JP Morgan: 5 top stocks for the AI explosion

JP Morgan’s research team has published an investor report revealing its top AI stock picks, shows CNBC. These are 5 of the firm’s ‘buy-rated’ stocks that should profit from the huge growth in AI. “We are at a pivotal point for its adoption today due to the availability of big data, high-powered computing and advances in algorithms – which all make AI cheaper and faster to implement,” states JP Morgan analyst Stacy Pollard. She calculates that the AI-related hardware, software and services market could hit $58 billion by 2021 from just $12 billion this year.

Here we take a closer look at these five stock ideas- and the analyst consensus outlook on TipRanks. The TipRanks screenshots below also reveal the range and average of analyst price targets on each stock, and whether this translates into upside potential from the current share price. By gauging the Street’s take on a stock, investors can get a better idea of which stocks represent the most compelling investing opportunities right now.

Now let’s begin with one of the Street’s most bullish stocks- Twilio Inc:

1. Twilio Inc (NYSE:TWLO)

Cloud communications app maker Twilio has impressive Speech Recognition capabilities. This “enables users to convert speech to text and analyze intent during any voice call” notes JP Morgan. The firm adds that “Twilio’s Automated Speech Recognition uses Google’s Cloud Speech API, which supports various languages.”

As we can see below, Twilio sports a Strong Buy analyst consensus rating. This breaks down into 12 consecutive Buy ratings in the last three months. According to the average analyst price target of $82, the upside potential is marginal. But if we break the ratings down, the picture becomes increasingly bullish.

Five-star KeyBanc analyst Brent Bracelin (Profile & Recommendations) has just upgraded TWLO from Hold to Buy. He sees the stock climbing 21% to $99. “2018 marks an inflection year for cloud software APIs that are poised to go ubiquitous across the broader enterprise over the next five years, in our view. We are upgrading TWLO to Overweight on a bullish view revenue could approach $2B by 2022.” writes Bracelin. See what other Top Analysts are saying about TWLO.

2. Oracle (NYSE:ORCL)

On database giant Oracle, JP Morgan says: “Apart from using AI and Machine learning across many parts of its cloud applications, Oracle is now using AI and machine learning to automate administration of its latest Oracle Database 18c.” And with this new self-driving database technology, the company has created the world’s first autonomous cloud.

“This is the most important thing we’ve done in a long, long time,” says ORCL CTO Larry Ellison. “The automation does everything. We can guarantee availability of 99.995 percent, less than 30 minutes of planned or unplanned downtime.” The cloud eliminates human labor, human error and the need for manual tuning.

The Street has a Moderate Buy consensus rating on Oracle. In the last three months, analysts are evenly split between Hold and Buy. With an average analyst price target of $54.73, analysts are predicting 14% upside potential from the current share price. Barclays analyst Raimo Lenschow (Profile & Recommendations) says Oracle’s current valuation remains attractive given underlying fundamentals. However the company “will remain in the penalty box in the near to mid-term” due to reporting structure changes. He has a $58 price target on the stock. See what other Top Analysts are saying about ORCL.

3. Facebook (NASDAQ:FB)

Social media giant FB has been investing heavily in AI for years. “Mark Zuckerberg considers AI to be one of the company’s 10-year bets, and believes that AI should replicate—and exceed—human senses such as vision and hearing so that FB is better able to serve users.” For example, FB now wants to use AI to make MRI scans up to 10x faster. The social network’s AI lab is collaborating with the NYU School of Medicine for a new research project.

“Using AI, it may be possible to capture less data and therefore scan faster, while preserving or even enhancing the rich information content of magnetic resonance images. The key is to train artificial neural networks to recognize the underlying structure of the images in order to fill in views omitted from the accelerated scan,” Facebook revealed in a blog post.

Overall this Strong Buy stock has 30 buy ratings, 5 hold ratings and 2 sell ratings in three months. These analysts have an average FB price target of $206.17. Given that the stock is now trading at $167.18, this translates into 23% upside from the current share price. See what other Top Analysts are saying about FB.

4. Palo Alto Networks (NYSE:PANW)

This next-generation security platform says effective machine learning can help prevent malware and protect endpoints. “The most promising weapon in the endpoint security arsenal is machine learning, with its ability to quickly learn, make instant decisions and enable rapid response to prevent threats rather than dealing with them during execution or after the fact” PANW states in a report. In light of this, PANW uses machine learning in Traps, its advanced endpoint protection solution.

Analysts in general are optimistic on PANW. In the last three months this Moderate Buy stock has received 5 buy ratings vs just 1 bearish sell rating. Altogether, these analysts have an average price target on Palo Alto of $232.33 (4.54% upside potential). “We believe PANW is poised for continued healthy growth driven by intact market drivers and consistent execution” cheers Oppenheimer’s Shaul Eyal (Profile & Recommendations). His customer checks suggest the stock is poised to record a Q4 revenue beat, driving shares higher. See what other Top Analysts are saying about PANW.

5. Workday Inc (NYSE:WDAY)

Workday is a leading provider of enterprise cloud applications for finance and human resources. According to JP Morgan: “AI is an integral part of the Workday system and surfaces in terms of intelligent recommendations to predictive analytics across HR as well as Finance.”

“In our view, Workday is one of a handful of software names that growth investors could just BUY and put away; after all, we’re quite confident that in 5 or 10 years from now, this will be a much bigger, higher margin, and presumably more valuable business” gushes Canaccord Genuity’s Richard Davis (Profile & Recommendations). This five-star analyst has just boosted his price target from $145 to $175 (23% upside potential). He made the move on September 4 following solid FQ2 results. Revenue and cash flow topped expectations and full revenue guidance was increased by $20M organically. See what other Top Analysts are saying about WDAY.

Find the latest stock ratings from the Street’s best analysts here

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