Use Short-Term Fear to Build a Lasting Legacy with Long-Term Winners

2023 has been a banner year for AI stocks. However, as with anything tech related, it’s a sector prone to big swings. The secret to succeeding with such investments is to look at the fundamentals.

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  • If a company can still deliver – and in the tech space, new competitors create obsolete ideas all the time – it could be a winner when shares are hit hard. Buying or adding to such positions when they’re down can make for big profit opportunities on the rebound.

    Case in point? (AI).

    The software developer dropped nearly 11 percent last week when it reported earnings but offered cautious guidance. However, is well positioned for the long-term, and analysts still see more upside ahead.

    At current prices, shares are valued at less than 10 times their enterprise value to revenue, a reasonable metric for a fast-growing company that still isn’t profitable. Plus, the company has no debt and over $6 per share in cash.

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  • The current selloff takes shares down nearly half from their overly bullish high from the summer.

    Action to take: Long-term investors interested in the AI space may want to consider buying or building onto a position here, or at any lower prices in the next few months. Rising growth will likely lead to a far higher share price in time.

    For traders, shares are near a multi-month low where they appear to be forming a base after selling off this summer. The April 2024 $35 calls, last going for about $1.85, could see mid-to-high double-digit returns.


    Disclosure: The author of this article has a position in the company mentioned here, and may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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