While artificial intelligence represents one of the hottest ticket items out there, the reality is that many if not most AI stocks are overvalued. However, digital intelligence doesn’t have to come at a premium price.
Just like anything else, if you look around, you can find more attractive deals. Granted, by walking the path less traveled, you will incur higher risk. That’s just due to the lack of predictability tied to moving away from groupthink.
Still, if you want tremendous deals, you can’t get them by buying into whatever the crowd is selling. No, you’ve got to walk a lonelier path. If you’re up to the challenge, these are the less-appreciated AI stocks to consider.
IBM (IBM)
As the vanguard of myriad digital innovations, IBM (NYSE:IBM) is one of the underappreciated AI stocks to buy. Sure, the legacy tech juggernaut doesn’t have the pizzazz of most of its peers. However, we’re talking about an enterprise that consistently gets the job done. It is profitable, featuring a net margin of 13.18%. Its return on equity (ROE) also stands at 36.3%, above 93.25% of the competition.
For the current fiscal year, covering experts anticipate earnings per share to land at $9.93. That’s up from last year’s result of $9.62. Also, the most optimistic target calls for earnings of $10.32, a significant improvement. On the top line, they’re targeting $63 billion on average, with a high-side view of $63.44 billion. In 2023, IBM rang up $61.86 billion in sales.
Looking ahead to fiscal 2025, consensus revenue calls for $65.84 billion while the blue-sky target aims at $67.46 billion. Right now, shares tread at 2.45X trailing-year revenue, which is near the median value of 2.27X. For forward earnings, IBM trades at only 16.44X. Given the anticipated expansion in both the top and bottom lines, IBM ranks among the AI stocks to buy.
Duos Technologies (DUOT)
Focused on the software application field, Duos Technologies (NASDAQ:DUOT) designs, develops, deploys and operates intelligent technology solutions. Its main product is Centraco, an enterprise information management software platform that consolidates data and events from multiple sources into a unified and distributive user interface. Duos has the potential to bring tremendous efficiencies to enterprises, making it one of the more enticing AI stocks.
Financially, Duos isn’t the most stable enterprise out there. So, much of the bullish case centers on its forward-looking narrative. That said, analysts believe that the company can post sales of $16.2 million by the end of this year. If so, that would represent a 116.8% increase from last year’s haul of $7.47 million.
What’s more, in fiscal 2025, revenue could reach $25 million. That would be up 54.3% from projected 2024 sales. Also, the most optimistic target calls for revenue of $30 million.
Trading at 2.98X trailing-year revenue, DUOT isn’t exactly undervalued. However, when priced against 2024 sales (and especially 2025 sales), the aforementioned multiple gets more attractive. Getting there is no guarantee. But if you believe the trajectory, DUOT is one of the AI stocks to consider.
Cerence (CRNC)
Also falling under the software application field, Cerence (NASDAQ:CRNC) provides AI-powered virtual assistants for the mobility and transportation markets. Per its corporate profile, Cerence offers edge software components, cloud-connected components, virtual assistant coexistence and professional services. It also provides conversational AI-based solutions, such as speech recognition and natural language processing.
As with other speculative AI stocks, investors must ignore the work-in-progress type of financial profile. This is another idea where narrative plays a big role. Still, the storyline is an attractive one. For fiscal 2024, analysts anticipate EPS to hit $1.35. That’s well above last year’s result of 36 cents.
On the top line, experts see sales flying up to $359.96 million. If so, we’re talking about a 22.2% growth rate from the prior year’s tally of $294.5 million. Also, the high-side estimate calls for revenue of $379.3 million.
CRNC is already undervalued, trading at 1.13X trailing-year sales. However, with such robust growth projected, Cerence is potentially an even better deal. It’s one of the AI stocks to gamble on.
On the date of publication, Josh Enomoto 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.
