Going parabolic on the stock market is a rare event, but there are a few artificial intelligence (AI) stocks that have achieved this feat. One such stock is Super Micro Computer, which has seen a remarkable 161% increase. Another example is Arm, which recently surged nearly 50% following its earnings report. Given the success of these AI stocks, many investors are eagerly searching for the next big winner.
However, not all AI stocks are experiencing the same upward trend. Perion Network, a small-cap adtech company, saw its stock plummet 20% after its fourth-quarter earnings report on February 7. The decline was attributed to the company’s weaker revenue growth guidance for 2024. Perion predicted a revenue range of $860 million to $880 million for this year, reflecting a slowdown in the video advertising industry.
Despite the stock’s decline, there are reasons why savvy investors may consider buying the dip on Perion Network. The company has been actively investing in AI, which is likely to pay off in the coming years. Perion is best known for its intelligent hub that connects ad buyers and sellers and optimizes purchases and placements using machine-learning algorithms. However, its work in generative AI is particularly exciting.
A few months ago, Perion launched WAVE, an audio advertising program that utilizes generative AI to narrate ads. This technology allows for customized ads based on various factors such as time, location, target audience, and even weather conditions. It has proven to be more cost-effective and deliver better results than traditional ads. Retailers like Albertson’s and Pep Boys have embraced this technology, and it is available on popular audio platforms such as Spotify, SiriusXM Radio, and iHeartRadio. Additionally, revenue in Perion’s retail media segment rose by 196% in the fourth quarter, reaching $20.2 million.
Perion’s innovation extends beyond WAVE. The company has partnered with DirecTV to show ads on linear and streaming TV when viewers pause the program they are watching. Furthermore, Perion acquired Hivestack, a digital-out-of-home (DOOH) ad company, for $100 million in the fourth quarter. Hivestack’s technology enables ads to be placed on digital billboards and other outdoor media spaces. This acquisition expands Perion’s presence in a fast-growing ad channel.
Several factors indicate that Perion is poised for strong growth in the coming years. The company’s investments in AI will enhance ad targeting and increase marketers’ return on investment, consequently driving more ad spending. As the digital advertising industry continues to recover, brands are expected to ramp up their advertising efforts. Perion also plans to pursue further acquisitions, which will contribute to business growth and provide a competitive advantage as it aims to become a comprehensive adtech solution.
One significant factor that may contribute to Perion’s stock growth is its current undervaluation. With a price-to-earnings ratio of less than 11, the stock is trading at a steep discount compared to its peers, despite its track record of strong growth. While it could be favorable for Perion to repurchase shares at this valuation, CEO Tal Jacobson believes it is more beneficial to invest in the company’s growth and generate long-term shareholder returns.
Investors can expect Perion to introduce new products and features throughout the year and potentially make additional acquisitions. Should the company surpass its guidance, the stock has the potential to soar as investors regain confidence in its growth story.
In conclusion, although Perion Network experienced a stock decline following its earnings report, its focus on AI and innovative initiatives position it for future success. Opportunities such as the WAVE program, partnerships with major retailers and media platforms, the acquisition of Hivestack, and the undervalued stock make Perion an attractive investment option for those seeking exposure to the AI industry.
