Canadian stocks recently reached record highs as the TSX Composite Index soared above the 22,400 level for the first time ever. Interestingly, while AI (artificial intelligence) is arguably emerging as one of the most disruptive and transformative technologies of our time, with the potential to transform various industries and sectors, many fundamentally strong AI stocks in Canada still haven’t seen much appreciation of late.
This trend suggests that there is a significant gap between such Canadian AI stocks’ current market valuations and future growth potential, making them appear undervalued based on their long-term growth outlook. Buying such stocks at discounted prices now could help investors generate handsome returns in the long run. Here are two Canadian AI stocks that I find worth buying today and holding for at least the next five years.
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Kinaxis stock
Kinaxis (TSX: KXS) is the first AI stock you can consider adding to your long-term portfolio right now. It currently has a market cap of $4.3 billion as its stock trades at $150.77 per share with a minor 1.4% year-to-date gain. This Ottawa-based company is leveraging AI technology and concurrent planning to anticipate future scenarios, monitor risks, and respond quickly, ensuring agility in business planning and the digital supply chain.
Even as high inflationary pressures and other macroeconomic challenges have taken a toll on the financials of many tech businesses globally, Kinaxis continues to post strong growth. In the first quarter of 2024, Kinaxis reported an 18% YoY (year-over-year) increase in its total revenue to US$119.4 million. While its SaaS (Software as a service) segment revenue rose 16% YoY, its professional services sales jumped by a solid 30% from a year ago. Stronger revenues and the company’s strategic cost-saving measures and focus on operational efficiencies drove its adjusted earnings up by 45% YoY last quarter to US$0.58 per share, exceeding Street analysts’ expectations.
As Kinaxis focuses on integrating human intelligence with AI to make its offerings more insightful for businesses, its financial growth trends are likely to improve in the years to come, which should help its share prices rally in 2024 and beyond.
BlackBerry stock
BlackBerry (TSX: BB) could be another attractive AI stock in Canada, which I find undervalued based on its long-term growth outlook, especially after its recent big declines. It currently has a market cap of $2.2 billion as its stock trades at $3.78 per share with nearly 20% year-to-date losses. This Waterloo-headquartered mainly focuses on providing AI-equipped cybersecurity and IoT (Internet of Things) software solutions for private and public organizations across the globe.
In the last 12 months ended in February 2024, BlackBerry’s total revenue jumped 30% YoY to US$853 million with its IoT division hitting a record high sales figure in the latest quarter. The company posted an adjusted net profit of US$31 million for these 12 months, far better compared to its adjusted net loss of US$103 million in the previous four quarters.
Besides using AI and machine learning technology in its security solutions to provide clients with predictive cybersecurity, BlackBerry is also focusing on developing advanced technological solutions for the automotive industry. Given that, the demand for its services is likely to increase significantly in the coming years, which should help its stock recover fast.
