1 Dow Jones Artificial Intelligence (AI) Stock to Buy Hand Over Fist in 2024. Hint: It's Not in the "Magnificent Seven."

Motley Fool2023-12-29

Salesforce.com has pumped the brakes on acquisitions and turned its focus to profits. The company's operating margin is consistently expanding and free cash flow is piling up. Despite a ...

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Hint: It's Not in the \"Magnificent Seven.\"","media":"Motley Fool","content":"<div>\n<p>Salesforce.com has pumped the brakes on acquisitions and turned its focus to profits.\n\n\n\n\n\n\n\nThe company's operating margin is consistently expanding and free cash flow is piling up.\n\n\n\n\n\n\n\nDespite a ...</p>\n\n<a href=\"https://www.fool.com/investing/2023/12/29/1-dow-jones-artificial-intelligence-stock-to-buy/\">Source Link</a>\n\n</div>\n","source":"fool_stock","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>1 Dow Jones Artificial Intelligence (AI) Stock to Buy Hand Over Fist in 2024. 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Hint: It's Not in the \"Magnificent Seven.\"\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-12-29 16:30 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.fool.com/investing/2023/12/29/1-dow-jones-artificial-intelligence-stock-to-buy/><strong>Motley Fool</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Salesforce.com has pumped the brakes on acquisitions and turned its focus to profits.\n\n\n\n\n\n\n\nThe company's operating margin is consistently expanding and free cash flow is piling up.\n\n\n\n\n\n\n\nDespite a ...</p>\n\n<a href=\"https://www.fool.com/investing/2023/12/29/1-dow-jones-artificial-intelligence-stock-to-buy/\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4543","symbol_name":"AI","start_time":0,"source_url":"https://www.fool.com/investing/2023/12/29/1-dow-jones-artificial-intelligence-stock-to-buy/","article_id":"2395080430","we_media_id":null,"thumbnails":["https://g.foolcdn.com/image/?url=https%3A%2F%2Fg.foolcdn.com%2Feditorial%2Fimages%2F759098%2Fdigital-analysis-professional-computing.jpg&op=resize&w=165&h=104"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2395080430","pubTimestamp":1703838600,"sourceInfo":{"source_id":"fool_stock","name":"Motley Fool"},"weMediaInfo":null,"summary":"Salesforce.com is starting a new chapter, and investors won't want to miss out.","collect":0,"end_time":0,"defaultTopTitle":"fool.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4543":"AI","CRM":"赛富时","LU0130102774.USD":"Natixis Harris Associates US Equity RA USD","LU2236285917.USD":"ALLIANZ GLOBAL INCOME \"AMG\" (USD) INC","LU1814569148.SGD":"WELLINGTON GLOBAL QUALITY GROWTH \"D\" (SGDHDG) ACC","BK4527":"明星科技股","BK4538":"云计算","BK4579":"人工智能","LU1046421795.USD":"富达环球科技A-ACC","LU0648001328.SGD":"Natixis Harris Associates US Equity RA SGD","BK4550":"红杉资本持仓","BK4588":"碎股","LU1951198990.SGD":"Natixis Thematics AI & Robotics Fund H-R/A SGD-H","BK4551":"寇图资本持仓","IE00BKVL7J92.USD":"Legg Mason ClearBridge - US Equity Sustainability Leaders A Acc USD","BK4561":"索罗斯持仓","LU2286300806.USD":"Allianz Cyber Security AT Acc USD","LU0127658192.USD":"EASTSPRING INVESTMENTS GLOBAL TECHNOLOGY \"A\" (USD) ACC","BK4505":"高瓴资本持仓","LU1951200564.SGD":"Natixis Thematics AI & Robotics Fund R/A SGD","LU1496350171.SGD":"FRANKLIN DIVERSIFIED BALANCED \"A\" (SGDHDG) ACC","BK4581":"高盛持仓","LU1496350502.SGD":"FRANKLIN DIVERSIFIED DYNAMIC \"A\" (SGDHDG) ACC","LU1316542783.SGD":"Janus Henderson Horizon Global Technology Leaders A2 SGD","AI":"C3.ai, Inc.","LU1923623000.USD":"Natixis Thematics AI & Robotics Fund R/A USD","LU2458330169.SGD":"FRANKLIN SHARIAH TECHNOLOGY \"A\" (SGD) ACC","LU2458330243.SGD":"FRANKLIN SHARIAH TECHNOLOGY \"A-H1\" (SGDHDG) ACC","LU0234570918.USD":"高盛全球核心股票组合Acc Close","LU1791710582.SGD":"Fidelity Global Demographics A-ACC-SGD (SGD/USD hedged)","IE00B19Z9505.USD":"美盛-美国大盘成长股A Acc","LU0642271901.SGD":"Janus Henderson Horizon Global Technology Leaders A2 SGD-H","IE00BJTD4V19.USD":"NEUBERGER BERMAN US LONG SHORT EQUITY \"A1\" (USD) ACC","LU1791710400.SGD":"Fidelity Global Demographics A-ACC-SGD","LU0082616367.USD":"摩根大通美国科技A（dist）","BK4023":"应用软件","LU2461242641.AUD":"WELLINGTON US QUALITY GROWTH \"A\" (AUDHDG) ACC","BK4528":"SaaS概念","BK4532":"文艺复兴科技持仓","LU1803068979.SGD":"FTIF - Franklin Technology A (acc) SGD-H1","LU0719512351.SGD":"JPMorgan Funds - US Technology A (acc) SGD","LU2265009873.SGD":"Eastspring Investments - Global Growth Equity AS SGD-H","LU1989764664.SGD":"CPR Invest - Global Disruptive Opportunities A2 Acc SGD-H","BK4585":"ETF&股票定投概念","BK4567":"ESG概念","LU0234572021.USD":"高盛美国核心股票组合Acc","LU0109392836.USD":"富兰克林科技股A","BK4587":"ChatGPT概念","IE00BZ1G4Q59.USD":"LEGG MASON CLEARBRIDGE US EQUITY SUSTAINABILITY LEADER \"A\"(USD) INC (A)"},"translate_title":"1道琼斯人工智能（AI）股票将于2024年一手买入。提示：它不在“壮丽七人组”中。","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"AI":1,"CRM":1,"WORK":0.77},"content_text":"Salesforce.com has pumped the brakes on acquisitions and turned its focus to profits.\n\n\n\n\n\n\n\nThe company's operating margin is consistently expanding and free cash flow is piling up.\n\n\n\n\n\n\n\nDespite a healthy run, the stock trades at a steep discount compared to competitors.\n\n\n\n\n\n\n\n\nMotley Fool Issues Rare “All In” Buy Alert\n\n\n2023 has been a solid year for investors. Through late December, the tech-heavy Nasdaq Composite index returned 45% while the S&P 500 returned 25%. One of the prominent investment themes of 2023 was artificial intelligence (AI), with much of the hype captured by the Magnificent Seven stocks.While these shares performed well during 2023, it would behoove investors to think beyond this cohort as it relates to investing in AI. Cloud-based customer relationship management (CRM) business Salesforce.com (CRM -0.43%) has posted a respectable operating performance so far this year. In fact, after a 100% return, Salesforce is the top-performing Dow Jones Industrial Average stock of 2023 at the time of this writing -- and I think it's headed even higher.Let's dig into what helped propel such a massive move in Salesforce stock this year, and why 2024 could be the start of a new growth story for the enterprise software leader.The beginning of a new chapterFor many years Salesforce was known for its aggressive growth tactics, mostly in the form of splashy acquisitions. While Wall Street and investors historically cheered these deals, Salesforce arguably bit off more than it could chew following its $28 billion purchase of messaging and productivity tool Slack back in 2021. While the integration efforts have been a bit sluggish, causing many to believe Salesforce overpaid, the deal actually carried a silver lining.In retrospect, the Slack acquisition more or less forced Salesforce's management to take a step back and reevaluate the entire business. This means that firing on all cylinders in the name of revenue growth was no longer the top priority. Instead, Salesforce realized that it needed to mature and start focusing on both revenue and profitability.While this may sound obvious, keep in mind that the last couple of years have been difficult for cloud software businesses as customers have been operating under much tighter budgets due to a challenging macroeconomy. In a way, the Slack acquisition could not have come at a worse -- or better -- time, depending on how you look at things.After reporting earnings for the third quarter of