Market Overview - The AI-driven bull run of 2023 and 2024 faced significant challenges in 2025 due to overstretched valuations, stock inflation, weak economic data, geopolitical conflicts, and concerns over the Trump administration's trade policies, impacting confidence in equities [1] - The technology sector, particularly AI-focused stocks, has been the most affected, but current low valuations present investment opportunities [2] Recommended AI Stocks - Five Internet-based AI stocks with favorable Zacks Rank recommended for purchase on the dip include Arista Networks Inc. (ANET), Fastly Inc. (FSLY), Five9 Inc. (FIVN), HubSpot Inc. (HUBS), and Twilio Inc. (TWLO), all carrying a Zacks Rank 2 (Buy) [3] Arista Networks Inc. (ANET) - Arista Networks is positioned well with a robust network architecture for cloud and AI networking, focusing on proactive products, zero-touch automation, and predictive operations [6] - The company’s AI suite enhances job monitoring and performance issue resolution, with expected revenue and earnings growth rates of 18.7% and 12.8% for the current year, respectively [8] - ANET is currently trading at a 31.6% discount from its 52-week high price [8] Fastly Inc. (FSLY) - Fastly provides cloud computing infrastructure and recently launched Fastly AI Accelerator, optimizing generative AI applications [10][11] - The company has expected revenue and earnings growth rates of 8.7% and 16.7% for 2025, respectively, and is trading at a 40.5% discount from its 52-week high price [12] Five9 Inc. (FIVN) - Five9 offers intelligent cloud software for contact centers, benefiting from the growing adoption of AI tools [13][15] - The expected revenue and earnings growth rates for the current year are 9.6% and 11.7%, respectively, with a 47.6% discount from its 52-week high price [16] HubSpot Inc. (HUBS) - HubSpot provides a cloud-based CRM platform and is experiencing steady adoption from enterprise customers, driven by its AI features [17][18] - The expected revenue and earnings growth rates for the current year are 15.4% and 14.9%, respectively, with a 30.2% discount from its 52-week high price [19] Twilio Inc. (TWLO) - Twilio focuses on generative AI offerings and has launched Customer AI technology to enhance customer engagement [20][21] - The expected revenue and earnings growth rates for the current year are 7.8% and 22.6%, respectively, with a 25.3% discount from its 52-week high price [24]

Group 1: Stock Performance and Price Targets - Shares of Five9 (FIVN) have increased by 9.5% over the past four weeks, closing at $26.96, with a mean price target of $37.05 indicating a potential upside of 37.4% [1] - The average of 20 short-term price targets ranges from a low of $23 to a high of $65, with a standard deviation of $9.91, suggesting variability in analyst estimates [2] - The lowest estimate indicates a decline of 14.7% from the current price, while the most optimistic estimate suggests a 141.1% upside [2] Group 2: Analyst Consensus and Earnings Estimates - Analysts show strong agreement in revising earnings estimates higher, which is a positive indicator for potential stock upside [4][11] - The Zacks Consensus Estimate for the current year has increased by 47.7% over the past month, with 11 estimates going higher and no negative revisions [12] - FIVN holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimates [13]

