In 2024, the buoyancy surrounding artificial intelligence (AI) has become a pivotal agent in driving the performance of major stock indices like the S&P 500. This optimistic outlook has significantly benefitted various sectors, especially semiconductor and utility companies, which are increasingly seen as critical players in the AI ecosystem. Investors are now faced with the challenge of identifying firms with robust long-term growth trajectories. To navigate this complex landscape, insights from seasoned analysts can be invaluable, guiding them to select stocks that promise healthy returns. This article reviews three notable companies mentioned by leading Wall Street analysts that have the potential to deliver significant value.
One of the standout performers in the cybersecurity arena is Fortinet (FTNT). Positioned strategically within the secure access service edge segment, Fortinet seeks to leverage the capabilities of machine learning and AI technologies to enhance its cybersecurity offerings. Recently, TD Cowen analyst Shaul Eyal reaffirmed a buy recommendation for Fortinet, elevating his price target notably from $75 to $90. This revision is largely informed by positive feedback from industry channels, indicative of a recovery trend in Fortinet’s business model. Eyal’s insights suggest that upcoming quarterly results may exceed expectations, with revenue and billings projected to align with the higher end of the company’s forecast.
Eyal’s confidence in Fortinet also extends to anticipated growth in the fourth quarter, with an estimated revenue growth rate of 12%. He attributes this optimistic outlook to a solid sales pipeline and a favorable closure rate, critical factors as the company heads into a seasonally strong period. A key component driving Fortinet’s resurgence is its operational technology product line, boosted by a systemic shift towards modernized systems that phase out outdated technologies. The strategic acquisition of Lacework, enhancing the firm’s focus on cloud security, further underscores Fortinet’s commitment to adapting to the evolving cybersecurity landscape.
Next on the radar is GitLab (GTLB), a cloud-based platform that is revolutionizing software development practices through AI integration. Analyst Gregg Moskowitz from Mizuho has maintained a buy rating on GitLab, setting a target price of $62. His bullish perspective springs from discussions with GitLab’s management, who are optimistic about capitalizing on the total addressable market, currently valued at $40 billion. Interestingly, GitLab and its main competitor, Microsoft’s GitHub, command a mere 5% of the software development lifecycle market, suggesting substantial room for growth.
Moskowitz highlights the expectation of increasing momentum for GitLab’s Duo Pro product, particularly harnessing the surge in generative AI starting in 2025. The company is also witnessing favorable reception for its GitLab Dedicated offering, which promises to enhance average revenue per user. With a multi-pronged growth strategy focusing on customer acquisition, price adjustments, and upsells, GitLab is positioned to execute effectively over the medium to long term. Although Moskowitz holds a lower rank among analysts at No. 321, his recommendations have demonstrated a profitability rate of 58%.
Lastly, we explore Nvidia (NVDA), a multinational corporation that has emerged as a linchpin in the semiconductor industry, particularly with its advanced graphics processing units (GPUs) tailored for AI applications. Recently, analyst Toshiya Hari from Goldman Sachs reiterated a buy rating for Nvidia, raising the price target from $135 to $150. This revised target stems from a deeper understanding of Nvidia’s competitive positioning and insights shared during a recent investor conference.
Nvidia’s ongoing revenue growth is underpinned by substantial demand for computational acceleration among data center operators. As organizations increasingly invest heavily in AI, the company’s upcoming product launch, the Blackwell platform, is anticipated to enhance not only immediate revenue streams but also long-term competitive advantages. Additionally, Hari revised his revenue estimates for Nvidia for the fiscal years 2025 through 2027 in light of rising trends in cloud expenditures and optimistic order trajectories among key customers like Dell and Hewlett Packard Enterprise.
The synergy between AI enthusiasm and stock performance lays fertile ground for identifying investment opportunities in 2024. Fortinet, GitLab, and Nvidia exemplify companies that, through strategic growth initiatives and operational improvements, offer investors promising avenues for sustainable growth amid an evolving technological landscape. As the market continues to respond to advancements in AI, discerning investors will monitor these key players closely to capitalize on their potential for robust returns.