Two Prominent Growth Stocks Currently Suffering Over 35% Price Drops, Potential Buying Opportunities
In 2024, the stock market reached unprecedented heights, yet there still exist promising growth stocks offering substantial returns. AI, a burgeoning market, is particularly attractive. Two such stocks, Dell Technologies (DELL) and C3.ai, are currently trading at discounts to their 52-week highs despite experiencing growing demand for their AI products. Here's why these stocks are worth your consideration.
1. Dell Technologies
Last year, Dell Technologies' shares peaked at $179.70. At the time of writing, the stock is trading around $112. Purchasing Dell Technologies shares now gives you the opportunity to capitalize on the rising demand for AI servers. Dell generates half of its revenue from PCs and related products. However, the other half comes from infrastructure products, including servers – an area in which Dell ranks among the leaders.
Dell reported a 10% year-over-year revenue increase in Q3 2024, with nearly 60% of that coming from AI-related products, such as servers and networking. Demand for these products has also expanded Dell's addressable market.
CEO Michael Dell refers to the AI opportunity as "very significant," comparing it to the internet boom of the 1990s. Just as the 90s brought opportune growth for Dell's PC business, the investment in AI servers could bring a similar level of prosperity for its infrastructure business. Statista projects the AI server market will surpass $200 billion by 2029.
With analysts predicting an annual growth rate of 13% for Dell, its stock currently has a forward price-to-earnings ratio of 14 and a dividend yield of 1.53%.
2. C3.ai
Leaning towards software, C3.ai is one of the dominant players in enterprise AI applications. Recognizable for its role in enabling faster and more informed decision-making, C3.ai's revenue is skyrocketing. Following a new high of $45.08 at the close of 2024, the shares are currently trading around $33.18.
C3.ai's AI solutions are making significant strides in helping organizations make better decisions. New agreements with several large companies and U.S. government agencies, such as the Department of Defense, contributed to C3.ai's 29% year-over-year revenue growth in Q3 2024, marking its sixth consecutive quarter of accelerated growth.
C3.ai's stock hasn't performed as well as rival Palantir Technologies, a more profitable business. While investors are paying a price-to-sales multiple of 66 for Palantir's shares, C3.ai is currently available for $12, offering a considerable discount and potential for explosive returns once the company turns a profit.
Even so, C3.ai continues to face challenges. Concern has arisen about its dependency on Baker Hughes, which accounted for 18% of Q3 2024 revenue. Scheduled to expire in June, this significant revenue source has left critics skeptical about future revenue prospects.
However, when excluding Baker Hughes, C3.ai reported a 41% year-over-year revenue growth in Q2 2024. With expanding customer bases across various industries, stakeholders remain optimistic that these growing revenue streams will eventually outweigh Baker Hughes' influence on the company.
In conclusion, continued revenue growth is the main driver for either of these stocks to soar within the next few years. Given the current market dynamics and future potential, investing in Dell Technologies and C3.ai now holds significant promise for stronger long-term returns.
- Given the growing demand for AI servers and Dell Technologies' leading position in this market, investing in Dell's shares could provide substantial returns, especially considering the company's 10% year-over-year revenue increase in Q3 2024, with nearly 60% coming from AI-related products.
- Despite C3.ai's current trading price being lower than its 52-week high, its AI solutions have been instrumental in enabling better decision-making for organizations, resulting in a 29% year-over-year revenue growth in Q3 2024. This growth, combined with the potential for the company to turn a profit, makes C3.ai an attractive investment opportunity with significant growth potential.