Artificial Intelligence (AI) is not just a futuristic concept; it's an integral part of our daily lives. From online research to one-click shopping, AI is revolutionizing technology across all industries and solving many problems humans face. This powerful tool enables us to rethink how we integrate information, analyze data, and use insights to make better decisions.
In this article, we’ll explore two tech stocks, Adobe Inc. (ADBE) and Salesforce, Inc. (CRM), along with an ETF, Robo Global Artificial Intelligence ETF (THNQ), which offers promising opportunities to tap into the AI revolution.
While many agree that AI is poised to revolutionize our lives, it’s important to recognize that AI is already making waves in everything we do. Whether it’s a music app curating personalized playlists or AI systems outperforming humans in intricate games, the impact of AI is evident.
Moreover, with generative AI and prompt engineering gaining traction, AI has solidified its presence in various sectors like healthcare, retail, travel, and manufacturing. The global AI market is forecasted to surge from $621.19 billion in 2024 to a robust $2.74 trillion by 2032, growing at a CAGR of 20.4%.
While tech stocks like ADBE and CRM benefit immensely from the AI boom, investing in an ETF like THNQ offers a diversified approach. ETFs hold a variety of stocks, which means the failure of a single company won't lead to catastrophic financial losses, making them a safer bet when investing in emerging technologies like AI.
With that in mind, let’s look at the fundamentals of the above-mentioned stocks and ETF in detail.
Stocks to Buy:
Adobe Inc. (ADBE)
ADBE operates as a diversified software company worldwide. It operates through three segments: Digital Media; Digital Experience; and Publishing and Advertising. The company offers products, services, and solutions that allow individuals, teams, and enterprises to create, publish, and promote content.
On June 6, ADBE introduced the Adobe Experience Platform (AEP). This new platform leverages generative AI to boost the productivity of experienced practitioners while making enterprise applications more accessible to a broader audience by integrating more individuals into content production and insights workflows.
The AEP AI Assistant provides product expertise, content generation, automation, and predictive insights and recommendations, helping users harness data to deliver valuable insights and automate tasks.
In May, the company launched the generative remove feature in Adobe Lightroom, integrating Adobe Firefly's capabilities into everyday photo editing across Lightroom's mobile, web, and desktop platforms. This update includes AI-powered innovations like Lens Blur, allowing users to add aesthetic blur effects with a single click, making photo editing faster and easier for photographers.
These advancements align well with Adobe's goals, as the streamlined Lightroom mobile user interface makes photo editing fun, easy, and intuitive for all photographers, from hobbyists to professionals, to create stunning photos.
ADBE’s total revenues increased 10.2% year-over-year to $5.31 billion for the second quarter that ended May 31, 2024. The company’s gross profit grew 11% from the year-ago value to $4.71 billion. The non-GAAP operating income of $2.44 billion indicates growth of 11.9% from the prior year’s quarter. In addition, ADBE’s non-GAAP net income and non-GAAP EPS came in at $2.02 billion and $4.48, representing increases of 12.8% and 14.6% year-over-year, respectively.
Analysts expect ADBE’s revenue and EPS for the third quarter (ending August 2024) to increase 9.9% and 10.6% year-over-year to $5.37 billion and $4.53, respectively. Further, the company has surpassed the consensus revenue and EPS estimates in all of the trailing four quarters.
Shares of ADBE have surged 22.7% over the past month, closing the last trading session at $564.55.
ADBE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Quality and a B for Sentiment. It is ranked #42 out of 135 stocks in the Software - Application industry. Click here to see the other ADBE ratings for Growth, Value, Momentum, and Stability.
Salesforce, Inc. (CRM)
CRM provides Customer Relationship Management (CRM) technology that connects companies with customers globally. Its service includes sales to store data, monitor leads and progress, forecast opportunities, gain insights through analytics and AI, and deliver quotes, contracts, and invoices.
Last month, the company declared a quarterly dividend of $0.40 per share, payable to its stockholders on July 25, 2024. CRM pays an annual dividend of $1.60 per share, which translates to a yield of 0.63% on the prevailing share price. Its four-year average dividend yield is 0.01%.
On May 22, CRM expanded its Einstein Copilot capabilities by introducing new features for marketers and merchants. These features complement the existing functionalities for sales and service, assisting businesses with daily marketing and merchandising tasks.
CRM also revealed new tools for unifying business and commerce data and a new AI-powered personalization decision engine that helps companies personalize customer interactions at every touchpoint using data from any source.
For the fiscal first quarter that ended April 30, 2024, CRM’s total revenues increased 10.7% year-over-year to $9.13 billion. Its non-GAAP income from operations rose 28.7% from the year-ago value to $2.93 billion.
The company’s non-GAAP net income stood at $2.41 billion and $2.44 per share, up 43.8% and 44.4% from the prior-year quarter, respectively. Also, its free cash flow for the quarter stood at $6.08 billion, up 43.2% year-over-year.
The consensus revenue estimate of $9.23 billion for the fiscal second quarter (ending July 31, 2024) represents a 7.3% increase year-over-year. The consensus EPS estimate of $2.36 for the current quarter indicates an 11.1% improvement year-over-year. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Moreover, the stock has gained 22.1% over the past nine months to close the last trading session at $252.59.
CRM’s POWR Ratings reflect its robust prospects. It has an overall B rating, which equates to a Buy in our proprietary rating system.
CRM also has a B grade for Sentiment and Quality. Within the same industry, it is ranked #22 out of 135 stocks. Click here to see the additional ratings for CRM (Growth, Value, Momentum, and Stability).
ETF to Buy:
Robo Global Artificial Intelligence ETF (THNQ)
THNQ, managed by Exchange Traded Concepts, LL, invests globally in companies at the forefront of the AI revolution. This fund includes companies developing the technology and infrastructure for AI, such as computing, data, and cloud services, as well as companies applying AI across various sectors, including business processes, e-commerce, and healthcare. THNQ exposes investors to new market opportunities and potential revenue growth driven by AI's widespread development and application.
The fund has a total of 59 holdings. Its top holdings include Cloudflare, Inc. (NET) with a 2.45% weighting, Microsoft Corporation (MSFT) at 2.39%, followed by Palo Alto Networks, Inc. (PANW) and Samsara Inc. (IOT) with 2.38% and 2.31% weightings, respectively.
The fund has an expense ratio of 0.68% compared to the category average of 0.58%. Over the past six months, THNQ’s fund inflows came in at $1.48 million and $65.09 million over the past year.
THNQ has gained 30.9% over the past year and 33.5% over the past nine months to close the last trading session at $46.12. As of July 9, 2024, THNQ had an AUM of $144.80 million and an NAV of $45.99.
THNQ’s POWR Ratings reflect solid prospects. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
THNQ has an A grade for Buy & Hold, Peer, and Trade. Of the 119 ETFs in the Technology Equities ETFs group, it is ranked #45. Click here to access all the THNQ ratings.
What To Do Next?
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ADBE shares were trading at $561.28 per share on Thursday morning, down $3.27 (-0.58%). Year-to-date, ADBE has declined -5.92%, versus a 17.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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