20.9% drop in total revenue to $85.1 million from $107.66 million in the same period the previous year, mostly due to the loss of clients and the closure of non-core business lines, as claimed by the company. The revenue growth rate has also decreased -21.91% year over year to $401.98 million in 2023. The stock closed at $0.70 per share on June 6, 2024. Although in the past month, the stock percentage return has surged up 19%, it has decreased more than 80% over the past year.
Artisan Small Cap Fund, in its Q4 2021 investor letter, mentioned LivePerson, Inc. (NASDAQ:LPSN) and discussed its stance on the firm.
Here is what Artisan Small Cap Fund has to say about LivePerson, Inc. in its Q4 2021 investor letter:
“LivePerson is a leading provider of mobile and online messaging solutions. We believe customer service and sales centers are shifting from voice to digital communications, and LivePerson is well equipped to lead this shift. Its LiveEngage cloud-based platform allows brands to engage with customers across digital channels at scale, more efficiently and more effectively. The market opportunity is substantial and goes well beyond digital conversations in service contexts and into areas such as sales, marketing and possibly social media monitoring. A key part of our thesis when we began our investment campaign in 2018 was the arrival of Alex Spinelli as the company’s CTO. Mr. Spinelli came from Amazon, where he was one of the architects and leaders of Alexa. In addition, Mr. Spinelli brought several well-respected technologists to LivePerson with him. Unfortunately, Mr. Spinelli announced his departure from LivePerson in Q3. In addition to this development, our profit cycle thesis has been stalled as the company makes a round of investments into its sales force which will weigh on margins over the near term. We believe Mr. Spinelli’s replacement, Andrew Hamel, carries the credentials to continue leading LivePerson’s technology efforts. Mr. Spinelli worked for Mr. Hamel at Amazon, and the investments in the sales force have the potential to allow the company to scale its business more rapidly. Still, we are in a holding pattern until we gain conviction that the profit cycle we originally invested in can continue to flourish with these changes.”
Of the 920 funds in Insider Monkey’s database, 11 hedge funds had stakes in LivePerson, Inc. (NASDAQ:LPSN). Cynthia Paul’s Lynrock Lake is the largest stakeholder in the company, with 145.96 million shares worth $60.21 million.
Revenue growth dropped in this quarter and prior year, with a declining EPS suggesting that the company is currently unprofitable. Investing in such a stock involves higher risk, but the company may still have room to develop given the unexpected surge over the past month. A forward P/E ratio of 19.30 reveals that investors are willing to pay for the company’s estimated future earnings because they believe the company is underearning now and will probably rise back up. Overall, its average volume is 3.61M with 11 hedge funds invested in this stock which makes it one of the Most Popular AI Penny Stocks Under $1.
Overall LPSN ranks 2nd on our list of the most popular AI penny stocks under $1. You can visit 10 Most Popular AI Penny Stocks Under $1 to see the other popular AI penny stocks that are on hedge funds’ radar. While we acknowledge the potential of LPSN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LPSN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
Disclosure: None. This article is originally published at Insider Monkey.