Investors bought shares of Nvidia (NVDA -0.95%) was the first to pass on shares last year as excitement over artificial intelligence (AI) permeated the stock market. In fact, the AI chipmaker saw its share price rise 239%, making it the best-performing stock in the industry S&P 500 in 2023. Nvidia is already up another 20% in 2024, but Wall Street now sees more upside in other AI stocks.
To elaborate, Nvidia has a median analyst price target of $650 per share, implying 9% upside potential. But The trading desk (TTD -1.61%) has a median price target of $83 per share, implying an upside potential of 20%. And Docebo (DCBO -1.39%) has a median price target of $56 per share, implying an upside potential of 24%.
Here's what investors should know about these two AI stocks.
1. The trading desk
The Trade Desk operates the largest independent ad tech platform for media buyers. Its software is powered by artificial intelligence (AI) to help advertisers create, measure and optimize campaigns across digital channels. The Trade Desk is the market leader in connected television (CTV) advertising and the company is rapidly gaining influence in offsite retail media, the two fastest-growing segments of the broader digital advertising market.
One reason for The Trade Desk's success is its independent business model, meaning the company doesn't own any media that could influence advertising spending, nor does it compete with publishers by selling advertising inventory. Publishers are more willing to share data with non-competitors like The Trade Desk than with other publishers like The Trade Desk alphabeta company that monetizes media content such as Google Search and YouTube with advertising.
Due to a unique combination of independence and size, The Trade Desk has attracted numerous key partners. It sources data and inventory from most major CTV publishers including Walt Disneyand it sources data from many leading retailers including Walmart. Therefore, The Trade Desk offers measurement capabilities that media buyers cannot find on other ad tech platforms.
A consequence of robust and unique data is differentiated AI. To this end, Morgan Stanley sees The Trade Desk as one of 11 companies best positioned to benefit from AI, and consulting firm Quadrant Knowledge Solutions sees The Trade Desk as the most technologically advanced ad tech platform on the market, surpassing even Google.
Looking forward, advertising technology spending is forecast to grow 14% annually through 2030, but The Trade Desk is expected to outperform the industry given its strong market position. In fact, Wall Street is forecasting 21% annual revenue growth over the next five years. In this context, the company's current valuation of 19.4 times sales is acceptable. Patient investors with a five-year investment horizon should consider buying a small position in this growth stock today.
2. Docebo
Docebo operates a learning management system. The platform includes multiple applications that help companies create, deliver and measure the impact of training content for internal employees and external audiences. Two applications stand out in particular as they demonstrate a propensity for innovation and offer significant growth opportunities.
Docebo Shape uses generative AI to automate content creation and convert source material such as documents, presentations and case studies into corporate training materials. Docebo Flow embeds learning content into other software products, which is suitable for external use cases such as customer training. For example, Flow allows companies to embed learning into customer-facing applications to train new users.
Through consistent innovation, Docebo gained a strong market presence. European industry analyst Fosway Group has recognized its leadership in learning management systems for six consecutive years. Additionally, Morgan Stanley analyst Josh Baer picked Docebo stock as a top pick for generative AI in 2024. He said the company is not only revolutionizing the internal learning market but is also a leader in external use cases.
Docebo is an unfamiliar name to many investors, but the company has secured several large customers, including two of the five largest technology companies in the world. The first is Amazon and the second is unnamed, but all evidence points to Google.
Meanwhile, Docebo has also partnered with Google Cloud to advance its generative AI product roadmap. New features are coming to Shape in 2024, including virtual role-playing games with real-time feedback and an integrated copilot that simplifies the creation of learning content. Management says: “Shape will fundamentally change the way training material is created and consumed.”
With this in mind, the learning management systems market is forecast to grow 20% annually through 2030, and Wall Street expects Docebo to grow revenue by 25% annually over the next five years. This consensus forecast makes the company's current valuation of nine times sales seem downright cheap. The market is overlooking this little-known software stock, creating a fantastic buying opportunity for patient investors.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Trevor Jennewine has positions at Amazon, Nvidia, The Trade Desk and Walt Disney. The Motley Fool has positions in and recommends Alphabet, Amazon, Docebo, Nvidia, The Trade Desk, Walmart and Walt Disney. The Motley Fool has a disclosure policy.