The advent of the Internet has changed the business world forever. It created an opportunity for the smallest of traders to reach the far corners of the globe, and for large corporations, it redefined what it means to be multinational.
But there is a new frontier. Artificial intelligence offers an extension of the digital revolution, with the ability to quickly accomplish tasks that were once impossible without a significant amount of human intervention. Capturing that in your portfolio could be crucial for oversized returns over the next decade, and our Motley Fool contributors believe Holdings reached (NASDAQ: UPST), CrowdStrike Holdings (NASDAQ: CRWD), and UiPath (NYSE: PATH) could be one of the most explosive ways to do it.
With FICO, with AI
Anthony Di Pizio (arriving): Most consumers are familiar with the FICO rating system. It’s what banks use to measure creditworthiness when trying to borrow money – and it’s been around since 1989.
While FICO scores take into account simple things like the borrower’s payment history and existing debts, Upstart leverages artificial intelligence to assess over 1,000 different data points that include where the person went to school and their work history.
Capturing all of these unique factors wouldn’t be possible without AI, and the results show 75% fewer defaults for the same number of approvals, which is certainly interesting for banks. Upstart does not lend money itself, but rather creates loans for banks and receives fees for doing so. Additionally, lenders can pay the company to integrate its AI decision-making tools into their own application processes.
For investors, this means that Upstart faces no credit risk and can therefore scale its operations with less constraints as it is not burdened by capital intensive lending activities. The setup has worked well so far, with shares of the company rising 700% this year alone.
The appreciation in the share price is due to solid revenue growth and the fact that it is already a profitable business. In the first half of 2021 alone, Upstart issued loans worth $ 4.52 billion, an increase of 253% from the first half of 2020.
It is expected to improve further as the company enters the auto finance market, boosted by its acquisition of auto dealer sales software developer Prodigy in April. Over $ 1,000 billion worth of cars are sold annually in the United States, many of which are funded, and it is the largest market in which Upstart has operated so far.
The AI ââmomentum is only heating up in the lending industry, so the next 10 years could be sizzling.
Industry-leading threat detection
Trevor Jennevine (CrowdStrike Holdings): In 2011, George Kurtz boarded a flight and watched another passenger start his laptop, noting that it took 15 minutes to charge the Mcafee security software. At the time, Kurtz was McAfee’s CTO, so the experience hit home. Soon after, Kurtz resigned his post and founded CrowdStrike, with the goal of creating a faster and more efficient product from scratch.
To that end, CrowdStrike’s Falcon platform exists in the cloud, which means it can crowdsource data on an incredible scale. It then relies on artificial intelligence to analyze this information, making it possible to predict and prevent the most sophisticated attacks. Today, Falcon includes 21 different modules, each delivered via a single lightweight software, which means that the platform does not slow down endpoints (e.g. laptops) like legacy solutions do.
Fueled by this innovation, the CrowdStrike brand has become synonymous with cutting-edge threat detection, and its platform has set the benchmark for cybersecurity. In reality, Forrester Research recently recognized Falcon as the best endpoint protection product on the market, citing its performance and preventative capabilities as key differentiators.
Unsurprisingly, CrowdStrike has seen strong demand for its software as a service offering, and this has translated into truly explosive growth. Earlier this year, the company became the third fastest SaaS provider (across all categories) to achieve $ 1 billion in annual recurring revenue.
In the most recent quarter, CrowdStrike reached 13,080 customers, including 234 Fortune 500 companies, up 81% from the previous year. Revenue jumped 70% to $ 338 million, free cash flow jumped 127% to $ 74 million, and net retention remained above 120%, indicating existing customers are spending more over time. time.
It’s encouraging, but shareholders have every reason to believe that this dynamic can continue. Many existing security providers have over 100,000 customers, but none of them rival CrowdStrike’s technology. This should help the company gain equity in the years to come, capitalizing on what management believes will be a $ 106 billion market by 2025. That’s why this explosively growing stock looks like a buy. smart right now.
A new era of business efficiency
Jamie Louko (UiPath): If you think of robots, you will probably think of Amazonwarehouse robots or LemonadeJim and Maya’s bots, but another company that automates the world with bots is UiPath – which aims to “completely automate businesses”. The company uses artificial intelligence to automate simple tasks, allowing employees to work on thought-intensive processes.
The company realizes that employees can be 50% less productive when they have to work on automable tasks, and UiPath is looking to reduce that. So far, the company has been successful – attracting more than 9,100 customers globally and achieving recurring annual revenue of $ 727 million – representing a compound annual growth rate of 76% since the first quarter. of fiscal year 2020, calendar year 2019.
UiPath’s solutions have become a priority for businesses, with 118 customers spending more than $ 1 million on UiPath software in the second quarter of fiscal 2022. The company’s net retention rate in the second quarter 2022 is 144%, which means customers are spending 44% more today than they did. one year ago. With its loyal customers and high switching costs, it’s no surprise that the company increased its second-quarter 2022 revenue by 40% from the last quarter’s quarter to $ 196 million.
UiPath’s earnings reflect this focus on growth. The company’s sales and marketing expenses increased by approximately 60%, and its research and development, general and administrative expenses nearly doubled. That cost the company over $ 100 million in that quarter alone. Financially, the company has a steep slope to climb, but with a huge market opportunity of $ 60 billion, the company has plenty of room to grow and improve its financial position. Stocks are at nearly 40% of their all-time high, so now might be a good time to buy a company that could experience explosive growth over the next decade.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.