/AI%20(artificial%20intelligence)/shutterstock_2242235005.jpg)
Artificial intelligence (AI) stocks have been on a tear for more than a year now. Propelled by a large and growing market size, the AI juggernaut is not expected to stop anytime soon - and in fact, brokerage firm Goldman Sachs (GS) says investors should prepare for four distinct “waves” of AI adoption.
Similarly, KeyBanc recently highlighted stocks within the enterprise software sector that it believes are particularly well-positioned to monetize AI and capitalize on cloud efficiency. For investors seeking stocks with plenty of AI-fueled upside left in the tank, here are five Wall Street-approved software stocks to consider.
Software Stock #1: Sprout Social
Sprout Social (SPT) provides a social media management software platform aimed at businesses. Their platform helps businesses manage their social media presence across various platforms. Its market cap currently stands at $3.4 billion.
Sprout stock is down 3.5% on a YTD basis.
Sprout's leading position in social media management and leveraging of AI to enhance its operations are positive drivers, according to KeyBanc analysts.
Overall, analysts have deemed the stock a “Strong Buy,” with a mean target price of $72.82. This denotes an upside potential of about 22.7% from current levels. Out of 13 analysts covering the stock, 11 have a “Strong Buy" rating, 1 has a “Moderate Buy” rating, and 1 has a “Hold” rating.
Software Stock #2: Monday.com
Founded in 2014 and based out of Tel Aviv, Israel, Monday.com (MNDY) offers a cloud-based work operating system that allows teams to manage projects, collaborate, and automate workflows. The platform is designed to be customizable and cater to various departments and industries. MNDY currently commands a market cap of $11 billion.
Monday.com stock is up 21.3% on a YTD basis.
KeyBanc says it believes that Monday.com is on the path to efficient growth, driven by pricing tailwinds.
More broadly, analysts have a rating of “Strong Buy” for MNDY, with a mean target price of $239.43 - which indicates an upside potential of roughly 5% from current levels. Out of 16 analysts covering the stock, 12 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 2 have a “Hold” rating.
Software Stock #3: Microsoft
Perhaps one of the most active tech titans in the AI space, Microsoft (MSFT) hardly requires any introduction. Founded in 1975, Microsoft is a multinational technology corporation with a wide range of products and services, including operating systems, productivity software, cloud computing, consumer products and business solutions. It is currently the most valuable public company in the world, commanding a gargantuan market cap of $3.19 trillion.
MSFT stock is up 12.5% on a YTD basis.
KeyBanc's optimism around Microsoft stems from the fact that the company has multiple methods to monetize AI.
Overall, analysts have a rating of “Strong Buy” for MSFT stock, with a mean target price of $446.35. This denotes an upside potential of about 5.5% from current levels. Out of 37 analysts covering the stock, 33 have a “Strong Buy” rating, 3 have a “Moderate Buy” rating, and 1 has a “Hold” rating.
Software Stock #4: ServiceNow
Established in 2003, ServiceNow (NOW) is a cloud-based software company that provides a platform for managing digital workflows for enterprise operations. Their platform helps businesses automate tasks, improve efficiency, and streamline IT service management. NOW currently commands a market cap of $158.7 billion.
ServiceNow stock is up 9.2% on a YTD basis.
ServiceNow's AI monetization capabilities, along with its "growth drivers outside of that mega-trend," were highlighted as key drivers by KeyBanc behind its “Overweight” rating.
Overall, analysts have a rating of “Strong Buy” on NOW stock, with a mean target price of $795.58 - which denotes an upside potential of roughly 3% from current levels. However, its Street-high target price of $1,000 indicates an upside potential of 29.7% from current levels. Out of 33 analysts covering the stock, 29 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 2 have a “Hold” rating.
Software Stock #5: SAP
We conclude our list with German tech giant SAP (SAP), Europe's preeminent name in enterprise application software. Its key offerings include enterprise resource planning (ERP), customer relationship management (CRM), database management, cloud solutions and experience management.
With a current market cap of $230.4 billion, SAP stock is up 26.8% on a YTD basis.
KeyBanc called out the company's free cash flow generation and its cloud transition as key drivers that are expected to push SAP's share price higher.
Analysts have a consensus rating of “Strong Buy” for SAP stock, though the shares are trading nearly flat with this group's mean target price of $196.20. However, the Street-high target price of $230 denotes an upside potential of about 17.3% from current levels. Out of 15 analysts covering the stock, 11 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 3 have a “Hold” rating.
