These AI-powered stocks could supercharge your portfolio.
The U.S. stock market is currently grappling with increasing concerns that inflation may reaccelerate, which could lead the Federal Reserve to delay its plan to start cutting interest rates. Ed Yardeni of Yardeni Research has even cautioned that there is a possibility of the S&P 500 index declining by 10% amid these economic uncertainties.
In such turbulent times, long-term investors should favor fundamentally strong companies with robust growth potential. However, you do not need to bet huge amounts of cash in these periods of uncertainty. If you have even $100 that you can set aside for the future, then picking up a few shares of either of these stocks could prove to be a wise choice in the long run.
Palantir
The first no-brainer stock begging to be bought now is enterprise software player Palantir (PLTR 3.73%). Shares of the artificial intelligence (AI) company are up by nearly 26% so far in 2024 and up by 164.5% in the past year, even after a significant pullback in the past few weeks. That recent dip in share prices, however, presents an opportunity to pick up at least a small stake in this company and capitalize on its robust long-term growth potential.
Its latest offering, Palantir AIP (Artificial Intelligence Platform) is playing a pivotal role in new customer acquisition as well as driving existing customers to expand their use of its services by making it easier for them to deploy AI for specific use cases. The company’s go-to-market strategy of hosting “boot camps” for potential AIP clients is also helping drive demand. Unlike traditional pilot projects, which require one to three months, Palantir’s boot camps enable customers to demo AIP for multiple real-world use cases in five days or less. Palantir completed 560 boot camps across 465 organizations in 2023, topping its target of 500 boot camps.
Its U.S. commercial business is also seeing solid growth, thanks to AIP significantly expanding its addressable market through new customer wins and higher-ticket deals with established clients. In 2023’s fourth quarter, the company’s U.S. commercial revenues surged by 70% year over year to $131 million, while the U.S. commercial customer count rose 55% to 221.
For the past several years, Palantir has been playing a key role in helping the U.S. military and intelligence agencies identify trends and patterns in intelligence and confidential information reports. While its government business still accounted for almost 53% of the company’s revenues in the fourth quarter, that segment has been growing at a slower pace than the commercial business. However, Palantir expects increased demand for its services from the U.S. government in 2024, as its offerings are well suited to supporting modern combat needs.
Palantir is also seeing significant growth opportunities for its Government Web Services and Mission Manager offerings. Through these services, the company makes its proprietary technology available to government agencies and defense technology companies to enable them to build customized applications.
Palantir is currently trading at about 21.5 times trailing-12-month sales, which is more expensive than its three-year average PS ratio of 18.7. That premium, however, is justified mainly due to the company’s expanding addressable market and cutting-edge AI-powered offerings. Hence, Palantir appears to be an attractive buy now, especially for patient investors who can tolerate some short-term fluctuations in share prices.
My second suggestion for a stock to buy now is Pinterest (PINS 4.04%). Shares of the visual-centric social media platform operator have stagnated since mid-2022, but may soon start posting impressive gains.
The number of monthly active users (MAUs) globally on the platform grew 11% year over year to an all-time high of 498 million in the fourth quarter — the fastest it has grown since the first quarter of 2021. The company also dramatically improved its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) margin by 14 percentage points to 37% in the quarter.
But there are several more reasons to like this digital advertising company. First, international markets provide almost 80% of Pinterest’s user base, yet they contribute only 20% of its revenues. This disparity highlights the untapped monetization potential in these markets.
Second, Pinterest has also been successful in attracting Gen Zers to its platform — they account for nearly 40% of the user base. Since this demographic is more video-centric, is experiencing increasing purchasing power, and has a high lifetime value, this trend bodes well for Pinterest’s growth trajectory.
Third, Pinterest has been enhancing the platform with new features to boost user engagement such as collages, AI-powered auto-organization tools, and Shop Similar for mobile. The company is leveraging next-generation AI to give better and more relevant recommendations to users.
Fourth, Pinterest has transitioned from brand advertising (ads focused on creating brand awareness and shaping brand perceptions) to lower-funnel performance-driven advertising (ads focused on getting specific and measurable responses such as clicks and purchases from viewers). Because performance advertising offers ad buyers more measurable results in terms of return on investment, advertisers are expected to increasingly allocate shares of their budgets for performance advertising (as opposed to less reliable experimental or social advertising) to Pinterest. It has also partnered with third-party ad partners such as Amazon for the U.S. market and with Alphabet in international markets.
Pinterest is currently trading at 7.2 times trailing-12-month sales, lower than its five-year average ratio of 10.9. Hence, considering the company’s robust growth prospects and reasonable valuation, Pinterest seems like a good stock to buy now.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Manali Pradhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Palantir Technologies, and Pinterest. The Motley Fool has a disclosure policy.