its fiscal 2024, ended Oct. 31, Salesforce demonstrated that it is serious about long-term sustained profits. Moreover, the role that Salesforce will play in AI looks discounted, if not misunderstood, as Wall Street continues to be enamored by the Magnificent Seven.Image source: Getty Images. Don't miss the forest for the treesThe table below illustrates Salesforce's revenue growth across its various products over the last year:CategoryQ3 FY 2023Q4 FY 2023Q1 FY 2024Q2 FY 2024Q3 FY 2024Sales17%16%13%12%10%Service16%15%13%12%11%Platform and other22%18%12%11%11%Marketing and commerce18%16%10%10%8%Data16%20%20%16%22%Total subscription and supportrevenue18%17%13%12%12%Data source: Salesforce Investor Relations. You can see that the company's revenue is decelerating. Although this might not appear encouraging on the surface, there is more to the story. Salesforce has spent much of 2023 relentlessly focusing on operating margin and increased profitability.CRM Operating Margin (Quarterly) data by YChartsThe chart above illustrates Salesforce's quarterly operating margin over the past five years. Since early 2022, the company's margin profile has steadily improved and flowed straight to the bottom line.For the third quarter, Salesforce generated $1.4 billion in free cash flow, an increase of 1,088% year over year. Moreover, on a year-to-date basis, the company's total free cash flow of $6.2 billion represented 67% annual growth.It's obvious that Salesforce has turned into a leaner operation in the face of decelerating revenue. Nonetheless, with strong margins and robust cash flow, Salesforce looks ready to get back to making some noteworthy investments -- this time in AI.During the third-quarter earnings call, Salesforce CEO Marc Benioff stated that \"the AI revolution is a productivity revolution.\" This is an important, yet subtle, remark. Remember, at heart Salesforce is a CRM for sales and marketing professionals. But over the years, the company's major acquisitions have included analytics tool Tableau, data integrator MuleSoft, and messaging tool Slack. All of these fit squarely into workforce productivity services.What Benioff is alluding to above is that Salesforce can actually offer customers an end-to-end spectrum of productivity and automation tools wrapped around AI. In fact, Benioff also said that Salesforce Data Cloud was \"the foundation of every AI transaction\" during the third quarter. As seen in the table above, while the company's overall revenue growth is slowing, the Data category is the only one that increased year over year.Given the company's myriad subscription platforms, I think it's only a matter of time before the secular demand fueling AI helps the company's other revenue streams return to more robust growth.The valuation is compellingCRM PE Ratio (Forward) data by YChartsThe chart above shows the forward price-to-earnings (P/E) ratio of Salesforce, benchmarked against a peer set of other enterprise software businesses. The key takeaway is that Salesforce's forward P/E of 32 is the lowest among these comparable companies. While some investors could argue that Salesforce is a more mature business compared to the likes of Atlassian, Datadog, and ServiceNow, the disparity among valuation multiples is tough to ignore.Given management's commentary on the earnings call, coupled with Salesforce's increasing cash flow, I can't help but think that the next phase of growth is right around the corner. I view Salesforce as an under-the-radar AI opportunity and shares look like a bargain at current trading levels. Now looks like a great time to begin dollar-cost averaging into a position.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2395080430"}