Core Viewpoint - The article compares the future prospects of two AI-driven companies, BigBear.ai and Five9, highlighting their growth rates, revenue performance, and overall market positioning. Company Performance - BigBear.ai went public via a SPAC merger on December 8, 2021, with an initial stock price of $9.84, reaching a high of $12.69 on April 13, 2022, but now trades below $4 [2] - Five9 went public on April 4, 2014, starting at $7 and peaking at $211.68 on August 4, 2021, currently trading around $28 [2] - BigBear.ai's revenue grew at a CAGR of only 3% from $140 million in 2020 to $158 million in 2024, significantly below its initial target of 41% CAGR [5] - Five9 aimed for revenue growth from $610 million in 2021 to $2.4 billion by 2026, but revised its target to 2027 and later abandoned the $2.4 billion goal, now targeting 10%-15% annual growth [6] Revenue Growth Comparison - BigBear.ai's revenue growth rates were 4% in 2021, 6% in 2022, 0% in 2023, and 2% in 2024 [9] - Five9's revenue growth rates were 40% in 2021, 28% in 2022, 17% in 2023, and 14% in 2024, indicating a much faster growth trajectory [9][7] - In 2024, Five9 generated over six times the revenue of BigBear.ai [7] Market Challenges - BigBear.ai faced challenges including the bankruptcy of its leading customer, Virgin Orbit, tough competition, and macroeconomic headwinds that limited software spending [9] - Five9 continued to grow despite similar macro challenges, benefiting from companies outsourcing customer support and adopting AI chatbots [10] Future Projections - Analysts expect BigBear.ai's revenue to grow at a CAGR of 9% from 2024 to 2026, while Five9's revenue is projected to grow at a CAGR of 10% [11] - BigBear.ai is expected to remain unprofitable, whereas Five9 is anticipated to become profitable this year and significantly increase its net income by 2026 [11] Valuation Metrics - BigBear.ai has an enterprise value of $1.1 billion, trading at 6.5 times this year's estimated sales [12] - Five9 has an enterprise value of $2.8 billion, trading at 2.4 times this year's sales, indicating a more attractive valuation [12] - BigBear.ai's outstanding shares increased by over 130% in the past three years, while Five9's increased by about 9% [12] Insider Activity - Over the past 12 months, BigBear.ai's insiders sold more than 30 times as many shares as they bought, while Five9's insiders bought nearly three times as many shares as they sold, suggesting stronger insider confidence in Five9 [13] Conclusion - Five9 is identified as the superior investment option due to its larger size, faster growth rate, sustainable business model, clearer path to profitability, and more attractive valuation compared to BigBear.ai [14]

Group 1: U.S.-China Trade and Tariff Developments - The United States and China reached a temporary agreement to reduce reciprocal tariffs from 125% to 10%, while maintaining a 20% tariff on Chinese fentanyl imports, resulting in a total tariff of 30% on China [4] - The U.S. has also negotiated a tariff deal with the U.K. and is in discussions with 17 other major trade partners, including India [5] Group 2: AI Sector and Investment Opportunities - U.S. technology companies, particularly AI firms, are facing challenges due to increased input costs and potential recession fears, leading to significant stock price volatility [2] - It is suggested to invest in mid-cap AI infrastructure stocks with favorable Zacks Rank, including Innodata Inc. (INOD), Five9 Inc. (FIVN), UiPath Inc. (PATH), InterDigital Inc. (IDCC), and AeroVironment Inc. (AVAV), all currently holding a Zacks Rank 2 (Buy) [3] Group 3: Company-Specific Insights Innodata Inc. (INOD) - Innodata is positioned as a key player in the AI sector, providing essential data for training advanced language models, with a first-quarter 2025 earnings of $0.22 per share, exceeding estimates [7] - The company has launched a Generative AI Test & Evaluation Platform, expanding its AI services portfolio [8] - Expected revenue growth rate is 40.3%, while earnings growth rate is projected at -16.9% for the current year [11] Five9 Inc. (FIVN) - Five9 offers intelligent cloud software for contact centers, benefiting from the growing adoption of AI tools, with an expected revenue growth rate of 9.6% and earnings growth rate of 11.7% for the current year [15] - The company introduced its Intelligent CX Platform powered by Five9 Genius AI, enhancing its service offerings [14] UiPath Inc. (PATH) - UiPath provides an end-to-end automation platform with embedded AI capabilities, introducing new generative AI features to improve business automation [17] - Expected revenue growth rate is 6.8%, while earnings growth rate is projected at -1.9% for the current year [18] InterDigital Inc. (IDCC) - InterDigital is experiencing strong licensing momentum in the smartphone sector, with a focus on advanced 5G and 6G research [21] - The company reported strong first-quarter 2025 results, with both revenue and earnings exceeding estimates [19] - Expected revenue growth rate is -20%, and earnings growth rate is -21.5% for the current year [22] AeroVironment Inc. (AVAV) - AeroVironment designs and develops robotic systems for government and business applications, integrating AI and advanced technologies into its products [24] - The company has an expected revenue growth rate of 25.1% and earnings growth rate of 43% for the current year [26]

