New Trade for August 24th, 2023

Investors have been pouring into rapidly developing AI tech names over the past few months, and this is likely just the beginning. According to Grand View Research, the global artificial intelligence market reached a valuation of $136.55 billion in 2022. It’s projected that by 2030, the industry will command a revenue of nearly $1.9 trillion.  

Anyone looking to profit from the paradigm shift may wonder which companies stand to gain the most as breakthrough advancements are made in the industry. Here, we’ll look at a Buy-rated standout from the burgeoning AI group with an average projected upside of more than 50%.

FARO Technologies, Inc. (FARO)

It’s not uncommon for small tech companies to lose money for years before finding success. However, it is why investors have been hesitant about three-dimensional measurement solutions developer Faro Technologies since it boosted investment sharply in the last year, with cash burn ramping by 64%. That does raise some red flags, and there’s no solace in the operating revenue growth of 2.4% in the same time frame. Clearly, however, the crucial factor is whether the company will grow its business going forward.  

FARO’s latest offering is its cloud-based information platform, Sphere. With Sphere, users are able to leverage artificial intelligence and machine learning to automate time-consuming and repetitive tasks. Sphere enables faster 3D data capture, processing, and project management for engineering and construction projects. We expect this technology to grow and develop along with AI and don’t see the company’s extra spending as a deterrent.   

Its cash burn of $42 million is about 8.7% of its $478 million market cap. That’s a low proportion and stands out as evidence that the company is well on top of its spending. Considering the potential for advancement for this micro-cap, the pros on Wall Street are beginning to take notice. The five analysts offering recommendations for the stock say to Buy FARO, with none recommending to Sell. A median 12-month price target of $26 represents a 53% increase from the current price.  

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