Artificial Intelligence (AI) has become the backbone of technological evolution, fostering opportunities for companies with market caps under $10 billion. These smaller AI innovators often target niche markets, leveraging agility to outperform larger competitors while remaining cost-efficient and scalable.
Given this backdrop, investors might consider keeping an eye on these three AI innovators with strong intellectual property portfolios, such as Upstart Holdings, Inc. (UPST), Five9, Inc. (FIVN), and Innodata Inc. (INOD).
With rising corporate and government investments in AI, these smaller companies are riding a wave of support. The Department of State plans to provide an additional $23 million in funding to promote the responsible use and governance of AI globally, where approximately $5 million in Education and Cultural Exchanges funding is for programs that contribute to AI capacity building.
AI is predicted to grow increasingly pervasive as technology develops, revolutionizing sectors including healthcare, banking, and transportation. As per a survey, 87% of global organizations believe that AI technologies will give them a competitive edge. According to the PwC report, estimates suggest that AI technology is expected to generate $15.7 trillion in revenue by 2030, along with a 26% boost in GDP for local economies.
Firms with unique intellectual property and strong execution strategies could be the key to identifying the next big AI disruptor.
Considering these conducive trends, let’s analyze the fundamentals of the above-mentioned stocks.
Upstart Holdings, Inc. (UPST)
With a market cap of $7.16 billion, UPST operates a cloud-based artificial intelligence (AI) lending platform that offers personal loans, automotive retail and refinance loans, home equity lines of credit (HELOCs), and small-dollar loans which connect consumer demand for loans to its to bank and credit unions.
On November 19, UPST announced that DR Bank, an FDIC-insured member bank, adopted UPST's small-dollar loan product to support customers with short-term financial needs. This collaboration demonstrates UPST’s advanced AI technology as an innovative and effective credit solution and strengthens its presence in the banking sector.
In the same month, UNCLE Credit Union, a Northern California credit union with over 38,000 members, partnered with UPST to provide personal loans to new and existing members. This partnership should enhance its footprint in the credit union market by providing flexible and efficient lending tools.
For the fiscal third quarter that ended September 30, 2024, UPST achieved a 20.5% year-over-year increase in total revenue, totaling $162.14 million. The company’s adjusted EBITDA stood at $1.41 million. As of September 30, 2024, UPST’s cash reached $445.27 million, with total assets amounting to $1.81 billion as of September 31, 2024.
Analysts expect UPST’s revenue for the fiscal year 2025 (ending December 2025) to grow by 35.7% from the prior year to $812.75 million. Moreover, its EPS for the same period is expected to come in at $0.53.
Shares of UPST have gained 235.9% over the past six months and 222.2% over the past year to close the last trading session at $78.43.
UPST’s stance is apparent in its POWR Ratings. The stock has a B grade for Growth. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
Among the 83 stocks in the Financial Services (Enterprise) industry, it is ranked #54. Click here to see the additional UPST ratings (Value, Momentum, Stability, Sentiment, and Quality).
Five9, Inc. (FIVN)
FIVN provides intelligent cloud software for contact centers internationally. The company offers a virtual contact center cloud platform that delivers a suite of applications, enabling the breadth of contact center-related customer service, sales, and marketing functions. It has a market cap of $3.13 billion.
On November 13, FIVN announced the launch of Five9 AI Agents, the next generation of Five9 Intelligent Virtual Agents (IVA), incorporating Generative AI, enabling businesses to reduce the need for live agent interactions. This launch will blend AI models to automate self-service, giving businesses more control, flexibility, and trust.
On August 8, FIVN entered into an agreement to acquire Acqueon, a pioneering real-time revenue execution platform. This strategic acquisition enables FIVN to strengthen its outbound solutions and will help create additional contextual data that further enhance the value of the Five9 Genius AI Suite.
In the fiscal third quarter that ended on September 30, 2024, FIVN’s revenue increased 14.8% year-over-year, amounting to $264.18 million. The company’s adjusted gross profit rose 17.1% from a year-ago period to $163.28 million. The company’s non-GAAP net income came in at $50.46 million, and its EPS stood at $0.67, up 32.9% and 28.8% year-over-year, respectively. In addition, FIVN’s adjusted EBITDA amounted to $52.36 million, representing an increase of 26.8% year-over-year.
The consensus revenue estimate of $267.69 million for the fiscal fourth quarter (ending December 2024) represents an 11.9% increase year-over-year. The consensus EPS estimate of $0.70 for the current quarter indicates a 14.9% improvement year-over-year. The company has an impressive surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has gained 40.8% over the past month and 25.7% over the past three months to close the last trading session at $41.61.
FIVN’s POWR Ratings reflect this outlook. It has an A grade for Growth and is ranked #88 out of 128 stocks in the Software - Application industry. To see the other ratings of FIVN for Value, Momentum, Stability, Sentiment, and Quality, click here.
Innodata Inc. (INOD)
INOD operates as a global data engineering company with a market cap of $1.71 billion. The company operates through three segments: Digital Data Solutions (DDS); Synodex; and Agility.
On June 3, INOD announced that it had been awarded two new large language model (LLM) development programs by one of its existing ‘Magnificent Seven’ Big Tech customers, resulting in approximately $44 million of additional annualized run rate revenue. This award will provide INOD with a massive growth opportunity and allow it to utilize its capabilities in scaled data to play a part in the LLM revolution.
INOD’s revenues for the third quarter (ended September 30, 2024) increased 135.6% year-over-year to $52.22 million. Its attributable net income came in at $17.39 million, and its adjusted EPS amounted to $0.51, significantly higher than that of a year-ago period. Also, the company reported an adjusted EBITDA of $13.86 million, indicating a 336.6% growth from the prior year’s quarter.
Street expects INOD’s revenue for the fiscal first quarter (ending March 2025) to remain the same, valued at $54.05 million. Its EPS for the same period is expected to register a 523.3% growth from the prior year, settling at $0.19.
INOD shares have gained 498.9% over the past year and 407.7% over the past nine months to close the last trading session at $38.33.
INOD’s fundamentals are reflected in its POWR Ratings. The stock has an A grade for Growth and a B for Quality. It is ranked #50 out of 78 stocks in the Technology - Services industry.
Beyond what is stated above, we’ve also rated INOD for Value, Momentum, Stability, and Sentiment. Get all INOD’s ratings here.
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UPST shares were trading at $78.43 per share on Thursday afternoon, down $0.08 (-0.10%). Year-to-date, UPST has gained 91.95%, versus a 27.18% rise in the benchmark S&P 500 index during the same period.
About the Author: ShreyaRathi
