Amazon (AMZN 1.54%) and Robinhood Markets (HOOD 3.46%) are leaning on artificial intelligence (AI) to shape the future of technology within their industries. And most Wall Street analysts think the stocks are undervalued:
- Among 72 analysts, Amazon has a median target price of $285 per share. That implies 34% upside from the current share price of $212.
- Among 28 analysts, Robinhood has a median target price of $121 per share. That implies 59% upside from the current share price of $76.
Here's what investors should know about these AI stocks.
Image source: Getty Images.
Amazon: Automating fulfillment and last-mile delivery with robots and robotaxis
Amazon is the largest operator of industrial mobile robots, and it has deep expertise in artificial intelligence (AI). The company is blending those proficiencies to shape the future of fulfillment and last-mile delivery with physical AI. Morgan Stanley ranks Amazon as one of the companies best positioned to "deliver material financial return from physical AI and robotics."
Amazon last year introduced DeepFleet, an AI model that lets robots navigate warehouses more quickly. A press release said, "This AI technology will coordinate movement of robots across our fulfillment network, improving the travel time of our robotic fleet by 10% and enabling us to deliver packages to customers faster and at lower costs." The company is also developing a generative AI framework that will let workers instruct robots in natural language.
Meanwhile, Amazon is developing humanoid robots to help human drivers with package delivery, according to The Information. The robots will initially carry packages from delivery vans to doorsteps while human drivers wait in the vehicles. However, the entire delivery process could eventually be automated because Amazon is also testing robotaxis through its autonomous driving subsidiary Zoox.
On that note, while investors generally associate Amazon with e-commerce, digital advertising, and cloud computing, they often overlook opportunities in other markets like autonomous driving. But Zoox is testing robotaxis in Las Vegas and San Francisco, and plans to expand to Austin and Miami in the coming months. Some analysts think autonomous ride-sharing will be a trillion-dollar opportunity in the U.S. alone.
Here's the big picture: Amazon's investments in physical AI should push its profit margins higher. Wall Street expects earnings to increase at 15% annually through 2027, which makes the current valuation of 30 times earnings look reasonable. But Amazon could crush the consensus estimates if robots boost efficiency and robotaxis unlock a new revenue stream.
NASDAQ: AMZN
Key Data Points
Robinhood Markets: Empowering traders with AI and democratizing exposure to private companies
Robinhood runs a mobile-first trading platform built for young investors. The company is gaining market share in several brokerage services categories, including equities, cryptocurrency, options, margin lending, and prediction markets. Robinhood is shaping the future of financial technology by adding AI features and venture capital to its plaform.
Last year, Robinhood announced a suite of AI features called Cortex. It has since launched Cortex Digests, stock and portfolio insights informed by breaking news, analyst ratings, and market reports. The company will add new features in the coming weeks, including Cortex Assistant and Cortex for Legend.
Cortex Assistant is a digital advisor that can conduct research and adjust account settings. Cortex for Legend is a conversational interface that can build charts with custom indicators and conduct scans for technical signals. For instance, it could mark golden cross patterns on a chart, or scan multiple funds and stocks for recent golden cross patterns.
Meanwhile, Robinhood recently introduced the Robinhood Ventures Fund I (RVI), which trades on the New York Stock Exchange and provides exposure to seven private companies: Databricks is the largest holding, followed by Revolut, Mercor, Airwallex, Boom Supersonic, Oura, and Ramp. Robinhood Ventures plans to add shares of Stripe in the coming weeks.
Here's the big picture: Robinhood's popularity with millennials and Gen Z should continue to drive market share gains as those generations mature. Wall Street expects earnings to increase at 19% annually through 2027, which makes the current valuation of 37 times earnings look tolerable. But innovations like Cortex and access to venture capital could drive faster growth.
