13 AI stocks for your portfolio

Artificial intelligence has been an investment theme for years, but over the past six months the topic has literally dominated discussions and driven up the share price of many a stock. 

But who will benefit over the longer term from AI advances is still a bit of a puzzle. To help clarify matters, investment bankers Eight Capital put out a report on Tuesday on generative AI, with analysts Adhir Kadve and Christian Sgro predicting AI could have a similar impact on the economy as the Internet, with use cases emerging to enhance worker productivity, resulting in “a massive opportunity” ahead for companies and investors.

The analysts argue that generative AI adoption could outpace previous technology cycles, which bodes well for a select group of companies within Eight Capital’s coverage.

Kadve and Sgro point out that early beneficiaries from generative AI have mostly been infrastructure-focused companies like chip and hardware manufacturers (Nvidia, for example) and hyperscalers like Microsoft, Google, Meta and Oracle. All of these companies have singled out AI as a key reason for strong operational outlooks in coming quarters and years.

At the same time, and further down the line, enterprise software companies, with an average year-to-date return of about 30 per cent, have not seen similar big moves as the above companies and have underperformed the NASDAQ 100 in general. Valuations remain range-bound, according to the analysts, particularly within the Canadian SaaS environment.

The analysts give two reasons for the lag: a lack of development, so far, and availability of enterprise-grade generative AI solutions and barriers to adoption currently faced by enterprise companies, such as data privacy, accuracy, customizability, compliance, latency and cost, all of which have led enterprise companies to be more cautious of adoption.

Kadve and Sgro argue that the first, development-related issue has largely been solved already and that the latter series of concerns will be resolved in turn, with widespread implementation to follow.

“As technology companies harness the technology to bolster their offerings and accelerate growth, profitability and value creation, there will be a re-rate opportunity for well-positioned companies from 18-month valuation lows,” the analysts wrote.

To that end, Kadve and Sgro outlined some ways in which 13 companies in their coverage universe will benefit from generative AI. Note that all projected returns listed below are as of the publication date of the Eight Capital report.

Stock: OpenText (OpenText Stock Quote, Charts, News, Analysts, Financials TSX:OTEX)

Eight Capital rating: Buy

Eight Capital target price: US$50.00

12-month projected return: 25 per cent

Kadve and Sgro said that OpenText has a broad suite of AI offerings including key products Magellan and Vertica and that its enterprise information management platform leverages large language models to unlock potential insights for companies. They believe that OTEX is currently investing “significant resources” in deployments which could be a big growth driver for the company in coming quarters.

“Open Text is already working with customers across verticals such as Legal, Financial Services, BioTech and Automotive. Details are currently light, however, the company expects to deliver several use cases leveraging LLM technology as standalone product offerings within the company’s private cloud,” Kadve and Sgro wrote.

Stock: Kinaxis (Kinaxis Stock Quote, Charts, News, Analysts, Financials TSX:KXS)

Eight Capital rating: Buy

Eight Capital target price: $230.00

12-month projected return: 31 per cent

Kinaxis has a long history in machine learning, the analysts say, which makes up the backbone of the company’s supply chain management platform, as part of its Planning.AI solution. Kadve and Sgro said Kinaxis will be able to deliver a richer customer experience which will drive ARPU and retention levels.

“At the company’s recent Kinexions conference, Kinaxis teased the potential for upcoming Generative AI capabilities, including a chat interface, code creation, or auto-generated executive briefings,” they said.

Stock: Altus Group (Altus Group Stock Quote, Charts, News, Analysts, Financials TSX:AIF)

Eight Capital rating: Buy

Eight Capital target price: $65.00

12-month projected return: 50 per cent

Real estate analytics and software company Altus Group has machine learning algorithms to provide property intelligence, with Kadve and Sgro saying the company’s data generation gives it a significant edge in maintaining a moat and driving value for customers.

“As the company launches its Cloud- and subscription-based Altus Market Insights Premium offering, we expect a tiered pricing model to offer varying degrees of analytical insights driven by the company’s models. In addition to offering predictive insights, this platform includes performance attribution analysis to explain the relevance of key inputs, including demographics, employment, among others,” they wrote.

Stock: Docebo (Docebo Stock Quote, Charts, News, Analysts, Financials TSX:DCBO)

Eight Capital rating: Buy

Eight Capital target price: $75.00

12-month projected return: 55 per cent

Learning management systems company Docebo has built its own language models to power its productized generative AI tool as well as other content creation, tagging and interactive content, according to the analysts, with the roll out of enhanced chat and product features likely to drive upsell.

“We believe Docebo has built its market leadership in corporate LMS by being innovative, and we think that AI has accelerated this journey by enabling a higher-touch and personalized learning experience at scale,” the analysts said.

Stock: WELL Health Technologies (WELL Health Technologies Stock Quote, Charts, News, Analysts, Financials TSX:WELL)

Eight Capital rating: Buy

Eight Capital target price: $10.00

12-month projected return: 109 per cent

Kadve and Sgro said digital healthcare company WELL’s unique positioning as a leading clinic network in North America creates an opportunity to aggregate, test, and integrate AI tools, with WELL’s AI Voice offering a first such example.

“We see the potential for a product roadmap that ultimately provides a robust AI-assistant to doctors, enabled by WELL’s widely installed EMR and network,” the analysts said. “WELL’s network of patients and practitioners is immensely valuable to a start-up working through the Proof of Concept stage; we see acquisition candidates as highly motivated to join the WELL network.” 

