It’s been nearly one and a half years since ChatGPT went live, but it sure doesn’t feel like it. ChatGPT has shaken up many sectors, and triggered an AI revolution. I would argue that ChatGPT is the biggest reason why the ‘Magnificent 7’ stocks have done so well. This rally, in turn, has driven the broader market higher alongside these stocks.
However, this does not mean that ChatGPT is the only AI model in town. Other companies have been racing to make their own AI models. Indeed, many AI models have found their own niches and have gotten very good at providing innovation and disruption. Some AI models even claim to be better than ChatGPT at basically every task, like Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Gemini. The most recent contender is Anthropic, which has released Claude 3.
Claude 3 has delivered stellar performance across all benchmarks. And many now consider it to be the best AI model out there. Thus, I have asked Claude to help out with three stocks that it thinks are good buys based on the latest data that it has, which is as of August 2023.
Let’s dive in!
Roku (ROKU)
Claude: “Roku (NASDAQ:ROKU) is a leader in the rapidly growing streaming TV market. As more viewers cut the cord on traditional cable, Roku’s platform that allows access to various streaming services has become very popular. Claude likely sees the cord-cutting trend continuing to accelerate, benefiting Roku’s user growth and advertising revenues. With a first-mover advantage and strong brand recognition, Roku is well-positioned to capitalize on this shift in how we consume entertainment.”
I agree with Claude about the mega trends that currently support Roku. The stock seems like a great pick that has very little downside risk. However, this little downside risk doesn’t mean Roku is a boring stock with no upside. Roku has been trading sideways for a while near the $50-$70 per share range, but that is after it declined from its peak of $473 back in 2021. I believe this stock can deliver multi-bagger returns as its financials recover and the company’s growth gets back on track.
I don’t expect Roku to trade near $500 per share anytime soon. But $150-plus is definitely possible for ROKU stock. The company’s earnings and revenue estimates show analysts are projecting significant growth over the next several years. While earnings per share are expected to be negative until 2027, this metric is expected to improve dramatically thereafter, reaching $10.82 by 2032. Moreover, robust revenue growth of more than 10% annually is anticipated, with revenue potentially reaching $12.83 billion by 2032.
Etsy (ETSY)
Claude: “Etsy (NASDAQ:ETSY) operates a unique online marketplace for handmade, vintage and craft supply products. Claude probably views Etsy as a pandemic winner that has sustained momentum even as physical retail reopened. The company’s focus on unique and personalized items resonates with younger consumers. Additionally, Etsy has expanded into new categories and geographies, driving consistent revenue growth. With its differentiated offerings and loyal customer base, Etsy could continue thriving in e-commerce.”
I also agree with Claude that Etsy is a good buy right now. Claude seems to have a preference for stocks that are trading at bargain-basement levels after they have declined. These stocks offer significant upside potential over the long-run, since they have a long runway for recovery. This is pretty similar to my style of stock-picking as well, and both Roku and Etsy are stocks I have previously written about before.
Etsy’s Q4 earnings fell short of expectations, missing earnings per share estimates by over 9%. However, the company still managed to grow its top line by a respectable 4% to $842.3 million, surpassing analyst estimates by 1.8%. Currently trading sideways around $68 per share, I believe ETSY stock has significant room for upside as the company’s financial performance improves.
Consensus estimates indicate a temporary earnings dip of 6.1% in 2024, followed by a strong rebound. Etsy’s earnings per share are projected to reach $6 in 2027. On the revenue front, analysts expect Etsy to maintain a robust growth trajectory, with top-line estimates suggesting an average annual growth rate of around 8-10% between 2024 and 2028. Revenue is projected to reach an impressive $4.3 billion by 2028.
With these factors in mind, I see tremendous long-term upside potential for Etsy.
Guardant Health (GH)
Claude: “Guardant Health (NASDAQ:GH) is at the forefront of liquid biopsy tests for cancer. Its non-invasive blood tests can detect cancer early and help guide treatment. Given the massive potential market, Claude sees significant runway for growth for Guardant’s innovative tests.”
Guardant Health is a stock I haven’t covered before. That’s mainly because I tend to avoid biotech and pharma stocks. It is a big player, but size doesn’t ease my concern around this sector, since all companies are essentially at the mercy of FDA regulators.
Moreover, GH stock doesn’t have the prettiest chart. It has continued to decline, and while Guardant has seen a small uptick in price this month, this increase looks more like a dead cat bounce. The company is expected to report losses until 2027. From 2028 onwards, Guardant Health is expected to turn profitable, with earnings per share likely to grow at a rapid pace, reaching $7.33 by 2033.
Similarly, revenue is projected to grow from $664 million in 2024 to $4.3 billion by 2033, representing a compound annual growth rate (CAGR) of approximately 23% over the 9-year period. This high revenue growth rate indicates that the company is expected to gain significant market share in the coming years.
However, the expected losses until Guardant hits profitability are pretty significant. The company has $1.2 billion in cash, but it burned through $480 million in 2023 alone. The company appears to have just enough cash to make it to profitability, but Guardant can hit a cash crunch if it misses estimates. Thus, I would slightly disagree with Claude here and say this stock is a “hold.”
On the date of publication, Omor Ibne Ehsan 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.