As 2023 nears its close, investors should consider what stocks may be good picks for 2024. For me, one of the best places to invest will once again be in the artificial intelligence (AI) realm. Although some companies aren't worth the money in this space, others look like attractive deals that should be scooped up before the calendar turns.
At the top of my shopping list are CrowdStrike (CRWD 2.03%) and UiPath (PATH 0.26%). Each company is deeply integrated with AI technologies and should have an excellent 2024.
CrowdStrike
CrowdStrike is a cybersecurity company, positioning it well in an important business trend. Cyberattacks are continuing to ramp up, and 2024 will likely continue this pattern. In 2022, Check Point Research found that cyberattacks increased by 38% over 2021's levels. As a result, cybersecurity spending should continue to increase, benefiting companies like CrowdStrike, which estimates its total addressable market will expand from $76 billion in 2023 to $158 billion by 2026.
However, I prefer CrowdStrike over some of its peers because of its top-end endpoint protection product -- something every business needs. It also has over 20 other products to expand its reach, making it an obvious partner for clients serious about having top-tier cybersecurity.
What sets CrowdStrike apart from some competitors is its AI usage, which analyzes activity across a client's network. With AI monitoring, CrowdStrike's platform can quickly pinpoint a threat and shut it down before it does serious damage.
Despite many software companies seeing massive slowdowns in 2023, CrowdStrike posted impressive numbers, with annual recurring revenue (ARR) increasing by 37% to $2.93 billion in Q2 of fiscal year 2024 (ending July 31). It's also making the profitability transition, having posted positive net income during both FY 2024 quarters.
This ignited the stock in 2023, as it's up about 100%. However, I think it still has room to run. Given the wide cybersecurity market and CrowdStrike's AI usage, I think this run is just the beginning of something larger for CrowdStrike.
UiPath
Many executives are asking their management teams how they plan to implement AI in 2024 to make them more efficient or gain the upper hand over competitors. UiPath is a logical choice for this as most people can easily understand and see the benefits of its robotic process automation (RPA) software.
RPA gives companies the tools to automate repetitive processes, like filling out a document or running a report. This makes employees more efficient and allows them to do jobs computers cannot. UiPath also integrates AI into its platform by monitoring employees to understand what tasks can be automated or digesting emails to pinpoint where a package needs to go.
Like CrowdStrike, UiPath continuously posted solid results in 2023, with Q2 of FY 2024 being no exception. ARR rose 25% to $1.31 billion, and existing customers spent $125 for every $100 they spent last year. Although UiPath is unprofitable, it has improved its operating margin significantly over the past year (its operating margins are up from a 33% loss to a 21% loss). While UiPath's business is great, the stock is cheap and trades for a reasonable valuation.
PATH PS Ratio data by YCharts. PS Ratio = price-to-sales ratio.
UiPath looks like a bargain buy at less than 9 times sales right now, especially considering RPA could see an adoption explosion next year. Both CrowdStrike and UiPath represent the logical deployment of AI technologies in their respective fields. Each also is growing healthily, and I expect their success to continue into 2024 and beyond.