Core Insights - Investors in the Internet - Software sector may consider Five9 (FIVN) and Adyen N.V. Unsponsored ADR (ADYEY) as potential value stocks [1] - A strong Zacks Rank combined with a good Value grade from the Style Scores system is identified as an effective strategy for finding value stocks [2] Valuation Metrics - Both FIVN and ADYEY currently have a Zacks Rank of 2 (Buy), indicating a positive earnings outlook due to favorable analyst estimate revisions [3] - FIVN has a forward P/E ratio of 9.62, while ADYEY has a significantly higher forward P/E of 45.28 [5] - The PEG ratio for FIVN is 0.61, suggesting it is undervalued relative to its expected earnings growth, whereas ADYEY has a PEG ratio of 2.17 [5] - FIVN's P/B ratio is 3.05, indicating a lower market value compared to its book value, while ADYEY's P/B ratio is much higher at 14.36 [6] - Based on these valuation metrics, FIVN is rated with a Value grade of B, while ADYEY has a Value grade of F [6] Conclusion - Despite both companies having solid earnings outlooks, FIVN is considered the superior value option based on the discussed valuation figures [7]

Core Insights - The article discusses the investment strategy of GARP (Growth at a Reasonable Price) as a hybrid approach that combines elements of both value and growth investing, particularly in uncertain market conditions [2][3][5]. Investment Strategy - GARP investing prioritizes the PEG (Price/Earnings Growth) ratio, which relates a stock's P/E ratio to its future earnings growth rate, providing a more comprehensive view of a stock's potential [5][6]. - A lower PEG ratio, ideally below 1, indicates both undervaluation and future growth potential, making it attractive for GARP investors [6]. Stock Performance - Several stocks have shown significant success using the GARP strategy, including Takeda Pharmaceutical, Five9, LATAM Airlines, and Mizuho Financial Group [4]. - Takeda Pharmaceutical has a Zacks Rank of 1, a Value Score of A, and a long-term expected growth rate of 35% [11]. - Five9 holds a Zacks Rank of 2, a Value Score of B, and a historical growth rate of 19.3% [13]. - LATAM Airlines also has a Zacks Rank of 1, a Value Score of A, and an expected growth rate of 14.8% [14]. - Mizuho Financial has a Zacks Rank of 2, a Value Score of B, and a long-term expected growth rate of 15.9% [16]. Screening Criteria - Effective GARP investing involves screening for stocks with a PEG ratio less than the industry median, a P/E ratio below the industry median, a Zacks Rank of 1 or 2, a market capitalization greater than $1 billion, and an average 20-day trading volume exceeding 50,000 [8][9].

Core Insights - The article highlights five cloud computing-centric stocks that are expected to deliver strong returns in the short term, emphasizing their earnings and revenue growth potential for 2025 [3][4]. Group 1: Cloud Computing Overview - Cloud computing provides on-demand access to computing resources over the Internet, transitioning from traditional on-premises infrastructure to cloud-based solutions [1]. - Organizations can access shared resources from cloud service providers, which reduces operating costs and enhances productivity and scalability [2]. Group 2: Stock Picks and Performance - The selected stocks include Five9 Inc. (FIVN), Affirm Holdings Inc. (AFRM), Microsoft Corp. (MSFT), Juniper Networks Inc. (JNPR), and Tyler Technologies Inc. (TYL), all showing strong earnings growth potential [3][4]. - Each stock has received positive earnings estimate revisions in the last 60 days and carries a Zacks Rank of 1 (Strong Buy) or 2 (Buy) [4]. Group 3: Company-Specific Insights Five9 Inc. (FIVN) - Five9 provides intelligent cloud software for contact centers, offering a virtual platform for customer service and sales functions [8]. - The company is experiencing growth due to the adoption of AI tools, with an expected revenue growth rate of 9.6% and earnings growth of 10.9% for the current year [11][10]. Affirm Holdings Inc. (AFRM) - Affirm has diversified revenue streams and expects revenues between $3.13 billion and $3.19 billion in fiscal 2025, driven by partnerships and expanding into new markets [12][13]. - The expected revenue growth rate is 37.1%, with earnings growth projected at 96.4% for the current year [14]. Microsoft Corp. (MSFT) - Microsoft reported strong fiscal Q3 2025 results, driven by AI business growth and Azure cloud infrastructure [15][16]. - The expected revenue growth rate is 13.7%, with earnings growth of 12.7% for the current year [17]. Juniper Networks Inc. (JNPR) - Juniper Networks reported strong Q1 2025 results, benefiting from demand for AI-driven enterprise solutions and data center virtualization [18][19]. - The expected revenue growth rate is 7.3%, with earnings growth of 21.5% for the current year [20]. Tyler Technologies Inc. (TYL) - Tyler Technologies is capitalizing on the public sector's shift to cloud-based systems and the hybrid working trend, with an expected revenue growth rate of 8.9% and earnings growth of 15.6% for the current year [21][22].

