Market sentiment favors businesses demonstrating a clear capacity to leverage artificial intelligence (AI) for competitive advantage and revenue expansion. Despite recently issuing cautious near-term guidance, our three post-earnings tech stocks possess compelling long-term AI-powered strategies that could yield significant growth potential. Investors seeking to capitalize on the transformative impact of AI may find these post-earnings tech stocks worthy of deeper analysis.
Palo Alto Networks (PANW)
Shares of cybersecurity specialist Palo Alto Networks (NASDAQ:PANW) initially plunged over 25% following the release of its second-quarter financial report in late February. Revenue grew 19% YOY to $2 billion, while adjusted earnings per share (EPS) surged 39% YOY to $1.46. During the earnings call, management outlined $13-17 billion in AI revenue opportunities, contributing to their $15 billion revenue target by 2030.
Yet, while financial results exceeded expectations, the company announced a new pricing strategy that caught most investors off guard. This new strategy will likely offer increased incentives and free AI-based products to expand the company’s market share.
Management wants to encourage customers to adopt more tools on its platform faster and sign longer-term contracts. Palo Alto Networks is confident the new strategy will yield a significant payoff over the longer term despite hampering growth rates for the near future. However, analysts viewed the new pricing strategy as an indication of upcoming price wars in the cybersecurity sector.
PANW stock has returned more than 8% YTD. However, we should note that shares command a premium valuation of 61.4 times forward earnings and 14.7 times trailing sales. The average analyst price target of PANW stands at $335.
PayPal (PYPL)
In early February, fintech giant PayPal (NASDAQ:PYPL), which facilitates secure online and in-person payments, released fourth-quarter and full-year financial results. The metrics displayed solid growth, with revenue rising 9% revenue to 7.9 billion, while EPS surged 61% to $1.29. Yet PYPL shares dipped 10% after a disappointing future outlook raised concerns.
Investors have been increasingly concerned about the decline in PayPal’s transaction margins due to increasing competition in the fintech space. Management has highlighted its commitment to improving its margins, cutting 9% of its global workforce to “right-size” the company.
Meanwhile, PPayPalannounced six AI-driven products in its January product event to streamline checkout experiences and increase transaction value. The expanding global payments landscape, particularly in international and social media commerce, presents significant opportunities for this leading name among our post-earnings tech stocks.
Despite a 2% YTD decline, PYPL stock trades at a historically cheap forward price-to-earnings (P/E) ratio of 11.8 and 2.2 times trailing sales. The 12-month median price forecast for PYPL stock is $69, suggesting a 15% upside potential.
Twilio (TWLO)
The final name among our post-earnings tech stock is Twilio (NYSE:TWLO), which enables businesses to integrate real-time communication features into their applications. On February 14, the enterprise software company reported fourth-quarter and full-year financial results. While revenue growth slowed 5% YoY to $1.08 billion, adjusted EPS quadrupled to $0.86 from $0.22. The jump in earnings was driven by cost optimization and share repurchases.
However, Twilio’s weak first quarter revenue guidance spooked investors, triggering an initial 15% decline in its share price. Management initiated an operational review of its underperforming Segment business unit to address market headwinds, aiming to bolster its customer data platform market.
In 2023, the company launched CustomerAI, a generative AI-powered platform to drive stronger client sales. AI-driven innovations are expected to boost Twilio’s cross-sales, leading to stronger customer spending in the long run. Future Market Insights forecasts the communications platform as a service market will reach annual revenues of $12 billion in 2024 and $121 billion by 2034.
TWLO stock has tumbled 20% YTD. Shares are changing hands at 23 times forward earnings and 2.6 times trailing sales. The stock presents a 17% upside potential, based on average analysts’ price target of $70.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil, PhD, began contributing to InvestorPlace in 2018. She brings over 20 years of experience in the U.S. and U.K. and has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Publicly, she has contributed to investing.com and the U.K. website of The Motley Fool.