INOD Stock Rises 736.3% in a Year: Buy, Sell or Hold Post Q4 Earnings?

Core Viewpoint - Innodata has shown remarkable performance with a stock increase of 736.3% over the past year, significantly outperforming the Zacks Computer and Technology sector's growth of 20.6% [1][2] Financial Performance - Innodata reported fourth-quarter 2024 revenues of $59.2 million, a 127% year-over-year increase, surpassing guidance of $52-$55 million [5] - Full-year revenues reached $170.5 million, reflecting a 96% year-over-year growth [5] - Adjusted EBITDA for Q4 was $14.1 million (23.9% of revenues), up 231% year-over-year, while net income rose to $10.3 million from $1.7 million in the same period last year [6] - The company ended 2024 with $46.9 million in cash, more than tripling its cash position from year-end 2023, and has an undrawn $30 million credit facility [6] Strategic Positioning - Innodata is strategically positioned to benefit from significant AI infrastructure investments by major tech companies, with projections of $300 billion in capital expenditures toward generative AI in 2025, increasing to $337 billion in 2026 [7][8] - The company plays a crucial role in providing high-quality data necessary for training advanced language models, highlighting the vast untapped potential in AI data [8] Customer Diversification - Innodata has successfully diversified its customer base, with revenues from its largest customer reaching an annualized run rate of approximately $135 million, including $24 million in new awards [9] - Revenues from seven other Big Tech customers grew 159% sequentially, reducing concentration risk and validating the company's land-and-expand strategy [10] Future Outlook - For 2025, Innodata projects at least 40% revenue growth, which may be conservative given its history of upward revisions [11] - The Zacks Consensus Estimate for 2025 revenues is $251.7 million, indicating a year-over-year growth of 47.66%, with earnings estimates moving up by 6.1% over the past 30 days [12] Valuation - Innodata's 6-month forward 12-month P/S ratio of 7.76x is significantly higher than the Zacks Computer – Services industry average of 1.84x, justified by its extraordinary growth rate and strategic positioning [14] Investment Recommendation - Innodata is viewed as a compelling buy for AI-focused portfolios, showcasing proven execution and substantial unrealized potential in the AI sector [17][18]