Group 1 - Five9 (FIVN) shares have increased by 15.3% over the past four weeks, closing at $24.83, with a mean price target of $39.50 indicating a potential upside of 59.1% [1] - The average of 20 short-term price targets ranges from a low of $23 to a high of $67, with a standard deviation of $12.03, suggesting variability in analyst estimates [2] - There is strong agreement among analysts regarding FIVN's ability to report better earnings than previously predicted, which supports the potential for stock upside [4][11] Group 2 - Over the last 30 days, eight earnings estimates for FIVN have been revised higher, resulting in a Zacks Consensus Estimate increase of 45.9% [12] - FIVN holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimates, indicating strong potential for near-term upside [13] - While consensus price targets may not be entirely reliable, the direction they imply appears to be a good guide for potential price movement [13]

Core Viewpoint - The cloud and AI markets are experiencing rapid growth, benefiting companies like Microsoft, Cloudflare, and Five9, which are well-positioned to capitalize on these trends over the coming decades [1][2]. Microsoft - Microsoft has transformed from a slow-growth tech giant to a leader in cloud and AI under CEO Satya Nadella since 2014, expanding its cloud ecosystem and investing in AI technologies [4][5]. - Microsoft's Azure is now the second-largest cloud infrastructure platform globally, following Amazon Web Services (AWS), and the company has a significant stake in OpenAI, integrating AI capabilities into its products [5][6]. - From fiscal 2014 to fiscal 2024, Microsoft's revenue grew at a compound annual growth rate (CAGR) of 11%, with earnings per share (EPS) increasing at a CAGR of 16%. Analysts project a continued revenue and EPS growth of 14% CAGR from fiscal 2024 to fiscal 2027 [6][7]. Cloudflare - Cloudflare is a major content delivery network (CDN) provider, enhancing digital content delivery and protecting websites from cyber threats [8][10]. - The company aims to be a "water filtration" system for the internet, recently launching Workers AI to enable developers to build AI applications on its edge networks [9][10]. - Cloudflare's revenue has grown at a CAGR of 40% from 2020 to 2024, with expectations of 27% CAGR growth from 2024 to 2027, and it is projected to become profitable by the end of this period [11]. Five9 - Five9 specializes in cloud-based customer support services, utilizing AI-powered chatbots and human agents to manage customer interactions across various channels [12][13]. - The company serves over 3,000 customers and processes more than 14 billion call minutes annually, with a business model designed to thrive during economic downturns [12][13]. - From 2014 to 2024, Five9's revenue grew at a CAGR of 26%, with projections of 10% CAGR growth from 2024 to 2027, and an expected EPS growth of 125% over the next two years [14].

He also leads the investing group IPO Edge , which offers actionable information on growth stocks through first-look IPO filings, previews on upcoming IPOs, an IPO calendar for tracking what’s on the horizon, a database of U.S. IPOs, and a guide to IPO investing to walk you through the entire IPO lifecycle - from filing to listing to quiet period and lockup expiration dates.Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to init ...