Stock: Coveo Solutions (Coveo Solutions Stock Quote, Charts, News, Analysts, Financials TSX:CVO)

Eight Capital rating: Buy

Eight Capital target price: $12.00

12-month projected return: 80 per cent

Through its long history of leveraging AI to develop its Relevance Cloud platform for data retrieval and indexing Coveo represents a pure-play on the AI growth theme, according to Kadve and Sgro.

“We believe that as Enterprises look to harness AI technologies (both Generative AI and others) to drive efficiency and profitability, this should result in higher AI-related budget spending, and Coveo should be a net beneficiary,” they said.

Stock: Converge Technology Solutions (Converge Technology Solutions Stock Quote, Charts, News, Analysts, Financials TSX:CTS)

Eight Capital rating: Buy

Eight Capital target price: $7.00

12-month projected return: 107 per cent

Sgro and Kadve argued that IT services provider Converge’s advanced analytics practice has been a growth area for the company and that they have a large team of data scientists and a diversified set of partner vendors to add substantial value to customers.

“We see Converge as a beneficiary of new analytics engagement and a one-stop-shop for the mid-market as companies explore AI opportunities,” they said.

Stock: D2L (D2L Stock Quote, Charts, News, Analysts, Financials TSX:DTOL)

Eight Capital rating: Buy

Eight Capital target price: $11.00

12-month projected return: 27 per cent

Learning management system D2L has been offering AI-based capabilities over the past decade, according to the analysts, with its commercial opportunity lying in the ability to upsell packages that offer analytics and templated features.

“[W]e see D2L as an enabler of business practices and at low risk of disruption given the quality and stickiness of the company’s academic and corporate customer base. As well, we think D2L is well-positioned to benefit from a focus on privacy and regulation, given the cloud-based nature of the platform and its historical focus,” they said.

Stock: Quisitive Technology Solutions (Quisitive Technology Solutions Stock Quote, Charts, News, Analysts, Financials TSXV:QUIS)

Eight Capital rating: Restricted

Eight Capital target price: n/a

12-month projected return: n/a

As a reseller of Microsoft services and solutions, Quisitive is able to help clients identify and implement AI solutions, the analysts pointed out, and the company has said it’s seeing customers explore AI solutions to build value in revenue generation and cost optimization.

“The company has called out analytics as a key practice area in recent quarters where it has seen demand from customers. The company has outlined its roadmap to leverage the Microsoft OpenAI platform to enable analytics, Generative AI, and other opportunities for its healthcare and other offerings,” Kadve and Sgro wrote.

Stock: Propel (Propel Stock Quote, Charts, News, Analysts, Financials TSX:PRL)

Eight Capital rating: Buy

Eight Capital target price: $15.00

12-month projected return: 105 per cent

Fintech platform Propel uses AI to improve its underwriting posture and the performance of its operations, according to the analysts, in features such as customer acquisition and service.

“Looking into the future, Propel believes that Generative AI can be leveraged to improve Quality Assurance, Customer Service (with chatbots), while also providing mass customizations while driving down customer acquisition costs and lowering default rates via significantly improved underwriting,” the analysts wrote.

Stock: MediaValet (MediaValet Stock Quote, Charts, News, Analysts, Financials TSX:MVP)

Eight Capital rating: Buy

Eight Capital target price: $2.50

12-month projected return: 108 per cent

Digital asset management company MediaValet has been using Microsoft AI engines for about five years, according to Kadve and Sgro, who say revenue opportunities await in greater customer adoption and usage of DAM and add-on modules.

“The Microsoft backbone includes Open AI services that MediaValet can natively integrate with to enable this solution. We believe this will accelerate MediaValet’s innovation cycle. As well, we want to call out the MediaValet bull thesis related to an anticipated explosion in the quantity of content. We expect the DAM industry to be a key beneficiary, and MediaValet by extension,” they wrote.

Stock: Wishpond Technologies (Wishpond Technologies Stock Quote, Charts, News, Analysts, Financials TSXV:WISH)

Eight Capital rating: Buy

Eight Capital target price: $1.30

12-month projected return: 106 per cent

Marketing tech for the small and medium-sized business community, Wishpond already has an AI Website Builder solution on the market, the analysts point out, one which leverages OpenAi’s platform to generate completely customized landing pages for SMBs in minutes. 

“Wishpond’s core revenue model is on a subscription basis, offering access to marketing bundles or specific tools on an a la carte basis. Wishpond has focused on value-selling lately, revamping offerings and pricing models, and we see a natural opportunity for Wishpond to adjust pricing or add features as AI solutions are brought to market,” Sgro and Kadve said.

Stock: Sabio Holdings (Sabio Holdings Stock Quote, Charts, News, Analysts, Financials TSXV:SBIO)

Eight Capital rating: Buy

Eight Capital target price: $3.50

12-month projected return: 367 per cent

Kadve and Sgro said Sabio’s connected TV ad ecosystem already incorporates AI capabilities and the company leverages machine learning to sift through user data for patterns in order to deliver highly personalized ads.

“Given the data pipes today, Sabio’s GenAI roadmap has solutions which utilize natural language to harness this data for broader insights and improved customer outputs. Looking ahead at the industry, we expect Gen AI to play a deeper role in producing marketing assets and content aligned with each consumer’s interests,” they wrote.

Disclosure: WELL Health Technologies, Wishpond Technologies and Sabio Holdings are annual sponsors of Cantech Letter. Nick Waddell and Jayson MacLean own shares of WELL Health Technologies.