The AI story continues. While many big-cap names are at all-time highs, other and smaller players are starting to show better signs of strength. Investors can likely see better returns going into 2025 with smaller-cap AI stocks.
That’s especially true with software stocks. That’s because software companies tend to offer high profit margins. Once a piece of software is developed, the marginal cost of developing an additional copy is essentially zero.
Software companies seeing strong demand from AI software can continue to be winners from here. One such play is Verint Systems (VRNT), which just reported an earnings and revenue beat thanks to string AI demand.
The customer engagement software uses AI to better provide logistics and routing, as well as forecasting and other trends.
Verint shares are now slightly up over the past year following the earnings beat, but are still inexpensive at 8 times forward earnings.
Action to take: With some momentum starting under shares and the potential for better returns as they roll out AI-powered software, Verint could become a strong growth play over the next few quarters.
Growth and momentum investors may want to pick up a stake here, and use any pullback to add to that position.
For traders, the March 2025 $35 calls, last trading for about $3.00, could see high double-digit returns from further share price appreciation in the months ahead.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.