Artificial Intelligence (AI) is moving, if not advancing too fast, and Canada isn’t behind the times. The country is one of the world’s leading AI research hubs. Some market analysts believe many AI stocks will skyrocket in the next bull market.
Coveo Solutions (TSX:CVO) and OpenText (TSX:OTEX) are worth watching on the Toronto Stock Exchange. Both AI stocks have market-beating returns year to date and are ready for a bull run.
Accelerating the path toward profitability
AI powers Coveo’s software-as-a-service search engine and leading platform. This $1 billion SaaS company takes pride in its Coveo Relevance Cloud. The cloud-native platform uses data and AI across websites, e-commerce, services, and the workplace to enhance the digital experience economy.
Business growth and profitability are on the horizon following the Q1 fiscal 2024 results. In the three months that ended June 30, 2023, total revenue rose 15.4% to US$30.5 million versus Q1 fiscal 2023, while net loss improved 44.4% year over year to US$6.95 million.
CFO, Brandon Nussey, said it was another quarter of solid progress as Coveo continue accelerating toward the path to profitability. He adds the operational efficiency of the business in the current business environment enables management to invest prudently for future growth.
Meanwhile, Coveo launched Coveo Relevance Generative Answering, a rival to ChatGPT. Louis Têtu, Chairman and CEO of Coveo, said, “Our years of experience in developing applied AI solutions for large, complex enterprises have allowed us to bring to market what we believe is a transformative offering in generative AI.”
Têtu notes the early interest and positive feedback from design partners and customers. He adds that the latest product is a powerful extension of Coveo’s industry-leading solutions and the natural evolution of its innovation. Relevance Generative Answering combines large language model (LLM) technology with the capabilities of the award-winning Relevance CloudAI platform.
Coveo’s new growth driver will be generally available this fiscal 2024. The AI firm also expects positive operating cash flow in fiscal 2025. At $9.98 per share, current investors are up 9.9% year to date. Market analysts’ average and high 12-month price targets are $12.77 (+28%) and $14.02 (+40.5%).
New generative AI
Canada’s fourth-largest software brand is flying high in 2023. OpenText outperforms the broader market with a year-to-date gain of +29.11% versus +5.28%over the year-ago period. Also, at $51.13 per share, this AI stock pays a decent 2.61% dividend.
The $13.8 billion information company offers AI and analytics services that use a data science methodology. Its business and analytics solutions apply in the fields of Machine Learning, Natural Language Processing, expert systems, speech recognition and vision.
In fiscal 2023 (12 months ended June 30, 2023), total revenue and annual recurring revenue (ARR) increased 28.4% and 26.2% to US$4.5 billion and US$3.6 billion versus fiscal 2022, respectively. However, net income fell to US$150.6 million from US$397.3 million a year ago.
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Opentext.ai is the firm’s new strategic approach to advancing how customers can solve complex problems. It applies AI and large language models with the OpenText Information Management software. Management said this generative AI will impact many corporate use cases.
Upside potential
AI stocks have enormous upside potential in a vastly improved macroeconomic environment. OpenText, in particular, could soar higher and deliver massive gains with the broader adoption of AI.
