Top 5 Stocks to Watch for AI-Driven Gains That Aren’t NVIDIA

June 24, 2024 at 10:54 AM EDT

JLL logo on smartphone

Goldman Sachs (NYSE: GS) released a list of their top 50 stocks based on expected AI-driven earnings leverage. The firm ranked companies across sectors according to forecasted productivity gains linked to AI-powered automation. While these stocks may not see improvements this year or even next, all but two are expected to boost earnings by double-digits and some by triple from the current baseline scenario over the next five years. This is a look at the top five stocks, which are forecast to boost their earnings power by triple digits, and whether they are a good buy today.

JLL Incorporated Poised for a 120% Boost to Earnings

JLL (NYSE: JLL) is a real estate holding and services company with global exposure. The company is ranked #1 among real estate businesses with an expected 120% boost to the baseline scenario. As it is, JLL returned to growth this year and is expected to widen its margin. The outlook for 2025 is robust, with the top and bottom lines growing by 6% and 25%, respectively. The company doesn’t pay dividends but uses cash to reinvest and maintain a fortress balance sheet.

MarketBeat.com tracks seven analysts with ratings on the stock; they peg it at Buy and are leading it higher with revisions. The consensus target is only a few hundred basis points higher than the current action, but it is rising, and the recent updates suggest a 15% upside and two-year high. Trading at 16x this year’s and 13x next year’s earnings forecast, this stock is set up for a price-multiple expansion over the next two years.

Jones Lang LaSalle JLL stock chart

Tenet Healthcare Automates Workflow and Consumer Experience

Tenet Healthcare (NYSE: THC) is among the US's largest healthcare systems and is set up for a 135% productivity boost. The boost will come from gains on both sides: internal operations and client experience. The company is growing in 2024 and has a widening margin, but the forecast is for growth to slow next year. The mitigating factor is that the 2024 results outperform the consensus estimates, suggesting that next year’s forecasts are cautious.

Tenet doesn’t pay dividends but can repurchase shares and reduce debt. As of the last quarterly report, the company reduced its share count by 5% on average; Long-term debt is down 13%, and leverage is low near 3x equity. Shares of THC surged following the latest report and are frontrunning the consensus estimate. The mitigating factor is that the results sparked a round of analyst revisions and upgrades that have the market advancing another 5% to 10% this year.

Tenet Healthcare THC stock chart

Pinterest's Profitability Could Increase by 162%

Consumer app Pinterest (NYSE: PINS) is among the leading companies for potential productivity gains and earnings leverage. Goldman Sachs estimates a 162% gain over the next five years, suggesting it is deeply undervalued. Trading at 30x this year’s earnings and 25x next, it is highly valued today, but the valuation will fall below 15x soon and closer to 10x by 2029 if Goldman is right. Pinterest doesn’t pay dividends now, but it may in the future. It is cash flow positive, has no debt, and repurchases shares. 27 analysts rate this technology stock a moderate buy. The consensus target lags the market but is led higher by revisions. It is up 50% in the last year; the latest updates put the stock near $50 or about a 20% upside.

Pinterest PINS stock chart

Clarivate Poised to Boost Profitability by 230%

Clarivate (NYSE: CLVT) is an information services company that aggregates and delivers content across numerous business and industry platforms. Goldman forecasts that this data-centric business is poised to boost its earnings potential by more than 200%, making it the 2nd-best positioned in this ranking. It is struggling with growth today but is expected to return to sustained growth and margin improvement beginning next year. Nine analysts are holding this stock; they view it as a deep value trading below the lowest price target. The low target assumes a nearly 10% upside, while the consensus, down 40% over the last year, assumes about a 40% upside.

Clarivate CLVT stock chart

Guidewire Leads the Pack With a Forecasted 388% Earnings Boost, Thanks to AI

Guidewire Software (NYSE: GWRE) is a cloud-based business service SaaS focused on the insurance industry. It is expected to see a nearly 400% increase in its baseline earnings power within the next five years. The company is growing today and widening its margin; growth is expected to continue with earnings to lead results next year. Takeaway in 2024 is sequential and YoY acceleration; the takeaway from the 2025 forecast is that EPS should grow more than 45%. 13 analysts rate this stock a consensus Moderate Buy. The consensus target lags behind the price target but is up 53% in the last year, and the latest targets are leading to the range's high end for another 15% gain.

Guidewire GWRE stock chart

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