The Russell 2000, an index tracking the performance of small-to-mid cap companies, has not had a good year in terms of relative performance. So far, the Russell returned about 8.6%, while the S&P500 and Nasdaq have appreciated 20.4% and 37.9%, respectively. With inflation clearly edging downward, U.S. equities have entered a rally period, and now may be a time for investors to begin allocating to new and innovative stocks.
Without further ado, below are three innovative Russell 2000 stocks for investors to watch in 2024.
C3.ai (AI)
C3.ai (NYSE:AI) provides an application development and runtime environment, dubbed the ‘C3 AI Platform’, to provide enterprises with the tools to develop and deploy their own AI applications. The company also provides turnkey AI application solutions to serve clients in a variety of industries. There has been a lot of hype around artificial intelligence, and C3’s shares have certainly benefitted as a result. Not to mention, the company’s strategic change to focusing on AI applications could not have come at a better time.
Despite decisive gains in share price appreciation, the enterprise software company has definitely hit some strong moments of volatility as equities investors scrutinize the company’s pathway to improved profitability.
In their Q2 FY’2024 earnings report released last week, in fiscal year 2021, C3.ai’s revenue and earnings came in lower than what Wall Street analysts had estimated. Moreover, C3.ai pushed back its timeline to reach adjusted profitability due to the company wanting to prioritize investments into its platform and shifting its pricing model to a consumption-based one. While this may have short term pressure on margins, in the long run, these shifts in C3.ai’s business model could pay off significantly for the company and its Investors.
Onto Innovation (ONTO)
The semiconductor space impacts many aspects of modern life, from powering our consumer electronics devices to the vehicles we drive. Less understood is how these small devices are made – what kinds of equipment are used and why they are important. Onto Innovation (NYSE:ONTO) designs and manufactures metrology and inspection tools for the semiconductor industry.
As the semiconductor space has increased in importance and size, semiconductor equipment manufacturers, such as Onto, have been able to capitalize on this new demand and boost revenue figures. Over the past four years, Onto Innovation has managed to deliver double-digit revenue growth. While the chip slump has begun to eat into growth in 2023, the company still has amazing prospects, especially as the chip slump comes to an end. Shares have catapulted 112% since the start of the year.
Duolingo (DUOL)
If you have ever attempted to learn a language before, chances are you have heard of this final entry. Duolingo (NASDAQ:DUOL) is a digital platform offering courses in more than 40 different languages, including Spanish, English, French, German, Italian, Portuguese, Japanese, and Chinese primarily through its Duolingo app. The company also provides a digital language proficiency assessment exam.
While the company has exhibited robust, double-digit revenue growth figures in the last few years, the Duolingo’s management announced a strategic shift in its product. Instead of just offering language-learning, Duolingo wants to become a multi-subject product, offering mathematics and music on top of language subjects. Given the popularity of the platform, which had 83.1 million monthly active users at the end of September (a 47% Y/Y increase), Duolingo could certainly benefit from expanding its current subject portfolio.
Shares have skyrocketed 203% on a year-to-date basis.
On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
