In the vast equities landscape, hidden gems are waiting to be unearthed. Like diamonds in the rough, these undervalued stocks possess the potential to shine brightly in an investment portfolio.
Picture the first one: a company rapidly evolving into the leading AI CRM provider, paving the way for the future of customer relationship management. Or consider the second one: consistently achieving robust revenue growth and securing large deals in the ever-expanding cybersecurity market.
The third one enters the spotlight with its deep integration of AI and substantial patent portfolio. It is positioning itself as an industry leader in automation solutions.
These are just a few of the intriguing stocks in the quest to identify the next big winners in the stock market.
The article showcases the diverse paths these companies are evolving from dust to diamonds, from cutting-edge technology to ethical AI adoption and advanced biotech and fintech players.
Salesforce (CRM)
Salesforce (NYSE:CRM) focuses on transforming into a profitable growth company. The fact that this is one of the top undervalued stocks is evident in its recent performance, with operating margins up over 10% YoY in Q2 2023.
Salesforce is rapidly establishing itself as the leading AI CRM provider. The company has substantially invested in integrating AI into its core platform and products, like Einstein.
Also, Salesforce’s Data Cloud is a game-changer. With the ability to ingest over six trillion records and trigger one trillion activations for customer engagement, it is becoming a powerful asset.
Salesforce’s metadata-driven platform seamlessly integrates the Data Cloud, providing customers with a single source of truth for their data. This simplifies AI adoption as it minimizes data integration challenges, accelerating customer success.
Trust is paramount in the AI revolution, and Salesforce is at the forefront of ethical AI adoption. Creating an Einstein trust layer ensures data privacy, security, and compliance.
Finally, the Dreamforce conference, billed as the world’s largest AI conference, further solidifies Salesforce’s position in AI and CRM.
Palo Alto (PANW)
Palo Alto (NASDAQ:PANW) has consistently delivered robust revenue growth. With a 26% YoY increase in Q4 fiscal 2023, it is marking its 12th consecutive quarter of revenue growth north of 20%. It highlights the company’s ability to capture market share and meet the increasing demand for cybersecurity solutions.
Palo Alto has strategically invested in its next-generation security (NGS) portfolio and diversified its product offerings within the NGS segment.
Remarkably, the Cortex platform and Secure Access Service Edge offerings have achieved significant milestones, with Cortex surpassing $1 billion in annual bookings. Notably, Prisma Cloud, a cloud security platform, has exceeded $5 million in annual recurring revenue (ARR).
The company’s ability to secure large deals is something to look for in undervalued stocks. It has signed significant transactions, such as a $45 million deal with a large industrial manufacturer and a $40 million deal with a professional services firm.
These deals highlight Palo Alto Networks’ success in providing comprehensive, integrated security solutions that simplify customers’ architectures, reduce costs, and enhance security.
UiPath (PATH)
UiPath’s (NYSE:PATH) deep integration of AI throughout its platform is significant. Generative AI is at the core of this strategy, which makes this one of the undervalued stocks to buy for AI access.
GenAI simplifies automation development with tools like Project Wingman, making it accessible to business users and developers. This not only improves automation creation but also enables tackling of complex processes effectively.
With an ARR of $1.3 billion and a 25% YoY increase, UiPath is on a growth trajectory. The significant increase in customers with $1 million or more in ARR, up over 30% YoY, shows that larger enterprises are adopting UiPath’s solutions.
The company is winning in competitive takeouts, as evidenced by a Fortune 500 oil producer that expanded its automation program with document understanding and process mining.
Collaborations with partners like Ashling Partners and SAP are expanding UiPath’s reach and delivering superior outcomes. Notable successes like the transformational automation program at ADT demonstrate the strength of these partnerships.
Finally, UiPath’s extensive patent portfolio, featuring over 850 patents globally, including 300 related to AI, solidifies its position as an industry leader.
Nextracker (NXT)
Nextracker (NASDAQ:NXT) had a YoY revenue increase of 19% (Q1 fiscal 2024) and an EBITDA up over 160% YoY which signify solid financial growth. We attribute this growth to pricing discipline, monetization of product features, and operational efficiency improvements.
