Artificial intelligence (AI) applications are improving at a rapid rate. And one of the areas where they are making strides is in predicting the movements of stock prices. While far from perfect, AI is able to review news reports of companies and stocks, and make forecasts about the future direction of share prices based on whether the news is positive or negative. Increasingly, AI is able to identify positive and negative catalysts for stocks and point those out to users. Already, professional traders are seeking to capitalize on the predictive power of AI, integrating the technology into their complex trading algorithms. In time, AI’s ability to predict which stocks will rise and which will fall is expected to become first-rate. With that in mind, we look at the best under-the-radar stocks: three that AI predicts will soar in Q4.
General Motors (GM)
Artificial intelligence feels that the end of the current strike by the United Auto Workers (UAW) will be a big catalyst for General Motors (NYSE:GM) in this year’s fourth quarter. That, combined with just released Q3 financial results that were much better than expected, should help GM stock to rise sharply by year’s end. The automaker’s Q3 print did manage to beat Wall Street expectations despite the targeted strikes that continued at its U.S. manufacturing plants.
General Motors reported Q3 earnings per share (EPS) of $2.28 and revenue of $44.1 billion. Those results were much better than the EPS of $1.88 and revenue of $43.6 billion that Wall Street analysts had been looking for from the company. The fact that GM was able to post strong results in the midst of a strike is definitely a positive for the company and its stock. Still, the ongoing strike by the UAW remains a significant issue. The targeted strikes that began on Sept. 15 have led to thousands of GM workers walking off the job. GM pulled its forward guidance due to the strike.
However, there might be light at the end of the tunnel for the strike. Before announcing its Q3 earnings, General Motors published details of its latest offer to the union’s leadership team, including a wage increase of 23% over 4.5 years. Hopefully, the two sides are getting closer to a deal. GM stock is down 14% on the year and currently trading at a rock-bottom price-earnings ratio of only three.
AT&T (T)
Telecommunications firm AT&T (NYSE:T) is another AI pick that seems somewhat counterintuitive. After all, T stock has struggled for years and many analysts view the company as a value trap. Over the last five years, AT&T’s share price has declined 30%. Yet, AI sees recovery ahead due to a rebound in broadband revenue and a boost in wireless phone subscriptions. To be fair, AT&T did just report much better-than-expected Q3 financial results, suggesting a turnaround in the stock might be forthcoming.
For the July through September quarter, AT&T reported results that trounced Wall Street estimates and raised both its forward guidance and its target for free cash flow for the remainder of 2023. The company reported EPS of 64 cents, which was ahead of forecasts of 62 cents. Revenue in Q3 rose 1% from a year earlier to $30.40 billion. Analysts had forecast revenue of $30.20 billion. Looking forward, AT&T said it anticipates free cash flow of $16.5 billion. Previous guidance called for free cash flow of $16 billion.
The company also reported its broadband revenue should grow 7% or better this year. And, AT&T announced net additions of wireless postpaid phone subscribers in Q3 totaled 468,000, and net adds for consumer wireline fiber optic service totaled 296,000. Both numbers beat Wall Street expectations. T stock is down 19% year to date, but the share price has increased about 7% since the Q3 results were made public.
Peloton (PTON)
It’s been a minute since internet-connected fitness company Peloton (NASDAQ:PTON) was a fast-rising stock. But AI thinks PTON stock has room to run after its recently announced deal with Lululemon Athletica (NASDAQ:LULU). Indeed, Peloton’s share price jumped 15% higher immediately after news broke that the maker of fitness bikes and treadmills struck a five-year partnership deal with Lululemon. Under the terms of the partnership, Peloton becomes the exclusive provider of digital fitness content to Lululemon, an athletic apparel maker known for its yoga pants.
Lululemon is now Peloton’s primary apparel partner and agreed to stop selling its Studio Mirror fitness device by the end of this year — a competitor of Peloton’s internet-connected stationary bikes and treadmills. Lululemon will also discontinue its digital app-only membership tier as part of the arrangement with Peloton. In time, Peloton will develop all content for Lululemon Studio, which, like Peloton, offers pre-recorded online fitness classes to members. Analysts have praised the partnership, noting that Peloton has neutralized a direct competitor and is likely to profit from the sale of its fitness content with Lululemon. AI likes the deal too.
PTON stock is down 43% on the year but is up 5% in the last month.
On the date of publication, Joel Baglole did not hold (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.
