It’s been an investment theme for some years, but Artificial Intelligence (AI) came back with a thunderous roar in 2023 as generative AI ruled news headlines. Despite interest in prominent and obvious AI stocks, two top growth stocks remain heavily beaten-down in 2023, even as they rapidly embrace AI to enhance their revenue and earnings growth prospects. Let’s have a closer look at two beaten-down Canadian artificial intelligence-powered growth stocks that are cheap undervalued buys right now.
Nuvei stock could get an AI facelift
Nuvei Corp (TSX:NVEI) is a beaten-down $4.4 billion Canadian tech stock that’s still poised to rise to AI-powered greatness if its recent investments in artificial intelligence improve its competitiveness in a fast-growing global payments market that’s galloping towards US$ 3 trillion by 2027.
How is Nuvei harnessing AI for revenue and earnings growth? Early into 2023, the innovative company launched an AI-powered self-enrollment function for merchant onboarding. The AI tool helps customers add additional payment methods instantly – saving costs and accelerating the time to the first realization of revenue for the business. Nuvei also launched an AI-driven data analytics platform this year to optimize customer approval rates.
Leveraging both traditional AI (machine learning) and generative AI may help reduce Nuvei’s operating costs, help scale the business at a faster pace across geographical regions, and improve its earnings efficiency.
The payments provider is growing revenue at double-digit rates, even after losing a key (top 10) customer for undisclosed reasons in 2023. Down 82% from its post-pandemic highs, Nuvei stock trades in value territory today. Shares fell out of the market’s favour when traders and investors fled out of richly valued growth stocks in the face of run-away inflation and soaring interest rates in 2022. However, Nuvei is leveraging AI to grow revenue and rescue its earnings from a recent plunge.
Analysts project Nuvei may grow revenue by 17.4% over the next year and average 17.9% annual growth in net profits over the next five years. Despite recent 145% growth in debt in 2023, which was accompanied by rising financing costs, Nuvei has a chance to safely manage its leverage if expected sales growth translates into cash flow increases.
Nuvei traded at an enterprise-value-to-sales (EV/Sales) multiple of around 4 at the time of writing – far below its peak valuation multiple of 35.7 times recorded in September 2021. The Canadian tech stock is a potentially rewarding AI-powered growth play that’s cheaply priced today.
TELUS International stock hangs on AI growth – for now
TELUS International (TSX:TIXT) is a $3 billion separately listed subsidiary and brain-child of Canadian telecommunications behemoth TELUS Corporation that has been a significant growth investment to its parent company as it taps into AI growth opportunities globally. The artificial-intelligence-powered stock could richly reward growth-oriented investors as it rides a new AI-powered growth wave, leveraging on generative AI to amplify its revenue and earnings growth prospects across regional markets worldwide.
How is TELUS International using AI to increase revenue and expand earnings margins? The company is a digital customer experience innovator that has become a key AI development partner to global corporations. The company recently reported 8% year-over-year growth in third-quarter revenue following higher volume uptake of its projects, notably within AI Data Solutions.
Among TELUS International’s technology offerings is AI training data, at scale, for companies developing new AI models. Clean, optimized, AI-ready data is a key product development input needed for customers to train and develop useful, trustworthy, and dependable AI platforms for commercial purposes. TI is an AI model-building partner of choice.
In a recent TELUS Corp earnings release in November, the parent company’s Chief Executive Darren Entwistle sees “…meaningful opportunities in digital transformation – particularly in generative AI adoption…” as a “…vibrant tailwind for TI’s medium – and long-term growth and profitably.”
Following a 58% year-to-date drop in TELUS International stock, shares trade at a price-to-sales multiple of 0.9 – far below an industry average multiple of 9. The stock trades cheaply following slower revenue growth rates and declines in profitability as some large customers in Europe reduce services uptake due to rising economic uncertainty. Demand could roar back once recession fears subside, while AI offerings could smoothen TI’s growth trend.