Innodata Trades 29% Below 52-Week High: Buy, Sell, or Hold the Stock?

Core Insights - Innodata (INOD) shares closed at $50.10, approximately 29.4% below the 52-week high of $71 reached on February 21, 2025, with a year-to-date appreciation of 26.8%, outperforming the Zacks Computer and Technology sector's return of 8.6% and the Zacks Computer – Services industry's return of 0.9% [1][2] Financial Performance - INOD expects 2025 revenues to rise 40% year over year to $238.6 million, driven by growing enterprise demand and contracts with eight Big Tech firms for LLM data work, including five of the "Magnificent 7" [9][14] - The Zacks Consensus Estimate for second-quarter 2025 earnings is pegged at 11 cents per share, unchanged over the past 60 days, while the consensus mark for 2025 earnings is 69 cents per share, suggesting a 22.47% year-over-year decline [16][18] Competitive Positioning - Innodata has outperformed competitors such as Cognizant, Infosys, and ExlService year to date, with their shares dropping 1.8%, 15.8%, and 4.3%, respectively [2] - The company is expanding its Generative AI capabilities and has secured approximately $8 million in new engagements from four Big Tech customers, indicating strong growth potential [11][13] Investment and Growth Strategy - Innodata plans to invest $2 billion in AI technology in the second quarter of 2025 to support its largest customer, benefiting from significant investment promises made by major tech firms [3][10] - The company is building capabilities to collect and create Gen AI training data, targeting the growing Generative AI IT services market expected to be worth $200 billion by 2029 [12] Valuation Metrics - Innodata shares are trading at a premium, with a forward 12-month Price/Sales ratio of 5.84X compared to the Zacks Computer Services industry's 1.76X, indicating a premium valuation relative to closest peers [19]