The technology rally could continue strong going into the new year, but don’t expect the Magnificent Seven stocks to keep leading the pack as the artificial intelligence (AI) tailwind spreads. AI stands to benefit more than just mega-cap tech, and in this piece, we’ll look at three stocks with AI upside and the enviable “Strong Buy” rating from the Wall Street crowd.
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Let’s use TipRanks’ Comparison Tool to check out two web-development firms (WIX and GDDY) with skin in the e-commerce game and a cybersecurity innovator (CRWD) whose businesses have plenty to gain from the rise of generative and predictive AI technologies.
CrowdStrike (NASDAQ:CRWD)
CrowdStrike is one of the first names that should come to mind when investors hear of cybersecurity stocks. Indeed, CRWD stock is one of the largest holdings, if not the largest, of most cybersecurity ETFs, like the iShares Cybersecurity and Tech ETF (NYSEARCA:IHAK). Shares have been in recovery mode this year, rising over 129% year-to-date. The impressive comeback puts the stock just 16% or so away from new highs.
I found it quite surprising to see shares shed two-thirds of their value from peak to trough between 2021 and 2022. Though 2022 was most unkind to high-growth tech stocks, CrowdStrike still stood out as a more defensive way to play disruptive innovation, given that security software does not seem like a wise place to cut costs due to the pervasiveness of high-profile cyberattacks and the sheer magnitude of what’s at stake for firms. Given the long-term secular tailwinds to be had, I’m staying bullish on CRWD.
Looking back, it’s clear that Mr. Market made a mistake by punishing CRWD stock as much as it did, considering the explosiveness of this year’s rebound. The recent Q3 beat and raise ($0.82 adjusted profit on $786 million revenue vs. the $0.74 on $777 million analyst expectation) was every bit as impressive as the ensuing rally suggested. The 34% rise in subscription revenues also goes to show how quickly the firm can land on its feet after a period of macro stagnation.
For the year ahead, I’d look for the firm to keep making higher highs as it looks to innovate on the front of AI. Many enterprises rely on CrowdStrike’s innovative software to protect them from cyber threats. However, neither CrowdStrike nor its peers can afford to grow complacent. Cyber threats are constantly getting smarter and potentially more dangerous with time.
With the rise of AI, the defenders (cybersecurity firms) will need to outdo attackers in such an arena to stay ahead. The company’s Charlotte AI, a generative AI for security analysis, is particularly intriguing and could help bring the level of protection to the next level.
What’s the Price Target of CRWD Stock?
CrowdStrike’s a Strong Buy, according to analysts, with 35 Buys and two Holds assigned in the past three months. The average CRWD stock price target of $234.78 entails 0.93% downside. Clearly, some price target upgrades are in order as analysts catch up with the recent run. And they have been steadily flowing in over the past few days.
Wix.com (NASDAQ:WIX)
Wix is behind the easy-to-use site builder that goes by the same name. The stock has been on a very choppy recovery since bottoming out in June 2022, plunging by over 20% on multiple occasions over the past year. Though the rally off lows has been flat relative to the steep 2021-22 crash, I view plenty of catalysts that could help keep the run going strong into the new year and beyond. Things are looking up for Wix following its solid Q3 number, guidance boost, and possibilities with generative AI.
What’s most intriguing about Wix is its new conversational AI, which can create a tailored site based off of a chat. Indeed, the barriers to web development seem to be falling by the day. With the rise of AI, Wix may be able to put more power in its user’s hands. And with that, the firm seems to be a pretty under-the-radar tech company that could stand to monetize AI in a way similar to the so-called Magnificent Seven.
Indeed, pretty impressive capabilities underneath the hood of the $5.8 billion mid-cap innovator. Whether its take on site-creating generative AI reigns supreme in the long run, though, remains to be seen.
What’s the Price Target of Wix Stock?
Wix is a Strong Buy, according to analysts, with 15 unanimous Buy ratings assigned in the past three months. The average WIX stock price target of $122.00 implies 20.2% upside.
GoDaddy (NASDAQ:GDDY)
GoDaddy is another player in the web development scene. The domain registrar and web hosting businesses are what the firm may be best known for. However, its web builder and the generative AI opportunity may be the reason to pick up the stock.
The stock recently gained nearly 40% since its October lows on the back of a solid round of third-quarter results. Looking into the new year, margins and sales growth could trend higher again, especially as the economy moves toward some sort of normalization. Even if it doesn’t, GoDaddy is in a spot to profit a great deal from its AI efforts. For now, I’m bullish on the stock.
In fact, two notable analysts — RBC Capital and Citi — recently brought up AI in their recent notes. Over at Citi, Ygal Arounian hiked the price target to $125 from $95, following the firm’s unveiling of Airo, GoDaddy’s generative-AI-based web builders. Indeed, Airo is the answer to Wix’s own AI-driven web builder and could help GoDaddy level up its web builder business.
RBC’s Brad Erickson hiked his target to $124 from $90, noting the benefits of “a dash of AI.” GoDaddy is very much an AI stock and one that many may be overlooked as the Magnificent Seven hogs the headlines.
What’s the Price Target of GoDaddy Stock?
GoDaddy is a Strong Buy, with eight Buys and two Holds given by analysts in the past three months. The average GDDY stock price target of $104.88 entails 4.8% upside from current levels.
The Takeaway
It’s hard to believe, but some generative AI could benefit the broader tech scene as a whole. In this piece, we outlined three tech companies that have a great deal to gain as AI continues to advance over the coming years.
Indeed, ChatGPT is just the start of a wave of innovation that may act as the tide that lifts many boats in the tech sector. Of the trio presented in this piece, analysts expect the most gains from WIX stock (20%) for the year ahead.
