Today’s tech world is in the midst of an epoch-making change that will reverberate through a multitude of sectors. We’re not talking about autonomous robots – no one is going to build Data from Star Trek any time soon. But artificial intelligence (AI) can mimic the human ability to scan and parse data sets – and it can do it with computer speed. AI-powered digital platforms and software systems learn from their users, and can adapt to optimize their functionality accordingly.
The AI industry, benefitting from its clear applications to a wide range of sectors, is growing rapidly, and is predicted to expand by 40% over the next 4 to 5 years. Companies that stand to gain on AI’s coattails include silicon chip makers, computer and smart device hardware makers, virtual assistant providers, autonomous car developers – all of these will get a share of AI’s expansion. And yes, companies involved in robotics will get in on the game, too, as the tech makes slow strides toward Data.
Not every AI-related company makes a big splash, though. Plenty of them are working under the radar, developing products, fine-tuning the tech, and building out their own small corners of the AI universe. Using TipRanks’ database, we’ve looked up the details on two of these smaller stocks, to find out what makes the tick. The results are interesting.
We’ll start with the mid-cap stock. Alight, an Illinois-based multinational business process outsourcing company with a $4.5 billion market cap, has turned business processes into a business process as a service (BPaaS) model, offering customers subscription for cloud-based digital solutions for managing business processes and human capital. The company uses a proprietary AI to power its business analytics.
Alight’s biggest recent news was its entry to the public stock markets. This was accomplished via a SPAC merger, with Foley Trasimene Acquisition Corporation. The merger was completed in early July and the new ALIT ticker made its Wall Street debut on July 6. Proceeds from the combination allowed Alight to pay off more than 40% of the total company debt.
The other recent news for Alight came on August 12, when the company released its first quarterly report (for 2Q21) as a public entity. The company reported modest – but real – gains in revenues, a year-over-year increase of 3.9% to $672 million. That gain was driven by BPaaS revenue gains of 19%. Business Process as a Service brought in $94 million in revenues, 14% of the total. Alight’s Employer Solutions segment saw revenues grow by 5.4% in the second quarter.
Also supporting top line growth was the 13.9% increase in total bookings, to $435 million, and a whopping 287% gain in BPaaS bookings, to $240 million calculated on total contract value. Alight brought on board several new clients during the quarter, including ABN AMRO and GE Appliances. The gains in BPaaS bode well for Alight’s AI platform, as this is the company’s segment most closely built on AI tech.
In his coverage of this stock for Credit Suisse, analyst Kevin McVeigh writes:“ALIT is poised to enjoy multiple expansion as revenue remixes to analytics vs. health + wealth and payroll processing. With its business process as a service [BPaaS (~20% of revenue)]—combining software-as-a-service [SaaS] capabilities and automated service delivery with data and artificial intelligence [AI]—Alight captures insights via proprietary datasets, helping employers and employees—through its enterprise employee engagement platform—optimize outcomes.”
In line with these upbeat comments, McVeigh gives ALIT shares an Outperform (i.e., a Buy) rating. His price target of $15 implies the stock can gain up to 49% in the year ahead. (To watch McVeigh’s track record, click here.)
There are only two reviews on record for this newly public stock – but they are in agreement that it’s a stock to Buy, making the Moderate Buy consensus unanimous. ALIT shares are priced at $10.04 and the $15.50 average rice target suggests a one-year upside potential of ~54%. (See ALIT stock analysis on TipRanks)
Next up, Realnetworks, is a true micro-cap stock, with a market cap on only $82 million. The Seattle-based company provides a suite of new products using AI to power computer vision technology along with multi-media and textual analysis. Realnetworks’ legacy products include forays into gaming, online streaming, and mobile networking.
The premier product is SAFR, an AI-powered computer vision and facial recognition platform designed for use with live video streaming. SAFR stands for Secure Accurate Facial recognition, and the platform is capable of learning from past trials. SAFR has demonstrated the ability to detect if an individual is wearing a face mask – and still make a correct ID with 98.85% accuracy. High levels of accuracy, and the ability to ‘see’ through face masks, make this product uniquely well adapted for the COVID era. Earlier this year, the US Air Force awarded a third contract to Realnetworks for SAFR, under the Small Business Innovation Research program.
Realnetworks’ second leading product is KONTXT, a text and multi-media analysis platform that uses Natural Language Processing (NLP) to manage mobile text messaging and spam controls. KONTXT can filter message, enforce gray route policies, and defend against fraud. Its NLP is an AI-based technology, leveraging machine learning to power the platform’s tasks.
During the second quarter of this year, per Realnetworks’ quarterly report, the AI-based business products doubled their revenue year-over-year. The gain was driven mainly by SAFR, which saw 282% revenue growth. KONTXT revenue grew by 15%. Total company revenue came in at $14.6 million, down from $40 million in the year-ago quarter.
Analyst Mark Argento, of Lake Street Capital, says of Realnetworks: “AI revenues were approximately $2.4M this quarter, with SAFR growing 282% Y/Y and KONTXT up 15% Y/Y. Management indicated it would be leaning into its AI investment and increasing its spending to accelerate the growth of its platforms…. RealNetworks is in a prime position to execute against the more extensive and growing market opportunity with strong end-market demand for AI-related security solutions…”
Argento’s faith in the company’s AI products leads him to rate the stock a Buy, and his $6 price target indicates room for a robust 245% one-year upside. (To watch Argento’s track record, click here)
Some stocks fly under the radar, and RNWK is one of those. Argento’s is the only recent analyst review of this company, and it is decidedly positive. (See RNWK stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.