While agricultural equipment manufacturer Deere (NYSE:DE) represents a vital cog in U.S. infrastructure, it may also be the most important artificial intelligence (AI) investment right now. Last year, the company introduced an AI-empowered fully-autonomous tractor that can positively disrupt the agricultural industry. Further, Deere offers exposure to practical AI-integrated applications while delivering on its core relevant business. I am bullish on DE stock.
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During a press conference at the 2022 edition of the Consumer Electronics Show, Deere revealed its autonomous tractor that stood ready for large-scale production. Leveraging the company’s 8R tractor series, the innovation incorporates a GPS guidance system and several advanced technologies. Further, it features six pairs of stereo cameras, enabling 360-degree obstacle detection and the calculation of distance.
Adding to the credibility of DE stock representing a new brand of AI investment, the autonomous tractor carries a deep neural network, analyzing each pixel in approximately 100 milliseconds for trajectory determination purposes. In other words, the tractor thinks on its own, achieving its objectives without damage to people, property, and living assets.
Aside from the innovation itself, what makes DE stock so compelling centers on implied viability. With pure-play AI stocks, the investment thesis focuses on the narrative. If the narrative pans out, stakeholders may enjoy incredible rewards. However, pure-play innovators tend to be wildly risky.
With DE stock, the underlying enterprise is already established. Therefore, even if the AI component fails, investors can always fall back on a proven business model.
Adding to DE’s bull case, on TipRanks, DE stock has a ‘Perfect 10’ Smart Score rating. This indicates strong potential for the stock to outperform the broader market.
DE Stock Marries the Innovative with the Practical
Primarily, the bullish thesis undergirding DE stock stems from the marriage of innovation with practicality. Too many times, innovators market their ware under the constraints of granular or esoteric ecosystems. As a result, it’s difficult to determine if the AI or machine learning protocol sparked the advertised improvement.
With Deere’s autonomous tractor, the proof is in the pudding. Either the tractor is autonomous and does what it’s supposed to do, or it doesn’t. No places to hide exist, which adds to the bullish thesis. Basically, because the tractor demonstrates its worth to any observer, it’s a much easier sell. Indeed, the tractor sells itself.
Moreover, Deere’s innovation represents a positive disrupter as opposed to a more common negative disrupter. As multiple reports from TipRanks revealed, layoffs in the tech space continue to accelerate. Many of these companies utilize AI protocols to enhance their various products and services. Nevertheless, the layoffs keep coming and coming, suggesting credibility concerns with the innovations themselves.
More critically, if tech firms tweak AI to finally meet desired outcomes, the invention can easily result in job losses. To be utterly blunt, AI protocols don’t ask for restroom breaks, ask for raises, or get pregnant. Cynically, upper management may prefer AI to real workers.
However, with DE stock, the underlying enterprise’s use of AI won’t spark social backlash. Why? Fewer people want to become farmers. Also, while Congress seeks to address this challenge through litigation, it’s better to let the robots take this one.
The Financials Favor Deere Investors
As mentioned earlier, DE stock levers the key advantage of levering AI atop an already relevant business. Thus, if autonomous tractors don’t work out for whatever reason, Deere investors have a fallback option. In contrast, the fallback really doesn’t exist for pure-play AI upstarts.
In fact, the proof rests in DE’s financials. Aside from a dip in 2020 due to the COVID-19 crisis, over the past five years, Deere enjoyed year-over-year revenue growth. For the fiscal year ended October 31, 2022, the company posted top-line sales of $51.85 billion. This tally represented a 19% lift from the previous year’s count of $43.58 billion.
Also, after dipping into negative territory in fiscal years 2018 and 2019, free cash flow turned positive in 2020. It remains positive as of the last earnings report (for the fiscal fourth quarter of 2022). Therefore, DE stock offers a trustworthy investment with some compelling AI protocols splashed in.
Is DE Stock a Buy, According to Analysts?
Turning to Wall Street, DE stock has a Moderate consensus rating based on 12 Buys, six Holds, and zero Sell ratings. The average DE stock price target is $482.89, implying 17.8% upside potential.
The Takeaway: DE Stock is an AI Play That Makes Sense
While AI and machine learning represent the hottest commodities in the market right now, for prospective investors, the underlying sector carries risks. Too often, both the innovation and the problems it seeks to address feature esoteric profiles.
With Deere, the opposite rings true. Fitting AI atop an already relevant product line, the innovation centers on the tangible rather than the intangible. For that reason, DE stock makes plenty of sense as a viable AI investment.