Nextracker’s focus on solar technology innovation aims to reduce the levelized cost of energy for solar power. It has ended the quarter with a record backlog of over $3 billion, up from $2.6 billion at the end of fiscal 2023.
It shows Nextracker’s robust sales momentum. This is driven by repeat business and new customers across diverse geographical regions, with over 40% of revenue from overseas projects.
Furthermore, Nextracker’s global supply chain, involving approximately 50 partners across 16 countries and five continents, is a key competitive advantage. The company continues to collaborate with subcontractors to expand its global manufacturing footprint.
Overall, Nextracker is ramping up its U.S. manufacturing capacity, focusing on sourcing from electric arc furnace mills with lower carbon emissions.
This expansion aligns with the U.S.’s solar demand growth. Therefore, as society trends toward decarbonization and the electrification of transportation, the demand for solar power is expected to increase. That makes this one of the undervalued stocks to watch for 2023.
Crispr (CRSP)
Crispr (NASDAQ:CRSP) has emerged as a frontrunner in gene editing, offering transformative potential for medical science.
It has made remarkable strides in the development of CRISPR-based therapies. Also, it is on the cusp of introducing what could be the world’s first approved CRISPR-based medicine with exa-cel.
Over the years, the company has honed its expertise in leveraging CRISPR-Cas9 technology to modify genes, opening new frontiers in drug discovery and development. Its immuno-oncology platform, diabetes platform, and in vivo platform hold immense potential.
Looking forward, CRISPR-based gene editing is no longer a novelty; it has evolved into a fundamental drug discovery and development tool.
Pharmaceutical giants increasingly recognize the potential of CRISPR-based gene editing in their pipelines. It is not a matter of “if” but “when” every major pharmaceutical company will integrate gene editing into their drug discovery efforts. This industry-wide adoption solidifies Crispr’s position.
Finally, collaboration with Vertex and ViaCyte has propelled the development of next-generation therapies and expanded the company’s scope beyond oncology. Regenerative medicine, driven by the promise of edited IPS cells, may revolutionize healthcare, making this one of the best undervalued stocks in biotech.
SoFi (SOFI)
SoFi (NASDAQ:SOFI) has diversified revenue streams, contributing significantly to its long-term strength.
Operating in both the Technology Platform and Financial Services segments, the company leverages its unique position to weather market volatility and industry disruptions. Further, membership growth is another strength, as SoFi has consistently added new members, with a remarkable 584K in Q2 2023, bringing the total to 6.2 million.
Positive trends, such as lending net interest income surpassing expenses, indicate strong profitability potential. Remarkably, the company’s ability to attract high-quality deposits is notable.
Remarkably, deposits increased by $2.7 billion sequentially in Q2. Specifically, over 90% of deposits come from direct deposit members, ensuring a stable funding base.
Efficiency and monetization have also been key drivers of SoFi’s success. It is improving monetization rates and doubling YoY revenue per Financial Services product. Focusing on cross-buying and marketing efficiency has enhanced unit economics and operating leverage.
Finally, SoFi’s Technology Platform segment adds another dimension to its growth strategy. With a focus on new verticals, products, geographies, and partnerships, the company may attain accelerated YoY growth in Technology Platform revenue by Q4.
Block (SQ)
Block (NYSE:SQ) has an investment framework that emphasizes the importance of achieving over 100% gross profit retention and a Rule of 40 on adjusted operating income for each ecosystem within the company.
Strategically, Block has been diligently managing costs across the company. It focuses on hiring for critical roles and implementing performance management strategies.
The company prioritizes efficiency and channel optimization in sales and marketing, ensuring that resources are allocated effectively.
Block’s strength lies in its diversified ecosystems, including Cash App, Square, and banking products. Thus, by connecting these ecosystems and introducing new features, such as Cash App Pay for Square invoices and strategic partnerships with payment providers, Block maximizes its user engagement and cross-selling opportunities.
Cash App has shown impressive growth in monthly transacting actives, inflows per active, and monetization rate.
The peer-to-peer functionality has driven engagement. Also, the platform’s financial services products, including the Cash App Card and direct deposit, have experienced substantial growth.
Hence, Block’s focus on efficiency and product adoption in the Cash App continues to drive profitability.
On the date of publication, Yiannis Zourmpanos did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.